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Panama Wrong Choice for Obama's First Trade
Deal
Salvadorans for Quality of Life
Panama Wrong Choice for Obama's First Trade
Deal
By David Batker and Stephanie Celt
Panama is a country primarily known for
three things: a canal, cool hats and money
laundering. In fact, you can float right
through the middle of the country, sporting
a stylish straw hat, and nobody ever has to
know who paid for the trip, or the hat.
Panama's "comparative advantage" is tax
evasion. The more money multinational
companies shift to hokey Panamanian
subsidiaries, the fewer taxes they owe in
the U.S. And secrecy in the Panamanian
banking sector secures foreign investment of
another sort. The U.S. State Department and
the Drug Enforcement Agency have identified
Panama's financial sector as a primary
repository and conduit for Colombian and
Mexican narco-trafficking cartels.
In 2004, President Bush began trade
negotiations with this top tax haven, but
was unable to get the Panama deal passed
through Congress. Now the failed ending
point of the past administration threatens
to be the default starting point for the new
one. Panama is a ghastly choice for Obama's
first trade deal.
More than 350,000 corporations registered in
Panama conduct virtually no business there.
Panama is second only to Hong Kong as a
haven for multinational firms to fabricate
offshore subsidiaries, precisely to avoid
taxes. This trade deal — largely based on
the North American Free Trade Agreement
model — was written by and for multinational
companies. It enables companies to increase
their profits while skipping town on taxes.
This proposed trade agreement just provides
more financial incentive for American
companies to ship out.
President Obama has been vocal on opposing
tax loopholes, offshoring and outsourcing.
As a candidate, he ran more than a dozen ads
promising to change tax laws that move
American companies and jobs overseas. As he
said during the campaign, "It's time to
close corporate loopholes, shut offshore tax
havens, and restore balance and fairness to
the tax code." He co-sponsored the 2007 Stop
Tax Haven Abuse Act, which listed Panama as
one of 34 tax-haven jurisdictions.
Panama has put up stiff resistance to
combating tax evasion and money laundering.
It is one of very few countries to reject
all tax-information-exchange treaties. A
Government Accountability Office study
identified Panama as one of eight countries
— the only current or prospective trading
partner with the U.S. — listed on all major
tax-haven watchdog lists.
There's nothing "free" about this type of
trade except the license to cheat. As the
Senate Homeland Security Committee
estimates, tax evasion in offshore havens
costs U.S. taxpayers $100 billion a year.
This revenue is desperately needed to fund
domestic infrastructure projects and get our
own fiscal house in order. In the wake of
the G-20 Washington summit and G-7 finance
ministers' focus on banking secrecy's
contribution to global economic instability,
our first trade deal should not be with the
top money-laundering country in the
hemisphere.
Any future deal with Panama must be
conditioned on eliminating excessive banking
secrecy, ceasing to accept illicit
drug-cartel cash, re-regulating its
financial sector, forcing banks and
multinational subsidiaries to pay taxes, and
signing international tax-transparency
treaties. Panama should sign the U.S. Tax
Information Exchange Agreement and the
standard U.S. double taxation/fiscal evasion
treaty before any consideration for an
agreement.
Most believe international trade can be a
force for good, and that reform does not
equal protectionism. It's time for trade
deals that work to achieve larger societal
goals of fairness, transparency, poverty
alleviation and sustainability.
Unfortunately, the Panama FTA does not meet
any of these basic goals.
With 195 countries in the world, we should
perhaps be working with New Zealand or
Bolivia to craft a trade model that is
mutually beneficial. The hats aren't nearly
as nice in those places, but at least you
know who's paying for them. |
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