Development: On 2 August the Panamanian government led by President Juan Carlos Varela announced it was drawing up retaliatory measures in response to ‘discriminatory actions’ against Panama by “other states”.
Significance: The announcement is widely considered a response to a 29 July decree issued by the Colombian government led by President Juan Manuel Santos extending a tariff levied on textiles, clothes, and shoes from Panama’s Colón Free Trade Zone (FTZ) – reportedly to tackle alleged money laundering - until 1 November. Colombia’s move came despite a 7 June ruling by the World Trade Organisation (WTO) in favour of Panama over the issue. With the Colón FTZ - one of the world’s largest duty free trade areas - in continued crisis stemming in part from the tariffs imposed by Colombia, the Varela government is under growing pressure to act from local private sector lobbies such as Panama's association of FTZ users (AUZLC).
- A press release by the Panamanian presidency notes that the ministries of trade & industry (MICI), economy & finance (MEF), and foreign affairs are currently drawing up a list of new and possible measures to apply to states which “discriminate” against Panama in order to “defend” Panama’s economic interests. These measures could include new taxes or tariffs and/or the restriction of freedom of movement of individuals or transport.
- The 7 June WTO ruling had found that the tariffs imposed by Colombia were higher than allowed by WTO rules and were not necessary to combat money laundering. It was issued in response to a complaint filed by Panama back in June 2013. The dispute concerns a compound tariff first imposed by Colombia in January 2013 on imports of textiles, apparel, and footwear, consisting of a 10% ad valorem component and a specific component, which varies according to the import value and customs classification of the merchandise.
Looking Ahead: That the Colón FTZ - which AUZLC president Usha Mayani points out accounts for 7% of Panama’s GDP - continues to suffer a slowdown is suggested by a report released on 15 July by Panama’s national statistics institute (Inec). The Inec report found that in the first five months of 2016, trade in the Colón FTZ reached US$7.5bn, 15.8% less than on the comparable period in 2015.
