Democrats Support Secret Trade Deal that Lets Corps Evade Taxes


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.

(emphasis added)

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.

[W]ith the text of the Free Trade Agreement as it now stands, Panamanian investors would get new rights in the United States, with no new disclosure responsibilities at home. We have a situation where it is very, very easy to set up a business subsidiary in Panama. Panama’s “corporate” specialists advertise the country has having the most favorable and flexible incorporation laws in the world, in addition to some of the strictest banking secrecy laws available.

So the FTA will just encourage more U.S. businesses to pursue a strategy for tax purposes, designed solely to evade taxes in the United States. But then the text of the Panama agreement allows corporations and investors with a “substantial business presence” in Panama-that is, registered subsidiaries of multinational corporations-to use provisions found in Chapter 10 of the agreement to bring a claim against U.S. laws using an international investor tribunal. Panamanian-registered corporations would be able to bypass the U.S. courts system altogether in the case of an investment dispute involving the United States.

That’s right, Panamanian corporations – as well as Panamanian subsidiaries of U.S. corporations – would be able to bypass the U.S. legal system, and take their claims to an international investor tribunal. Historically, these tribunals have proven much more sympathetic to corporate interests than they have to public-interest regulation.

The case is heard before an ad-hoc panel of three international investment lawyers, working without a system of formal legal precedent. Panamanian investors would be empowered to challenge U.S. federal, state, or local laws, citing an “expropriation” of expected profits or a failure to provide Panamanian investors with a “minimum standard of treatment.”

(emphasis added)

Sirota explains what this means.

So, if U.S. federal, state, or local laws tried to close tax loopholes or prevent corporations from evading taxes through tax havens like Panama, those corporations could cite their subsidiaries in Panama and the Panama Free Trade Agreement as grounds to have an international tribunal strike those laws down. Such cases have already been brought under NAFTA by corporations seeking to strike down American environmental laws. But thanks to Panama’s tax haven status, the Panama deal would take such abuse to a whole new level.

Charlie Rangel has a long and distinguished history in the House, but his overt advocacy for and determination to pass the FTA is putting a blot on his reputation he’ll be hard-put to erase. He has publicly announced that he intends to see the FTA passed whether the rank-and-file like it or not, and that he will ram it through over their objections and the objections of its progressive opponents no matter what.

I never thought, a few years ago, that I would ever see Charlie Rangel pimping for corporate crooks but what else can you call this?

There is absolutely no way to explain away the Democratic leadership’s actions over this bill as anything other than a deliberate collusion with the Bush White House to clear the way for more corporate theft of the public Treasury by legalizing tax evasion for multinationals. There is no possible excuse that can be made for their rabid support of the Panama “trade” deal when its sole purpose is to enable corporate thievery. It can’t by any measure you like be rationally justified as an “accident”, incompetence, or electoral fear.

Would any of our Democratic apologists like to try explaining why we shouldn’t dump the Dems over this?

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4 responses to “Democrats Support Secret Trade Deal that Lets Corps Evade Taxes

  1. They were fooled! It was a procedural thing snuck in at the last moment while they slept! It’s not their fault; it’s just a lack of discipline and/or courage! If we loved them more, then they’d come around. More and better Dems!!

    How’s that?

    As for this:

    There is absolutely no way to explain away the Democratic leadership’s actions over this bill as anything other than a deliberate collusion with the Bush White House to clear the way for more corporate theft of the public Treasury by legalizing tax evasion for multinationals.

    Why would anyone even try to find another way to explain it? Don’t fuck with Rome’s trade routes, baby.

  2. What’s up with this?


    While the AFL-CIO isn’t expected to lobby hard against the Peru FTA, Samuel said he wants Democratic representatives to stress that the Peru FTA cannot be a model for future trade deals. This is intended to put the breaks on deals with Colombia and South Korea.

  3. Jesus, that was quick, Rob. This post had only been up, like, a minute. As for your defenses, though they probably accurately predict likely Dem excuses, they won’t wash.

    They were fooled! It was a procedural thing snuck in at the last moment while they slept!

    Nope. The leadership met in secret at the WH to negotiate the provisions weeks before the deals were made public, so they knew what they were long ago. So did we thanks to Sirota and a timely leak.

    It’s not their fault; it’s just a lack of discipline and/or courage!

    Uh-uh. It’s the discipline from the leadership that’s keeping a coterie of dissidents in line. And since they’re being attacked for it from the left rather than the right, if they were true cowards, they’d reject the Panama deal outright and replace the environmental and worker protections they removed from the others at the behest of the Bush.

    If we loved them more, then they’d come around.

    Sadly, no. We used to love them and they screwed us anyway.

    Don’t fuck with Rome’s trade routes, baby.

    That about sums it up. Our Imperial Democrats are protecting their privileges and their corporate sponsors. It’s no more complicated than that.

  4. What’s up with this?

    See explanation here.

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