Panama FTA Would Undermine U.S. Efforts to Stop Offshore Tax-Haven Abuse and Regulate Risky Financial Conduct
Trade Deal Would Leave Tax Shelters for AIG and Narcotraffickers Intact While Removing Existing U.S. Tools to Combat Tax Evasion and Other Financial Crimes
WASHINGTON, D.C. – President Obama's ability to deliver on his campaign commitments to close tax loopholes that promote offshoring and re-regulate the financial sector would be dealt a sharp blow if the U.S.-Panama Free Trade Agreement (FTA) is passed, according to a Public Citizen report released today (PDF).
The new report details how Panama explicitly created an industrial policy designed to create a "comparative advantage" in tax-evasion and money-laundering services for entities such as the bailed-out American International Group (AIG) and Mexican and Colombian narcotraffickers. The report also examines how specific FTA rules would remove key policy tools – such as limitations on transfers from tax-haven countries that are used to combat financial crimes – and would also conflict with U.S. government efforts to combat the global economic crisis by re-regulating finance.
"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," said Lori Wallach, director of Public Citizen's Global Trade Watch division. "The Obama administration has discarded or altered many leftover Bush initiatives, so why would it push a Bush trade pact that directly conflicts with its priority campaign goals of closing tax loopholes and regulating finance?"
The Panama deal, negotiated by the Bush administration, is modeled on the controversial North American Free Trade Agreement (NAFTA) template. It includes the controversial private "investor-state" enforcement system, which would give new powers to hundreds of thousands of private investors from around the world that are registered and have operations in Panama. This includes the right to challenge U.S. anti-tax haven policies and financial service regulations in foreign tribunals to demand taxpayer-funded compensation.
Among the key findings:
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