In general, textiles and clothing limit market access negotiations, but Panama produces very few of these products. The free trade agreement would grant immediate duty-free access to all textile and clothing products, subject to rules of origin (which require the use of fabrics and yarns produced in Panama or the United States).46 The sustainability of the more accommodating provisions and measures provide an advantage to the small Panamanian industry. Safeguards would increase tariffs on imports in which a sudden increase in volumes actually threatens or harms U.S. producers. The text also provides for short lists of materials, threads and fibres that are otherwise accompanied by tariffs. Market access rules were not the main problem of clothing. Given that Panama is a huge transshipment point for international trade and has its own duty-free zone, the main concern was to assure U.S. apparel manufacturers that there would be effective customs cooperation to discourage illegal transshipments of goods that do not comply with the rules of origin. There is a comprehensive provision on consultation, monitoring and on-site visits to support compliance with rules of origin.47 The labour and environmental provisions have been the subject of controversy in trade agreements, with significant differences in Congress and elsewhere on the aggressiveness of language in trade agreements to address these concerns. An important aspect of the U.S.-Panama Free Trade Agreement is that it adopts new standards for both the labor chapters and the environment, reflecting a bipartisan understanding of 2007, as developed by congressional and USTR leaders. Despite the multi-party nature of the agreement, some MEPs continue to express reservations about the effectiveness of labour rules and the general benefits of bilateral free trade agreements. Panama`s trade policy emphasizes increased exports as an engine of economic growth and refers to the Panama-Pacific Special Economic Area, the Free Zone (see below) and, to a lesser extent, small export processing areas and unconventional agricultural products as means of implementing this vision.

Panama is a global distributor and has ratified free trade agreements with Canada, Chile, Costa Rica, Cuba, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Singapore and Taiwan since 2002. It is also a party to an association agreement between Central America and the European Union. Negotiations on trade agreements are under way with Colombia, Peru and the European Free Trade Association (EFTA) countries. Panama has also expressed interest in negotiations with South Korea, the Caribbean Community (CARICOM) and the Gulf Cooperation Council26. House of Representatives. Commission on Roads and Means. Dominican Republic-Central America-U.S. Free Trade Agreement Act. H.Rept. 109-182, 50-51. The ancillary agreement is available on www.ustr.gov and for a summary of the debate, Rosella Brevetti, „CAFTA Opponents Blast U.S. Stance on Guatemalan Data Protection Law,“ BNA International Trade Reporter, March 10, 2005.

Below is a more in-depth discussion of key areas of negotiation and an analysis of topics that have been of particular interest to Panama and the United States, including the U.S. Congress. If necessary, the changes made in accordance with the agreement between the parties of 10 May are highlighted.