Concluding remarks by the Chairperson

This second Trade Policy Review of Panama has provided an excellent opportunity to consider the evolution of Panama’s trade and investment regime since its last review in 2007, and the challenges it now faces. I would like to thank His Excellency Mr. Miletón Arrocha, Minister of Trade and Industries; Vice-Minister of International Trade Negotiations, Ms. Diana Salazar; Ambassador Alfredo Suescum; and the rest of the delegation of Panama, for their active and constructive engagement in this review. I would also like to thank Ambassador Dacio Castillo for his valuable insights as discussant. Members highly appreciated Panama’s written responses to most of the 280 questions received, and look forward to any additional replies no later than one month after this meeting.

First of all, I would like to note that this has been a positive review. Members have praised Panama for its success in achieving outstanding economic growth, greater integration in world trade, and high levels of foreign direct investment. These achievements have been underpinned by open trade and investment policies, which have enabled Panama to capitalize on its comparative advantages and become a major exporter of international services, mostly associated with the Panama Canal and the Colon Free Zone’s operations. At the same time, Panama has been encouraged to strengthen the linkages between these buoyant sectors and the rest of the economy, reduce social disparities and allocate more resources to social programmes, including education.

Members welcomed Panama’s overall sound and stable macroeconomic policies, but they also pointed to the challenges of a rising fiscal deficit and encouraged Panama to consolidate its public finances.  

Members commended Panama’s strong commitment to the multilateral trading system, the conclusion of the Doha Round, and ongoing plurilateral initiatives such as the Information Technology Agreement. At the same time, Members took note of Panama’s active use of regional and bilateral trade agreements to deepen its integration into the global economy.

Panama was commended for moving ahead with significant legislative and regulatory reforms. These reforms have included strengthening the legal frameworks for competition and government procurement; overhauling the intellectual property regime to meet international obligations; amending the Free Zones Regime; and liberalizing mobile telephony. Members also welcomed Panama’s measures to facilitate trade, including the modernization of customs procedures, the introduction of a Single Window for exports and an authorized economic operator scheme, among others. In this respect, they encouraged Panama to also establish a Single Window for imports, and notify its category A commitments under the Trade Facilitation Agreement in a timely manner.

Notwithstanding these reforms and achievements, Panama still faces challenges in a number of areas. Panama has addressed most of these issues in its final remarks or written replies. I would now like to highlight some areas in which Members consider further improvements could be made:

• Tariffs: While acknowledging Panama’s efforts to simplify its tariff structure, Members have expressed concern about the fact that applied tariffs on a number of products exceed the bound rates. Panama has indicated that it is taking steps in this regard, with the view to rectifying this situation by the 1st of January 2015, at the latest, and that it will notify the WTO in due course.  
• Taxes affecting imports: Members have enquired about Panama’s rationale for applying different taxes on national and imported fuels mixed with ethanol, and urged Panama to remove discriminatory taxes. Panama informed that it is currently reviewing its fuel consumption taxes in light of the objectives of its national policy on biofuels. 
• TBT and SPS measures: Members raised a number of questions regarding the elaboration and implementation of technical regulations and sanitary and phytosanitary measures, in particular with respect to the importation of food products and live animals, and requested Panama to make further efforts to enhance transparency and notifications in these areas. Panama has replied that it is working on measures to improve its SPS system, including the establishment of a national SPS Committee, and to enhance its SPS and TBT notification mechanisms. 
• Free trade zones: Members welcomed Panama’s amendments to its free trade zones legislation and the removal of export subsidies, in order to meet its obligations under the Agreement on Subsidies and Countervailing Measures.  Members also took note of the key role played by the Colon Free Zone in regional and international trade. However, more information was sought regarding customs controls to monitor the entry, transit and exit of goods through the Zone, and about incentives granted in this area.
• Services: Members acknowledged the fundamental importance of the services sector for the Panamanian economy and its generally open trade and investment regime in the sector, and exhorted Panama to continue liberalization of services. In the banking sector, Members took note of recent financial reforms and called on Panama to continue applying relevant international regulations to strengthen banking supervision.
• Some questions were raised regarding the rationale and effects of foreign investment restrictions in some areas:

• With respect to maritime auxiliary services, Members expressed concerns about caps on FDI and crew nationality requirements under the recent Law N° 41, and exhorted Panama to remove such restrictions. Panama replied that it is currently evaluating this situation bearing in mind its international commitments.
• Members also sought clarification on Panama’s restrictions with regard to retail trade and encouraged it to further liberalize this sector.

To sum up, Panama was highly commended for its robust economic performance and rapid transformation into a regional trade and logistics hub, which is a good example on how an open trade and investment regime can support the integration of a small, services-oriented economy into the global economy. Members encouraged Panama to pursue further reforms along this path to consolidate these achievements.

Before I close this meeting, I would like to come back to the opening statement by Panama’s Head of Delegation about the social dimension of trade. He emphasized that Panama’s trade policies should promote freer and fairer trade, but at the same time be an instrument to improve the expectations and quality of life of its population, in other words, trade policy should not be divorced from social policy.

Finally, let me thank again the Panamanian delegation for their hard work and dedication to this exercise, and to the other delegations, the discussant and the Secretariat for this successful review.