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Snowe Comments on U.S.-Panama FTA

May 21, 2009

U.S. Senator Olympia J. Snowe (R-Maine) today stated her opposition to congressional passage of the U.S.-Panama Trade Promotion Agreement until Panama’s status as a tax haven and the inadequate enforcement of U.S. trade rights have been fully addressed. 

"Congressional approval of this agreement before Panama reforms its banking sector to allow for greater transparency would do more than merely reward Panama’s facilitation of tax avoidance and evasion by wealthy U.S. individuals or companies which seek to hide untaxed proceeds in its banks," said Snowe, a senior member of the Senate Committee on Finance which today held a hearing on the free trade pact. "I must frankly say that I am disappointed that proponents of this agreement-- at a time when we are asking so much of hardworking taxpayers to overcome the current economic downturn—are urging its passage without first securing a tax transparency agreement or reforms in Panama’s banking sector."

Panama’s status as a low corporate-tax country with strict banking secrecy laws render it one of the world’s most notorious tax havens.  A December 2008 Government Accountability Office study identified Panama as one of only 13 countries– and the only current or pending FTA partner– that was listed on all of the major tax-haven lists of watchdog groups such as the Organization for Economic Cooperation and Development that also do not have tax transparency treaties with the United States.

Snowe also reiterated her insistence that Congress first pass a robust trade enforcement bill before taking up any further trade agreements.

"We consider this agreement today against the backdrop of the most devastating economic crisis in more than a generation.  Over 5 million Americans have lost their employment since the onset of the recession in December 2007, and an estimated 2.5 million more jobs may be shed over the next year.  It is therefore essential for the new administration to work with Congress to redirect U.S. international trade strategy toward preserving American jobs through stringent enforcement of U.S. trade rights, rather than endlessly negotiating more free trade agreements."

The full text of Senator Snowe’s statement is below:

Thank you Chairman Baucus and Ranking Member Grassley for holding this hearing on what will likely be the first Free Trade Agreement that the new Administration will submit to Congress.  And I would like to thank the witnesses for appearing here today to offer their perspectives on this pact.

We consider this agreement today against the backdrop of the most devastating economic crisis in more than a generation.  Over 5 million Americans have lost their employment since the onset of the recession in December 2007, and an estimated 2.5 million more jobs may be shed over the next year.  It is therefore essential for the new administration to work with Congress to redirect U.S. international trade strategy toward preserving American jobs through stringent enforcement of U.S. trade rights, rather than endlessly negotiating more free trade agreements.

That is why I have insisted that before any additional Free Trade Agreements are considered by Congress, two major changes to our trade laws had to take place.  First, that an expanded Trade Adjustment Assistance bill be enacted which extended the retraining and income support benefits to American service workers and those who lost their jobs to offshoring to non-FTA countries like China and India.  I was therefore pleased to work with the Chairman and Ranking Members to include the bipartisan, bicameral addition to the Stimulus bill strengthening and expanding TAA to cover these workers, and creating a TAA for Communities program which I authored to provide rural towns with strategic planning assistance to overcome the affect of a plant closure due to trade competition. 

Yet we must not mistake this necessary relief for those who have already lost their livelihoods to trade as a substitute for a trade policy which keeps these hard-working Americans employed in the first place.  That is why I have insisted on a second pre-condition to Congressional approval of any further trade agreements— the enactment of a trade enforcement bill which would give greater assurances to manufacturing workers and businesses that unfair trade practices such as currency manipulation and labor and environmental exploitation would be consistently challenged by USTR in formal dispute resolution cases.

It is a shocking fact that all of the public petitions for trade enforcement action—each concerning currency manipulation or labor exploitation by China—filed during the previous Administration were denied by USTR— in some cases on the same day they were filed!  Trade abuses such as these are not limited to China, as when our FTA partner Jordan was discovered in 2006 to have failed to prevent the use of forced labor within its borders.    

To put an end to USTR’s hiatus from public-requested enforcement action, I, with the sagacious support of Senators Rockefeller and Conrad, introduced the "Trade CLAIM Act", which would allow for independent, judicial review of decisions by USTR NOT to take enforcement action under Section 301 of the 1974 Trade Act—the statute setting forth the process by which the U.S. businesses, workers and citizens can request trade enforcement action. Under our bill, workers, business and other members of the public who have had a petition for trade enforcement denied by USTR would be able to appeal that denial to the U.S. Court of International Trade, which would have the authority to force USTR to take enforcement action.  I firmly believe that enacting such measures to protect U.S. manufacturers and workers from unfair foreign trade practices must precede any consideration of new trade agreements, including the agreement with Panama which we are considering today. 

However, there remains another, particularly troubling concern overshadowing our economic relationship with Panama.  In recent weeks, hundreds of my constituents have contacted me to express their concern about concluding a trade agreement with a low-corporate tax country with strict banking secrecy laws that render it one of the world’s most notorious tax havens.  Indeed, a December 2008 Government Accountability Office study identified Panama as one of only 13 countries– and the only current or pending FTA partner– that was listed on all of the major tax-haven lists of watchdog groups such as the Organization for Economic Cooperation and Development that also do not have tax transparency treaties with the U.S.

Congressional approval of this agreement before Panama reforms its banking sector to allow for greater transparency would do more than merely reward Panama’s facilitation of tax avoidance and evasion by wealthy U.S. individuals or companies which seek to hide untaxed proceeds in its banks. I am concerned that it would actually encourage Panama’s use as a tax haven by codifying market access guarantees to Panamanian banks serving U.S. citizens and companies which those banks could use to challenge U.S. tax and banking regulations which may interfere with their questionable practices.

I must frankly say that I am disappointed that proponents of this agreement-- at a time when we are asking so much of hardworking taxpayers to overcome the current economic downturn—are urging its passage without first securing a tax transparency agreement or reforms in Panama’s banking sector.  Because of these outstanding problems—and because Congress has yet to enact a robust trade enforcement bill— I do not support passage of the Panama Trade Promotion Agreement at this time.

Thank you, Mr. Chairman.