Democrats' 'Canal to Nowhere' on Jobs

Democrats' "Canal to Nowhere" on Jobs

The U.S.-Panama Free Trade Deal

AUGUST 19, 2010

“If America sits on the sidelines while other nations sign trade deals, we will lose the opportunity to create jobs on our shores.”      — President Barack Obama, January 27, 2010

The U.S.-Panama Free Trade Agreement (FTA) was signed in June 2007 and Panama approved the deal within weeks.  For over three years, however, the deal has remained idle on Capitol Hill, blocked by Democrats’ political posturing.  The deal with Panama would result in significant liberalization of trade in goods and services, creating more jobs in the U.S. as market access increases for American products and services in Panama.  Increased engagement with Panama would also strengthen U.S. security interests in a vital region which has trended toward autocracy and instability in recent years.

  • A Rising Tide Lifts all Ships:  Nothing in the U.S.-Panama trade deal would hurt American workers.  Almost all Panamanian goods—a whopping 96 percent—already enter the U.S. duty-free, and since Panama’s economy is widely service-based, manufacturing, textile, and agricultural industries in the U.S. would be largely unaffected by the deal.  In 2008, the U.S. had a trade surplus of $4.3 billion with Panama, and the FTA would provide U.S. industries such as shipping, construction, and financial services an opportunity for increased exports, even in a recessionary economy.  For example, Singapore, a developed economy operating under a free trade agreement with Panama since 2006, saw domestic exports to the Latin American country increase nearly 20 percent each year from 2007 to 2009, from $3.2 billion to $4.6 billion.  This expanded export volume would lead to increased industry capacity, higher prices for producers, and more jobs created as a result—all benefits the U.S. is missing out on.

  • Getting Ditched by Competitors:  Rep. Connie Mack (R-FL), Ranking Member of the Subcommittee on the Western Hemisphere stated, “If the Obama Administration vacillates on free trade, make no mistake: we will be left behind as other nations work to lower tariffs, open borders, and increase the wealth and prosperity of their citizens.  Panama is a strong ally of the United States. And a FTA with Panama would help keep both economies open, dynamic, and competitive.”  While the Administration and Democrats sit on the sidelines, expansion of global trade among other nations has continued apace as Democrats pursue their unpopular domestic agenda.  Earlier this year, for example, Panama finalized and signed a free trade agreement with Canada, removing Panamanian tariffs on 90 percent of Canadian goods.

    In July 2009, Panama awarded a $3 billion contract to a consortium of European engineering firms to lead a massive, five-year expansion of the Panama Canal.  The announcement came as a surprise following a Reuters report in which industry analysts stated that a consortium led by U.S.-based Bechtel was in the best financial position to complete the project.  As James M. Roberts of the Heritage Foundation noted, “The continuing failure by Congress to approve the FTA may have led to the decision by the Panama Canal Authority to choose the European firms over Bechtel.”
  • An Ally Unlike Any Other:  For centuries, Panama has been critically important to the geopolitics of the Western Hemisphere—a bridge between the continents of North and South America and the dividing line between the Atlantic and Pacific Oceans.  With the opening of the Panama Canal in 1914, the country gained even more significance.  Historian David McCullough wrote in The Path Between the Seas: “The creation of a water passage across Panama was one of the supreme human achievements of all time… Primarily the canal is an expression of that old and noble desire to bridge the divide, to bring people together.  It is a work of civilization.”  Creating more profitable trade routes from the Mississippi River delta to the Pacific Ocean allowed for an expansion of trade to such a degree that stability in Panama became a strategic concern to the U.S. throughout the 1900s.   The canal’s pivotal role in U.S. and global economic development is complicated today as Panama City sits at the nexus of dangerous drug trafficking of Latin American cartels and hegemonic ambitions of Venezuelan despot Hugo Chavez.  The U.S.-Panama FTA would build on our existing security relationship and strengthen a small but essential player in our own backyard.

If President Obama is serious about expanding markets for American producers and supporting democratic allies, he should encourage Speaker Pelosi and Congressional Democrats to abandon their tax, spend, borrow, and bailout policies and turn to trade promotion.  Approving the signed U.S.-Panama Free Trade Agreement will help stimulate the economy at zero-cost, while solidifying a key relationship in our hemisphere.  Each day Democrats in Washington, DC, needlessly let this commonsense deal languish, American workers are suffering directly due to their inaction.