When it comes to the Panama Free Trade Agreement, President Obama is being torn between helping certain companies acquire additional overseas business and keeping labor unions and politicians against tax havens happy.
The Caterpillar company has been working for years at positioning itself to take advantage of the heavy equipment business to be generated by the canal expansion project. Caterpillar equipment is made in the USA and with general construction there at a standstill, the company has been dependent on foreign sales for most of its business over 2008. Things are not looking any brighter for 2009-2010 except for a stimulus program called the Panama Canal Expansion. This is a major opportunity for Cat to help it's balance sheet for this year and next and they don't want to miss it. They are putting on the full court press by lobbying hard to get theFTA passed. Everyday this week there are articles saying it will or won't happen.
But in the end, one has to wonder, why does it matter so much that they have the FTA. Can't they just sell and ship heavy equipment without it? Are import duties so high on this equipment that it would add to much to the price?
The fact is that the duties on this equipment are low or non existent and they certainly could build and ship from the U.S. and be competitive, but the real reasons Caterpillar wants the FTA has more to do with corruption than import duties. The fact is, any U.S. company wanting to do business in Panama right now is on a level playing field as long as they are willing to bribe there way to get the contracts they want. Of course, it is illegal for a U.S. firm to engage in such shenanigans, but other countries are not bound by such high moral standards and would be happy if the FTA were not in place. This gives foreign companies a distinct upper hand in gaining contracts in Panama.
The FTA has provisions in it that protects American companies from other foreign companies and governments using corrupt practices in order to gain contracts. These provisions call for complete transparency in the bidding process and allows a U.S. company to file charges in Panama that could bring all kinds of nasty things to light and hold up construction on the project until settled.
Like Obama, I too am torn on the FTA. I would like to see the provisions regarding corruption put in place to help eliminate the ability of the Panamanian politicians to rake it in, but I am against the strong arm tactics of the largest money laundering and tax haven in the world telling Panama it needs more transparency so the IRS can go fishing in ourfertile waters.