Nov. 18 (Bloomberg) -- Panama and the U.S. will sign an agreement to exchange tax information this month, as the Central American nation seeks to clear the way for lawmakers in Washington to approve a free-trade pact.
The tax accord has been concluded and will be signed by Treasury Secretary Timothy F. Geithner on Nov. 30, Roberto Henriquez, Panama’s minister of trade and industry, said today. With that pact secured, the U.S. Congress should approve the stalled trade deal, he said.
“The Panama deal is ready, it’s easy and it’s good for both countries,” Henriquez said in an interview at Bloomberg’s office in Washington. By passing the accord, “the U.S. will send the signal that it is serious about integration.”
Lawmakers such as Senator Carl Levin, a Michigan Democrat, have said Panama would need to sign a tax-exchange deal before they would consider the trade agreement, which was completed in 2007 and has been ratified by Panama’s legislature. President Barack Obama hasn’t submitted the trade agreement to Congress for approval.
The Organization for Economic Cooperation and Development placed Panama on a list of nations that must share tax data or face sanctions as Group of 20 nations crack down on banking secrecy. Tax-information exchange agreements, which let officials request details about citizens’ bank accounts in another nation, are needed to ensure that taxpayers have no place to hide their income and assets, according to a report by the organization on Nov. 10.
A review published in September by the international organization found Panama had “potentially serious deficiencies” in making banks and companies reveal tax information. Panama is seeking to change its laws to meet the group’s requirements, Finance Vice Minister Frank De Lima told reporters in Panama City last month.
Panama has already reached 13 separate taxation accords with other nations, Henriquez said today. By signing those deals and the one with the U.S., “we’re going to get the certification of the world” that Panama’s banks are trustworthy, he said.
Sandra Salstrom, a spokeswoman for the U.S. Treasury Department, didn’t have a comment.
U.S. manufactures such as Peoria, Illinois-based Caterpillar Inc. say the trade agreement will boost exports and provide an inroad for American companies to supply machinery for the $5.25 billion expansion of the Panama Canal.
Panama Ports Pledge
Panamanian President Ricardo Martinelli has pledged to spend $20 billion during the next four years to build ports, expand its main airports and lure international companies to the Central American nation.
Panama, whose economy is anchored by the Panama Canal, has primarily a service-based economy and is one of the few nations that have a trade deficit with the U.S. American companies shipped $4.3 billion in goods and agriculture products to Panama last year and imported $302 million. By comparison, the U.S. exports more to China in three weeks than it does to Panama in a year.
Obama has concentrated on winning congressional approval of a trade deal with South Korea. His efforts to rework that agreement, to resolve complaints about beef and automobiles, failed at a summit in Seoul last week.
Obama today met nine lawmakers critical of that accord, and asked them to give him a list of other changes they would like to see to the Korean agreement as well.
“If Obama were negotiating this deal from scratch, he definitely would do things differently,” Representative Mike Michaud, a Maine Democrat who led the lawmakers, said in an interview. “Each one of these trade deals has different problems.”
The U.S. also has a trade agreement with Colombia that was signed four years ago and never approved by Congress. When President George W. Bush submitted the measure for approval in 2008, Democrats put off a vote on the legislation.
Now Colombia also is renewing its pitch for a vote.
With Obama seeking to double exports, “we cannot understand how this agreement is not really at the forefront of discussions,” Gabriel Silva, Colombia’s ambassador to the U.S., said today at a roundtable for reporters.
President Juan Manuel Santos has taken steps to protect union organizers and strengthen labor protections, Silva said. He said steps have been taken to address concerns of the U.S. labor federation AFL-CIO, he said. The union group said its concerns have not been addressed.
“Rhetorically, Santos is an improvement,” said Jeff Vogt, the AFL-CIO’s global economic policy specialist. “But it’s not the time for this deal” with labor violence in that nation still high and needed labor reforms awaiting enactment, he said.
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