David Sirota has another round-up of the latest on the secret trade deal the Democratic leadership is developing with Bush out of the range of cameras or witnesses – or its own rank and file. The deal as a whole involves Peru, Panama, South Korea and Columbia, with different provisions that apply to each country separately as well as a group of provisions they hold in common. Sirota lists half-a-dozen articles and they’re all disturbing but I want to key on the one that is most indefensible: the deal with Panama.
Economist and investment/globalization specialist Peter Riggs of the Tax Justice Network, which describes itself as an outfit devoted to “combating tax evasion by corporations and the rich”, took a good long look at the Panama trade deal. After noting that the Panama and Peru deals have been considered “relatively non-controversial and will probably pass”, he explains that the deal with Panama has nothing to do with trade.
Indeed, the proposed bilateral trade agreement with Panama has skated through without much attention at all. But the agreement with Panama is highly significant. The problem is, the trade agreement with Panama isn’t really about trade. It’s about foreign investor rights, money laundering, and tax dodging. And the United States should in no way reward this notorious offshore tax haven with a “gold star” Free Trade Agreement.
Panama has two major areas of “economic comparative advantage” in the region. One, obviously, is the Canal. But the other is much more insidious-and major U.S. corporations are hoping that no one draws any attention to it.
Panama’s other economic comparative advantages are in the area of tax and banking secrecy, and the ease with which U.S. companies can create subsidiaries in Panama for purposes of dodging taxes.
Panama is already home to a lot of U.S. corporate subsidiaries. How many? Tens of thousands of U.S. corporations have hung out a shingle-or should we say, set up an email box-in that country.
Panama boasts a total of 400,000 registered corporations-second only to Hong Kong as a home to corporations and corporate subsidiaries. Subsidiaries whose sole purpose, in many cases, is to help transnational companies avoid taxes.
In the last few years, Panama has been consistently condemned by the G-7’s Financial Action Task Force for “resisting international norms in combating tax evasion and money laundering.” The Clinton Administration several times “vigorously expressed its concern about loose corporate accountability standards in Panama, and the murkiness of the Panamanian banking sector.” But the Bush Administration’s deal with Panama – a deal the Democratic leadership is pushing hard – is not only enshrining those low standards and “murkiness” in law, it’s going one step further and allowing corporations to evade both trade laws and courts.