The rules of origin define goods that can be processed duty-free on the basis of the country of origin of their content. The rules of origin are intended to prevent the transfer of goods from materials from countries outside the agreement. They are particularly relevant to the clothing and textile trade, with very few exports coming from Panama. The USTR informs Congress of President George W. Bush`s intention to begin negotiations for a free trade agreement with the Republic of Panama. The United States imports relatively little from Panama, which is responsible for the increase in the U.S. trade surplus. Most imports are primary products; 21% are seafood, mostly fresh fish and shrimp. Repair products account for one third of total imports from Panama30. Unlike Central American countries, where the United States is very sensitive to the textile and clothing trade, Panama does not act much in this sector. Panama`s agricultural exports, particularly sugar, were one of the most difficult to meet. At the beginning of the 21st century, the canal and close ties with the United States were still significant features of Panama`s economy, but in the past these characteristics have hindered Panama`s participation in regional integration.
Although Panama is part of the Central American integration system, a large-scale political agreement, it has refused to join the Central American common market and has instead relied on the canal and the major U.S. economy as an economic anchor. Since independence, Panama has had a fully dollarized monetary system and has benefited from the unilateral trade preferences of the United States established by the Caribbean Basin Economic Recovery Act (CBERA), the Caribbean Basin Trade Partnership Act (CBTPA) and the Generalized System of Preferences (SPG).24 These historical circumstances have provided little incentive for Panama to become a more open economy. It was only since joining the World Trade Organization (WTO) in 1997 that Panama began to reduce tariffs, an important step in the preparation of a free trade agreement with the United States. However, successful implementation of the strategy requires coordinated financial and technical resources between international and U.S. humanitarian organizations. A U.S. Agency for International Development (USAID) project is already in place to support Panama`s transition to more open trade. It has two important initiatives: supporting the implementation of the free trade agreement and helping Panama to adapt sectorally to increasing the competitiveness of international trade. In the first case, the USAID project contributed to the preparation and dissemination of a product explaining the benefits of the free trade agreement and how Panama could better access the U.S. market with its specific products. As requested under the ACCORD, the USTR conducted an environmental assessment of the potential environmental impacts, possibly attributable to the free trade agreement.
He noted that Panama “faces a number of challenges in protecting its environment as it supports its economic growth and population growth.” Deforestation, soil degradation, the loss of wildlife and threats to water quality and wetlands are, among other things, serious problems for Panama. The Panama Canal also imposes strict water consumption requirements in the country. Panama responded through the public order process by establishing environmental standards and concluding bilateral and U.S. environmental cooperation agreements.69 These issues were already factors of interference prior to the Panama Free Trade Agreement negotiations. Thus, the environmental assessment states that the marginal impact of the free trade agreement on environmental standards would be small, either with respect to the projected effects on the United States or Panama. The United States has free trade agreements with 20 countries.