By Doug Palmer
May 14, 2009

WASHINGTON, May 14 (Reuters) – The Senate Finance Committee will hold a hearing next week on a free trade pact with Panama that has been delayed by U.S. concerns over that country’s tax and labor laws, the panel said on Thursday.

The agreement is one of three free trade deals negotiated by the administration of former President George W. Bush that have been awaiting congressional action since 2007.

Approval of the Panama agreement is widely seen as clearing the way for action on more controversial trade deals with Colombia and South Korea.

Many U.S. businesses, such as Caterpillar (CAT.N), also want Congress to pass the deal to give them an advantage over foreign competitors in selling goods and equipment needed for a major expansion of the Panama Canal already underway.

U.S. Trade Representative Ron Kirk told Reuters last week he saw "a window" to pass the Panama agreement before current Panama President Martin Torrijos step downs on July 1.

But Panama needs to enact a number of labor reforms and address U.S. concerns about its tax haven laws, Kirk said.

U.S. trade officials have been in Panama this week for talks on the issue, which many Democrats want completely resolved before President Barack Obama formally submits the agreement to Congress for a vote.

Everett Eissenstat, assistant U.S. trade representative for Western Hemisphere affairs, is expected to testify on the results of that trip at the Senate hearing next Thursday.

Representative Kevin Brady, a Texas Republican who has pushed for quick action on the Panama deal, said it made sense for lawmakers to begin reviewing the agreement since it appears likely the White House "will send it up soon."

Once a trade pact is formally submitted to Congress, lawmakers have 90 days to approve or reject the agreement without making changes.

(Reporting by Doug Palmer; editing by Alan Elsner)