Panama has pursued a number of trade agreements to enhance market access, become less dependent on a few commodities, and encourage third country investments. The combination of its geographical location and the Panama Canal has made Panama a regional hub for commerce. A brief review of the most important trade arrangements made by Panama and their consequences for the country’s economy can be found here.
Agreement on free trade with the United States
A TPA with the US is one of the important components of Panama ratified its trade Strategy. Under this agreement, the U.S. market is made accessible to Panamanian goods on a preferential basis. The TPA, which came into force in 2012, eliminated duties imposed on lots of products offering large export opportunities for these sectors of manufacturing in Panama, including equipment, clothing, and food. This has caused the economic ties of the two countries to cement further, with the United States emerging as the dominant trading partner of Panama.
Trade integration with the European Union
The EU-Central America Association Agreement, of which Panama is a signatory, intends to enhance political and economic relations between the European Union and the countries of Central America. This agreement was initiated in 2013 and enables the entry of complete range of Panama goods into European markets without tariffs which aids the economic sectors such as manufacturing, fishing and agriculture. The agreement also promotes development, which helps in Panama’s exports and encourages investments from Europe.
Central American integration system
The Central American Integration System (SICA), of which Panama is a member, encourages political and economic cooperation among Central American countries. In order to create a single regional market and standardize customs laws, SICA supports the Central American Common Market (CACM). By promoting trade in manufactured and agricultural commodities, this integration fortifies Panama’s regional relationships and lays the groundwork for joint agreements with more powerful economies.
Free trade agreement with Canada
Tariff-free commerce on a wide range of products and services was established in 2013 by the Panama-Canada Free commerce Agreement. The purpose of this agreement is to promote Canadian investments in the sectors such as mining, energy, banking and agriculture in addition to exports from the country. The agreement encourages infrastructure construction and provides for increase in Canadian investments by offering access to the country for Canadian business activities.
Free trade agreement with South Korea
In August 2018, a Free commercial Agreement encompassing all aspects was signed by the countries of South Korea and Panama. This FTA encourages investment and enhances coordination in facilities and technology by eliminating the duties on some lists of goods including technology imports from South Korea and agricultural exports from Panama. Within this framework, Panama could reap rewards from the information technology, logistics and clean energy sectors of South Korea.
Additional bilateral free trade agreements
Panama and a number of Latin American nations have free trade agreements:
Mexico
Trade in goods including food, textiles, and electronics is encouraged under the 2015 free trade agreement.
Peru
This free trade agreement, which has been in force since 2012, promotes commerce in equipment, textiles, and agricultural products.
Colombia
The 2013 Free commerce Agreement between Panama and Colombia strengthens relations with Panama’s neighbor by promoting commerce in products and services.
By diversifying its trading network inside Latin America, these accords increase the scope of Panama’s imports and exports.
Membership in the world trade organization
Panama takes part in the international rules-based trade system as a WTO member. Panama may negotiate trade laws, take part in dispute settlement, and access international markets thanks to its participation in the WTO. Investor trust is increased and Panama’s international trading objectives are supported by its conformity to WTO criteria.
Commerce with China
Since they established diplomatic relations in 2017, Panama and China have built substantial commercial links, despite the fact that they do not yet have a formal trade agreement. China is a major importer of Panamanian commodities, particularly agricultural and copper products, and a major user of the Panama Canal. Negotiations are still ongoing despite discussions of a free trade agreement with China.
In conclusion
Panama’s position as a regional economic center has been strengthened by trade agreements that link it to important international economies. These agreements have set the stage for future expansion by increasing exports, drawing in foreign capital, and promoting economic stability. Panama is in a strong position to take use of its international trade network and its advantageous location thanks to continuous attempts to diversify and look into new alliances.
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