Assistant U.S. Trade Representative Everett Eissenstat told the Senate Finance Committee yesterday that the administration has put the Panama Free Trade Agreement on hold while the administration develops a "new framework" for trade. Some Democratic members of Congress have been pressuring the administration and Speaker Pelosi to delay approval of the agreement until a Tax Information Exchange Agreement (TIEA) has been completed with Panama, a known tax haven. TIEAs enable two countries' governments to exchange information necessary to prosecute offshore tax evasion (although arguably many of the existing TIEAs are so weak as to be useless). Panama and the U.S. began negotiations on a TIEA back in 2002, but Panama has never finalized it. The administration and Congress should, at very least, refuse to reward countries that are uncooperative with U.S. tax enforcement efforts with enhanced trading relations.
The national advocacy group Public Citizen issued a report on April 29th explaining the issues. Lori Wallach, director of Public Citizen's Global Trade Watch division said, "Members of Congress wouldn't vote to let AIG not pay its taxes or to give Mexican drug lords a safe place to hide their proceeds from selling drugs to our kids, but that's in essence what the Panama FTA does." She argued that the trade agreement directly conflicts with the goals of regulating finance and closing tax havens. Thankfully, the Obama administration seems to be listening.