Yet Panama is more than a passageway–it’s a country of some 3 million people. The Panamanians not only operate the canal, they also buy and sell goods with the rest of the world.
In the next few weeks, Congress has a unique opportunity to expand trade with both Panama and Peru by passing a pair of free-trade agreements that will improve the U.S. economy and strengthen ties to Latin America. If Washington approves these deals, it will also send a strong signal to the rest of the world that it hasn’t abandoned efforts to lower artificial barriers to the international exchange of goods and services.
Two-way trade with Panama is currently worth more than $2 billion per year, with American exports accounting for about 85 percent of it. The media occasionally gets worked up over so-called trade imbalances, as if the goal of free trade were to defeat another country rather than to work with it for mutual benefit. Yet it’s hard to look at these figures, in which the United States enjoys a massive trade surplus with Panama, and not come to the conclusion that this is an economic partnership worth expanding.
Farmers in particular have much to gain from the free-trade agreement. Immediately, more than half of our agricultural exports would experience duty-free access to Panamanian consumers. Products such as soybeans, wheat, cotton, most fresh fruits, whole frozen turkeys, and high-quality beef could be sold in Panama without first having to pay tariffs.
Other items would benefit from a reduced tariff. These include pork, corn, rice, and most tomato products. In 15 years, virtually all tariffs would vanish.
By approving the trade agreement, Congress would put the United States on sound footing for many years to come–especially if it also pushes plans to modernize the Panama Canal with a third set of locks that can accommodate the next generation of container ships.
Peru is a considerably larger country than Panama, with more than 26 million people living in its mountains or on their edges. In 2005, our trade with Peru was worth about $7.4 billion. U.S. exports accounted for about $2.3 billion of this total.
Once more, American farmers will see their opportunities expand immediately if Congress approves the deal. Two-thirds of agricultural products would gain access to Peruvian markets without facing tariffs. These include high-quality beef, cotton, soybeans, and wheat. Many fruits and vegetables, such as apples, cherries, peaches, and pears, would gain duty-free entry as well. Processed foods, ranging from cookies to frozen French fries, also would see barriers removed completely.
Moreover, all remaining obstacles to U.S. farm exports would be totally removed in 17 years.
Because Panama and Peru are both developing countries, they stand to make enormous economic gains in the near future. As they grow wealthier, their consumers will be better able to purchase U.S. products. These trade agreements will make sure they have the chance to buy goods and services that are made-in-America. The strategy blends nicely with Treasury Secretary Henry Paulson’s efforts to improve the Latin American business climate by making sure aid packages help entrepreneurs.
Finally, there’s a national-security angle. Venezuelan strongman Hugo Chavez, one of the most virulently anti-American leaders on the world stage, would love to expand his influence in Panama and Peru. A year ago, in fact, a man who would have welcomed the opportunity to become Chavez’s puppet in Lima finished second in the Peruvian presidential election.
One of the best ways to counter the negative influence of Chavez is to build economic ties to countries in the region. That’s one reason why the Colombian free-trade agreement is critical as well.
But Congress almost certainly won’t consider any other trade agreement without first giving consideration to the deals with Panama and Peru. For the good of the U.S. economy in general and American farmers in particular, both deserve to be passed as soon as possible.
Tim Burrack raises corn and soybeans in partnership with his brother on their family farm. Tim traveled to Panama in early 2007 and is a Board Member of Truth About Trade and Technology (www.truthabouttrade.org