Panama WT/TPR/S/186/Rev.1 
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II. TRADE AND INVESTMENT REGIME 
(1) OVERVIEW  
1. Panama joined the WTO in 1997.  Since then it has made numerous notifications to the WTO, 
although in April 2007 it was in arrears in some cases.   It has used the dispute settlement mechanism 
on three occasions as a complainant and once as defendant .  Although it is not currently a signatory of 
any of the WTO plurilateral agreements, it is in th e process of joining the Plurilateral Agreement on 
Government Procurement. Panama has signed the Agreement on Information Technology and was in 
the process of implementing it in mid-2007.  It is participating actively in the Doha Development 
Round negotiations and has put forward a number of pr oposals, either individually or in conjunction 
with other countries. 
2. Panama considers that trade liberalization is a valid tool to strengthen development, but 
believes that the concerns of each WTO member need to  be taken into considera tion.  It also believes 
that a country's trade development should be achie ved through market access, rather than rely on 
preferences. 
3. Panama has free trade agreements in place with  El Salvador, Chinese Taipei and Singapore;  
and it participates in other preferential agreements  with Colombia, Costa Ri ca, Guatemala, Honduras, 
Mexico, Nicaragua and the Dominican Republic.  Panama has also signed a free trade agreement with Chile and has completed negotiations for another w ith the United States;  as of 2007, however, these 
agreements were not yet in force.  The latter ag reement could have a major regulatory impact in 
addition to significant economic effects, since the United States is Panama's main trading partner. 
4. Panama's foreign investment regime offers na tional treatment with some exceptions.  The 
Constitution reserves for Panamanian citizens the acquisition of land located less than 10 km from the 
country's borders, as well as wholesale trade, fish ing in Panamanian territorial waters and 
broadcasting.  In addition, the operation of games of chance and gambling, along with postal and telegraph services, are reserved as State monopolies.  In the case of games of chance and gambling, 
the Tax Code gives the Gaming Control Board of the Ministry of the Economy and Finance (MEF) 
the power to regulate the explo itation and operation of casinos, bin gos, hippodromes a nd other related 
activities by signing contracts with private Panamanian or foreign-owned firms.  In practice, it also holds a monopoly on electric power transmission.  Foreign investment in the air transport sector is subject to restrictions.  Panama has bilateral inv estment treaties in force with 16 countries for the 
reciprocal promotion and protection of investments.  
(2) T
RADE POLICY AND INVESTMENT FRAMEWORK  
(i) General institutional and legal framework 
5. Panama is a unitary republic.  The 1972 Politi cal Constitution of the Republic, as amended by 
the Reforming Act of 1978, the Constitutional Act of 1983, and Legislative Acts Nos. 1 of 1993, 2 of 
1994 and 1 and 2 of 2004, vests executive power in a President elected by direct popular suffrage for 
a five-year term.  A First and Second Vice President are also elected by the same system, along with 
the President, for a similar term of office.  Neither the President nor the Vice Presidents can be re-elected to the same office in two consecutive presi dential periods.  The most recent elections were 
held in May 2004.  The President appoints Ministers of State, and concludes and signs treaties and other international agreements. 
6. The President issues the instructions and regulati ons needed to enforce legislation, and also 
participates in the formation of laws, and sanct ions and promulgates them.  In exceptional WT/TPR/S/186/Rev.1 Trade Policy Review 
Page 14 
 
 
circumstances, the Executive may issue decree laws for reasons of necessity and urgency, when the 
National Assembly is in recess.1  Decree laws of this type must  be submitted to parliament for 
legislation on the issue during the ordinary session of  the legislative following their promulgation.  
The President of the Republic is empowered to re ject a draft law should he or she consider it ill-
advised or unenforceable. 
7. The President of the Republic, together with the Vice Presidents and Ministers of State, 
comprise the Cabinet Council, a consultative body th at deals with issues submitted by the President 
for its consideration.  The Cabinet agrees with th e President of the Republic on the appointments of 
Supreme Court judges, the National Attorney Genera l, the Attorney General of Administration, and 
their respective alternates, subject to National Assembly approval;  and also on the signing of 
contracts, negotiation of loans and divestment of  national movable or immovable property.  The 
Cabinet Council is also responsible for organizi ng public credit, recognizing the national debt and 
arranging for its service, and for setting and altering ta riffs, rates and other provisions relating to the 
customs regime. 
8. Legislative power rests with a single-chamber National Assembly2,  which currently consists 
of 78 members, who are elected by direct popular vote as party candidates.  Deputies are elected for a 
five-year term on the same day as the presidential el ection.  Apart from its legislative function, the 
National Assembly's powers include approving for ratification or rejecting, but not amending, 
international treaties and agreements signed by th e Government;  and to establish national taxes and 
contributions, rents and official monopolies for the provision of public services. 
9. Laws are classified as organizational (tho se deemed necessary to fulfil the purposes and 
exercise certain functions of the State established in  the Constitution), and ordinary (issued in relation 
to any other matter).  To pass an organizational law requires a favourable vote by an absolute majority 
of all members of the National Assembly, whereas or dinary laws only require approval by a majority 
of the parliamentarians present. 
10. The existing legal instruments are ranked in the following order:  the Constitution;  
international treaties;  laws issued by the Na tional Assembly and decree laws;  administrative 
decisions by the Cabinet of Ministers;  and resoluti ons issued by the Cabinet and by the incumbents of 
regulatory bodies.  International agreements have to be approved by the legislature and become an 
integral part of Panamanian domestic law. 
11. The judiciary consists of the Supreme Court of Justice, the higher courts of justice, and the 
circuit/sectional and municipal courts establishe d by law.  The Ex-Officio Ombudsman's Institute 
(Instituto de Defensoría de Oficio ) also forms part of the judiciary.  The Supreme Court of Justice 
consists of nine magistrates appointed for a ten-y ear term by the Cabinet Council, subject to approval 
by the legislature.  Magistrates in the other courts are appointed by the Supreme Court, and judges by their supervisors.  There are 36 higher court magistrates.
3 
12. The Office of the Comptroller General of the Re public is the State supervision body.  It is 
required to submit an annual report on its activities to the Government and the National Assembly.4 
                                                      
1 Article 159 of the Constitution. 
2 Article 146 of the Constitution. 
3 Judiciary of the Republic of Panama, Organization of the Judiciary.  Consulted at:  http://www.organo 
judicial.gob.pa/contenido/orga nizacion/judicial/jerarquia.htm. 
4 The most recent of these reports (as at April 2007), can be consulted on the Comptroller General 
Internet site (Office of the Comptroller General of the Republic (2007)). Panama WT/TPR/S/186/Rev.1 
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13. The Constitution provides that the Government will be represented in each province by a 
Governor who can be freely appointed and dism issed.  Each province has a Provincial Council, 
consisting of all the representatives of the province's districts ( corregimientos ).  The Provincial 
Council acts as a consultative body for the Provinc ial Governor, as well as for the provincial 
authorities and national authorities generally. 
(ii) Objectives, formulation and application of trade policy 
14. The Ministry of Trade and Industry (MICI) is responsible for the formulation and 
implementation of trade policy in Panama.  Within the MICI, the Vice Ministry of Foreign Trade (VICOMEX) formulates the country's foreign trade policy.  The Office of International Trade 
Negotiations (ONCI), also attached to MICI, ac ting through its two subsidiaries, the National of 
International Trade Negotiations Directorate (DINECI) and the National Directorate for the Administration of International Trade Treaties a nd Trade Defence (DINATRADEC), is responsible 
for negotiating bilateral and multilateral trade agreements
5, and subsequently implementing them.  To 
fulfil  this task, ONCI coordinates with all public institutions that have jurisdiction on each of the 
issues covered in the treaties;  and it also collaborat es with the private and production sector to define 
negotiating positions and administrative coordination.   This coordination is undertaken through the 
International Trade Negotiations Commission, whic h is attached to DINECI and consists of 
government officials and the main representatives a nd alternates of the most representative private-
sector associations.  At the present time the MICI is also in the process of creating the Commission 
for the Administration of International Trade Agreements, which will be attached to the 
DINATRADEC, to deal with implementation issues arising in current agreements. 
15. The main guidelines of Panama's trade policy are contained in the National Foreign Trade 
Strategy prepared by VICOMEX, which pursues the following objectives:  the signing of international 
agreements on external trade;  promotion of Pana manian exports;  promotion of the domestic changes 
needed to improve production;  active private-sector participation in the formulation of strategies to improve the business climate;  and the formation of clusters in priority sectors.
6 
16. In the context of this review, the authorities st ated that the multilateral trading system and the 
WTO are at the centre of Panama's trade policy.  They  indicated that the priority of Panamanian trade 
policy is to move the country towards multilateral integration, involving more open trade practices 
and greater opportunities for the Panamanian economy.  They also stated that Panama relies on the 
multilateral trade system, in a strong multilateral scena rio with clear and transparent rules, in seeking 
the benefits of stability for a small economy that is  dependent on international trade.  The authorities 
see trade policy as a key tool for increasing comp etitiveness, supported by social and educational 
policy.  Apart from participation in the WTO, the authorities consider that the deepening of regional 
integration, negotiation of trade and investment  agreements, unilateral openness, and a national 
competitiveness strategy are important elements in attaining its trade policy goals. 
17. Panama sees trade liberalization as a valid in strument for strengthening development ideals7;  
but, as each country's development and economic cond itions are different, the concerns of each WTO 
Member need to be analysed in order to offer them the tools they need to prosper.8  Panama also 
                                                      
5 See:  http://www.mici.gob.pa/negociaciones.php.  Law No. 6 of 15 February 2006 restructured the 
MICI, creating the Office of the Chief of International Trade Negotiations, who is responsible for negotiations 
in the WTO, as well as monitoring all related issues. 
6 VICOMEX, National Strategy on External Trade, Programs, Projects and Targets 2004-2009 .  
Consulted at:  http://www.mici.gob.pa/comerciointerior/2. 
7 WTO document WT/MIN (01)/ST/58 of 11 November 2001. 
8 WTO document WT/MIN (01)/ST/58 of 11 November 2001. WT/TPR/S/186/Rev.1 Trade Policy Review 
Page 16 
 
 
considers that the country's trade development shoul d be achieved through market access, rather than 
depend on preferences.9 
18. The authorities believe complementary mechanis ms are needed to exploit the advantages 
generated by this trade liberalization process;  and,  for this purpose, the Complementary Agenda is 
being implemented.  It has five objectives:  strengthening the country's economy by making 
enterprises more productive;  increasing Panama's ex ports;  positioning the country as a destination 
for foreign direct investment;  making human resources, innovation and technological development the driving forces in the economy;  and improving trade facilitation schemes with streamlined export 
mechanisms.  The Complementary Agenda is admi nistered by a Council of Ministers for the 
Complementary Agenda and Competitiveness, chai red by the MICI.  In addition, a Technical 
Secretariat, attached to the Office of the President  of the Republic, was created to coordinate, prepare 
and execute issues within the Council's jurisdiction. 
(3) F
OREIGN INVESTMENT REGIME  
19. In Panama there is no specific legal statute on foreign investment, and the general legal 
regime is applied equally to national and forei gn investors alike.  The Constitution provides that 
foreigners in the national territory shall receive the same treatment as nationals, but it allows the 
authorities to impose special conditions or deny access to certain activities to foreigners in general 
(Article 20 of the National Constitution (C.N.)), fo r reasons of employment, health, morality, public 
safety and national economy.  
20. The Constitution reserves for Panamanian citizens the acquisition of national or private land 
located less than 10 km from the country's borders (Article 291 of the C.N.), and exercise of 
wholesale trade (except in firms that sell products  manufactured by themselves) (Article 293 of the 
C.N.).  It also reserves for Panamanian citizens th e right to fish in Panamanian waters when the 
produce is to be sold within the country (Article  286 of the Tax Code), and also the activity of 
broadcasting (Article 286 of the C.N. and Articles 14  and 25 of Law No. 24 of 30 June 1999).  In 
addition, Panamanian legislation reserves for the State the right to operate certain activities on a 
monopoly basis;  as of mid-2007, these were confin ed to games of chance and gambling, and postal 
and telegraph services.  At the same date, the State held a de facto monopoly on electric power transmission.  According to the Constitution, sa lt pans, mines, undergroun d and thermal waters, 
hydrocarbon deposits, quarries and mine ral deposits of all kinds may not be privately owned, but they 
can be exploited by private enterprise through conce ssions or other types of contract (Article 257 of 
the C.N.). 
21. Law No. 54 of 22 July 1998 (Law on Legal Stab ility for Investments) promotes and protects 
investments made in Panama, including foreign inv estment.  The Vice Ministry of Foreign Trade, 
acting through the National Investment Promotion Di rectorate, is responsible for trade policy, both 
domestic and foreign.  Law No. 54 states that fore ign investors and the enterprises in which they 
participate have the same rights and obligations as national investors and enterprises, without any 
restrictions other than those established in the Cons titution.  The same law allows foreign investors to 
freely dispose of the proceeds of their investment , guaranteeing free repatriati on of capital, dividends, 
interest and the profits arising from the investment, and freedom to market their production.  For firms 
registered in the National Investment Promotion Di rectorate, the law freezes all conditions existing at 
the time an investment is made.  Registration is not mandatory, however. 
22. There are also certain restrictions relating to the nationality of a firm's executive staff and 
workers.  Up to 10 per cent of a firm's total work force may be fo reign nationals, and up to 15 per cent 
                                                     
 
9 WTO document WT/MIN (05)/S T/119 of 16 December 2005. Panama WT/TPR/S/186/Rev.1 
 Page 17 
 
 
in the case of technical or specialized personnel.  The proportion of foreign technical or specialist staff 
may be increased, for a predefined period, with due authorization from the Ministry of Labour. 
23. Although foreign investment does not need prior authorization, registration and licensing 
requirements exist in certain activities that gene rate investments, e.g. banks, insurance and 
reinsurance (chapter IV(5)(iii)). 
24. Royalties remitted abroad are subject to a 15 per cent tax on the amount of the remittance;  in 
addition, interest paid abroad is subject to a withholding tax of 6 per cent of the amount remitted 
(chapter III(4)(i)). 
25. The Constitution allows for the possibility of  expropriations but only in cases involving 
public utility or social interest, through a special legal ruling and prior payment of indemnification.  
The amount of the indemnification is generally estab lished by a market valuation of the property in 
question, but the legislation does not indicate how compensation should be paid (Article 48 of the 
C.N. and Article 18 of Law No. 54 of 22 July 1998). 
26. Disputes are settled through the national courts;  and the foreign investor has access to the 
same procedural remedies as the local investor.  Wh ere investment agreements have been signed with 
other countries, the provisions indicated in the co rresponding agreements are applied.  It is also 
possible to use international arbitration.  Pana ma is a member of the Multilateral Investment 
Guarantee Agency (MIGA) (Law No. 19 of 8 Ja nuary 1996), and the International Centre for 
Settlement of Investment Disputes (ICSID) (Law 13  of 3 January 1996).  Only one case has been 
brought against Panama in ICSID since it joined th is organization in May 1996 – a complaint, filed in 
December 2006, concerning a situation in the electric power sector.10 
27. Panama has signed agreements for the recipro cal promotion and protection of investments 
with 18 countries,  16 of which were in force in June 2007.11  It also has double taxation agreements 
with eight countries;  these agreements are not general but are limited to taxation in the areas of international maritime and/or air transport, depending on the agreement.
12 
(4) INTERNATIONAL RELATIONS  
(i) World Trade Organization 
28. Panama has been a WTO member since 6 September 1997.13  It grants MFN treatment or 
better to all its trade partners.  Although it is not a signatory of any of the WTO plurilateral 
agreements, it has observer status in the Committe e on Government Procurem ent, and is in the 
                                                      
10 Nations Energy Inc. and others v. Republic of Panama (Case No. ARB/06/19).  Information 
consulted on the ICSID Internet site:  h ttp://www.worldbank.org/icsid/cases/pending.htm. 
11 The countries are as follows (year  of signing the treaty):  Argentina (1996), Canada (1996), Chile 
(1996), China (1992), Cuba (2001), Czech Republic  (1999), France (1982), Germ any (1983), Korea (1996), 
Mexico (2005), Netherlands  (2000), Spain (1997), Switzerland (1985), United Kingdom (1983), United States 
(1982) and Uruguay (1998).  In 2003, Panama signed agreements with the Dominican Republic and Ukraine 
which were still awaiting ratification by th e countries in question as of mid-2007. 
12 Panama has agreements with:  Argentina (maritime transport, 2005), Chile (air transport, 1996), 
Cyprus (shipping, 1993), France (shipping and aircraft operation, 1995), Mexico (air navigation services on 
official visits, 2005), Netherlands (aircraft operating en terprises, 1997), Peru (inter national aircraft operation, 
1996), Spain (aircraft operation, 1994 ) and the United States (maritime and air transport, 1987) (see Ministry of 
Foreign Relations:  http://www.mire.gob.pa/). 
13 General Council Decision of 2 October 1996.  WTO document WT/ACC/PAN/20 of 
11 October 1996. WT/TPR/S/186/Rev.1 Trade Policy Review 
Page 18 
 
 
process of joining this plurilateral agreement.14  Given the date of its accession to the WTO, Panama 
did not participate in the expanded negotiations on  telecommunications or financial services within 
the GATS framework. 
29. Panama has signed the Information Technolog y Agreement (ITA), but has yet to submit 
formal documentation to the WTO supporting its application.15  The authorities stated that they are 
working on implementation of the Agreement. 
30. Panama has submitted a large number of notifica tions to the WTO, but several were pending 
in April 2007, e.g. on agricultural export subs idies (for 2004 and 2005), domestic support (for 2003, 
2004 and 2005), and anti-dumping measures as from 2004 (see Table AII.1). 
31. Panama has participated in the WTO disput e settlement mechanism as a defendant in one 
case, as complainant in three;  and as a third part y in a further three cases.  In March 2005, Mexico 
requested consultations with Panama in relation to  Cabinet Decree No. 20 of 17 July 2002, in which 
Panama created two new dairy product subheadings in  its national tariff.  Mexico claimed that the 
new tariff classification for those dairy products could violate several Ar ticles of the GATT 1994 and 
the Agreement on Agriculture, while at the same time undermining the tariff concessions that Panama 
granted to Mexico upon joining the WTO.  In September 2005, the parties to the dispute notified the 
DSB that they had found a mutually satisfactory solution.16 
32. Of the three cases in which Panama participat ed as a defendant, panels were established in 
two cases relating to the European Union's banana  regime.  In the third case, Panama requested 
consultations with Colombia in July 200617, but in December 2006, it notified the DSB that the case 
had been settled mutually. 
33. In the WTO Doha Round negotiations, Panama  has submitted several contributions and 
proposals either individually or in conjunction w ith other WTO members.  In conjunction with a 
group of countries that are not founder members of the WTO, it presented a communication calling for differential treatment in the Doha Round agri culture negotiations for countries defined in the 
proposal as "Recently Acceded Members."
18  With regard to market access for non-agricultural 
products, Panama also supported a joint proposal  for "Recently Acceded Members" which advocates 
treatment beyond that currently available to developing countries.19 
34. Panama has participated in a joint communica tion for the liberalization of tropical products20;  
and it has also submitted joint proposals fo r the liberalization of financial services21, and trade in fish 
                                                      
14 WTO document GPA/89 of 11 December 2006. 
15 WTO document G/IT/1/Rev.39 of 26 March 2007. 
16 See:  http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds329_e.htm. 
17 See: http://www.wto.org/spanish/tratop_s/dispu_s/cases_s/ds348_s.htm, and WTO document 
G/L/782, G/VAL/D/8, WT/DS348/1 of 25 July 2006. 
18 WTO document TN/AG/GEN/24 of 13 March 2007, Negotiating proposal by Recently Acceded 
Members , submitted in conjunction with Albania, Armeni a, China, Croatia, Ecua dor, Former Yugoslav 
Republic of Macedonia, Jordan, Ky rgyz Republic, Moldova, Mongolia , Oman, Panama, Saudi Arabia, The 
Separate Customs District of Taiwan, Penghu, Kinmen and Matsu, and Viet Nam. 
19 WTO document TN/MA/W/83 of 26 February 2007.  Market access for nonag ricultural products, 
negotiating proposal of Recently Acceded Members.   Communication of Albania, Armenia, Croatia, Ecuador, 
Former Yugoslav Republic of Macedo nia, Jordan, Kyrgyz Republic, Moldova, Mongolia, Oman, Panama, The 
Separate Customs District of Taiwan, Penghu, Kinmen and Matsu, and Viet Nam. 
20 WTO document TN/AG/GEN/19 of 8 June 2006.  Proposals on modalities and implementation for 
the fullest liberalization of tropical and alternative products , Communication of Colombia, Costa Rica, 
Guatemala and Panama. Panama WT/TPR/S/186/Rev.1 
 Page 19 
 
 
and fish products.22  Panama circulated its initial offer on services in the context of the Doha 
Development Agenda negotiations in April 2003.  As of June 2007, it had not presented a revised 
offer. 
(ii) Preferential trade agreements 
(a) Current free trade agreements  
35. As of April 2007, Panama had free trade agr eements in force with El Salvador, Chinese 
Taipei and Singapore.  Its trade with these three c ountries is small, however:  El Salvador accounted 
for just 1.3 per cent of Panama's total trade in 2005;  Chinese Taipei accounted for 0.9 per cent of the 
total, and Singapore less than 0.1 per cent. 
36. The Free Trade Agreement (FTA) between Central America and Panama and the Bilateral 
Protocol between El Salvador and Panama were signed on 6 Marc h 2002, and ratified by Panama 
through Law No. 24 of 2003, in the first case, a nd Law No. 25 of 2003, in the second.  The Central 
America-Panama FTA entered into force for El Salvador and Panama on 11 April 2003, laying the 
foundations for creating a free-trade zone with the other Central American countries.23  The FTA 
eliminates most customs duties, albeit with some  exceptions.  In the case of Panama, these mainly 
involve alcoholic beverages, clothing and textiles,  and automobiles, for wh ich the MFN tariff will 
continue to be applied.  The agreement also regul ates rules of origin, customs procedures, safeguard 
measures, unfair trade practices, technical barrier s to trade, sanitary and phytosanitary measures, 
investment, cross-border trade in services, financial services, telecommunications, temporary entry of business personnel, competition policy, government pr ocurement, intellectual property and dispute 
settlement.  The FTA includes disciplines on export subsidies and domestic support for agriculture, 
but allows certain restrictions on imports and exports.
24  The agreement contains a positive list of 
commitments on services. 
37. The FTA with Chinese Taipei was signed on 21 August 2003 and entered into force on 
1 January 2004.  It was ratified in Panama and in corporated into domestic legislation through Law 
No. 62 of 18 October 2003.25  The agreement freezes tariffs on merchandise trade as from the moment 
it enters into force;  it also defines a group of goods subject to immediate tariff reduction, proposes 
progressive elimination of other tariffs through a reduction schedule, and establishes mechanisms for 
consultation on goods, rules of origin and cust oms procedures.  The tariff reduction schedule 
encompasses products to be liberalized over five or te n years, in equal annual instalments, and another 
group for which tariff duties will remain at the base level.  The agreement provides guidelines on 
rules of origin, customs procedures, sanitary and ph ytosanitary measures, technical barriers to trade, 
competition policy, government procurement, inv estment, cross-border trade in services, financial 
services, telecommunications, electronic trade, transparency and dispute settlement.  It also contains a positive list of commitments on services. 
                                                                                                                                                                    
 
21 WTO document TN/S/W/43, S/FIN/W/43 of 8 June 2005.  Communication of Australia, Bahrain, 
Canada, the European Communities, Japan, Norway, Oman, Panama, Singapore, Switzerland, The Separate 
Customs District of Taiwan, Penghu, Kinmen and Matsu, and the United States. 
22 Jointly with Canada, Iceland, Norway, New Zealand, Singapore and Thailand.  WTO document 
TN/MA/W/63/Add.1 of 22 May 2006. 
23 The text of the agreement and the full list of tariff reductions can be consulted on the Internet site of 
the Central American Integrated Economic Inform ation System (SIECA), http://www.sieca.org.gt/ 
Publico/RelacionesComercialesExternas/TLC-CA_Panama/listapan.pdf. 
24 In the case of Panama, these include narcotic drugs, gunpowder and explosives, scrap rubber, 
retreaded or used tyres, used clothing and footwear, used vehicles and armaments, among other items. 
25 The full text of the agr eement can be consulted at:  http://www.mici.gob.pa/. WT/TPR/S/186/Rev.1 Trade Policy Review 
Page 20 
 
 
38. The FTA with Singapore was signed on 1 March 20 06 and entered into force on 1 July 2006.  
In Panama it was ratified and incorporated into domestic legislation through Law No. 19 of 
20 June 2006.26  The agreement freezes tariffs on merchandise trade as from the moment it enters into 
force;  and it proposes progressive tariff elimina tion through a reduction schedule, and establishes 
consultation mechanisms on goods, rules of origin a nd customs procedures.  The authorities state that 
Panama granted Singapore immediate liberalization of  an estimated 94 per cent of its exports, and 
tariff reduction periods of five or ten years in equa l annual instalments for the remainder of its tariff 
lines.  For other products, the tariff will remain at th e base rate for ten  years and then will either be 
eliminated or remain at the base level without reduction.27  The FTA provides guidelines on rules of 
origin, customs procedures, sanitary and phytosan itary measures, technical barriers to trade, 
competition policy, government procurement, inv estment, cross-border trade in services, financial 
services, telecommunications, electronic commerce, tr ansparency and dispute settlement.  It also 
includes a positive list of commitments on services. 
(b) Other treaties and preferential agreements 
39. Panama had four free trade and preferential exch ange treaties in force in April 2007, with 
Costa Rica, Guatemala, Honduras and Nicaragua, all of which have the same basic design28 and were 
signed in the 1970s. The agreements were bei ng renegotiated in mid-2007 along the lines of the 
Panama-El Salvador agreement.  Each agreement relates exclus ively to products included on a 
positive list, which are duty-free, albeit subject to tariff quotas in some cases.29 
40. As of April 2007, Panama also had partial scope  agreements with Colombia, Mexico and the 
Dominican Republic. 
41. The partial scope agreement between Panama and Columbia was signed on 9 July 1993 and 
entered into force on 18 January 1995.  Protocols am ending lists of concessions entered into force in 
2003 and 2005.30  Preferences of 50, 70 or 100 per cent ar e applied to a small group of products.31  
The partial scope agreement between Panama a nd Mexico was signed on 22  May 1985 and entered 
                                                      
26 The full text of the agreement can be cons ulted at:  http://www.mici.gob.pa/negociaciones/ 
25574_2006%20Singapur.pdf. 
27 MICI, Panama-Singapore Free Trade Agreement. Consulted at:  http://www.mici.gob.pa/ 
encuentro1/Presentacion%20mici%20Singapur.pdf. 
28 The texts of these treaties can be consulted at the MICI and MIRE internet sites:  
(http://www.mici.gob.pa/tratados.php) and ( http://www.mire.gob.pa/ ), respectively.  The agreement with Costa 
Rica was signed on 8 June 1973, approved through Law No. 2 of 8 November 1973 and entered into force on 16 January 1974.  The agreement with Guatemala was signed on 20 June 1974, approved through Law No. 2 of 
October 1974 and entered into force on 25 April 1975.  The agreement with Honduras was signed on 
8 November 1973, approved through Law No. 13 of 9 November 1973 and entered into force on 14 February 1974.  The agreement with Nicaragua was signed on 26 July 1973, approved by Law No. 4 of 8 November 1973 
and entered into force on 18 January 1974. 
29 The list of products included in the Free Trade and Preferential Exchange Agreement between Costa 
Rica and Panama can be consulted on the Internet site of the Ministry of Foreign Trade of Costa Rica 
(http://www.comex.go.cr/acuerdos/comerciales/TLC%20Panam a/lista.pdf).  The list of products included in the 
Free Trade and Preferential Exchange  Agreement between Honduras and Panama can be consulted at:  
http://www.mici.gob. pa/honduras/Corre lacion%20Honduras%20ordenadov.htm. 
30 See: http://www.mici.gob.pa/segundo%20protocolo%20colombia/Preferencia%20que%20Panama 
%20aplicara%20a%20Productos% 20de%20Colombia%202005.pdf. 
31 These include fish, seafood, certain fruits and vegetables;  aluminium, acetic acid;  aniline and its 
salts;  cosmetic products;  lacquers;  ointments;  hygiene, medical or surgical articles;  office utensils;  bobbins;  hats;  deodorants;  mirrors;  pipes;  screws. Panama WT/TPR/S/186/Rev.1 
 Page 21 
 
 
into force on 24 April 1986.  It grants unilateral preferences for a small group of Panamanian products 
to access the Mexican market;  Panama does not  grant preferences under this agreement.  
42. The partial scope agreement between Panama and the Dominican Republic was approved by 
Law No. 19 of 27 December 1985 and entered into for ce on 8 June 1987.  An annex to the agreement 
lists 120 products for which  trade between th e two countries is duty-free in both directions32;  and 
there is a list of 25 Panamanian export products fo r which the Dominican Republic grants duty-free 
access, and a list of 26 products for which Pana ma grants duty-free entry from the Dominican 
Republic.  The latter include products such as fish, pl astic fibres, paints and yarns, among other items.  
(c) Preferential agreements awaiting entry into force 
43. Panama has also signed free trade agreements with Chile and the United States, but they were 
not yet in force at April 2007. 
44. The Panama-Chile FTA was signed on 27 June 2006, and approved by Panama through Law 
No. 7 of 12 January 2007.  The treaty envisages st epwise elimination of tariffs between the two 
countries, starting on 1 January of the year in which the agreement enters into force.  In the case of 
Panama, the reduction schedule includes goods for whic h tariffs will be eliminated immediately;  
goods that will be liberalized progressively over 5, 10, 12 or 15 years;  and others for which tariff 
duties will remain at the base rate without reduction.  The treaty also covers rules of origin, customs 
procedures, sanitary and phytosanitary measures, technical barriers to trade, competition policy, 
government procurement, investment, cross-border trade in services, financial services, telecommunications, electronic commerce, transparen cy and dispute settlement.  The FTA contains a 
positive list of commitments on services.  In 2005, tr ade with Chile accounted for 0.6 per cent of 
Panama's total trade. 
45. Negotiations leading to the Trade Promotion Treaty (TPA) between Panama and the United 
States were completed on 19 December 2006.  The dr aft treaty envisages phased elimination of tariffs 
between the two countries, starting on 1 January of the year in which the agreemen t enters into force.  
In general, the maximum phase-out period in the case of Panama is 20 years.  Some products (e.g. 
potatoes and fresh onions for Panama) do not have  any tariff reduction commitment and will be 
liberalized only through a quota.  In the agriculture  sector, grace periods of two and ten years were 
agreed upon, during which the tariff will not be lowere d.  Tariff reduction is concentrated in the final 
years of the programme for some industrial products.  The TPA also covers trade in services, investments, intellectual property, institutional provisions and dispute settlement;  and it contains 
provisions on environmental protection and labour issues. 
46. According to a document prepared by the MI CI, Panama will immediately liberalize about 
67 per cent of its agricultural tariff universe when th e TPA enters into force;  8.5 per cent will the 
liberalized in five years;  9.8 per cent over periods of up to ten years;  14.6 per cent in periods longer 
than ten years, and 0.1 per cent (potatoes and onions) will not be liberalized at all.
33  In the industrial 
sector, Panama will immediately eliminate tariffs on 71.2 per cent of the tariff universe;  in five years 
it will liberalize 10.8 per cent;  and it will liberalize th e rest on a straight-line basis over ten years.  
About 88.5 per cent of United States products will enter Panama duty-free as soon as the treaty enters 
into force;  4.5 per cent will be liberalized in five years;  and 7 per cent in ten years.  In 2005, trade 
with the United States accounted for 30 .8 per cent of Panama's total trade. 
                                                      
32 These include a group of agricultural products, fi sh and seafood, medicines, creams, paper, wood 
products, certain garments and furniture.  The full list can be consulted at http://www.mici.gob.pa/rdom/Anexo-
Lista-de-Productos-Negociados-Final-60203.pdf. 
33 Ministry of Trade and Industry (2007). WT/TPR/S/186/Rev.1 Trade Policy Review 
Page 22 
 
 
47. In its trade with the United States, Panama benefits from unilateral preferences under the 
Caribbean Basin Initiative (CBI) and also under the Generalized System of Preferences (GSP). 
According to the Office of the United States Trad e Representative, over 95 per cent of merchandise 
exports from Panama entered the United States duty-free in 2005.34 
48. Panama also benefits from the GSP of Canada , the European Union, Japan, New Zealand, 
Norway, Russia, Switzerland and Turkey.35  It does not participate in the Global System of Trade 
Preferences among Developing Countries (GSTP). 
                                                      
34 See:  http://www.ustr.gov/assets/Document_Li brary/Fact_Sheets/2006/a sset_upload_file138_10233.pdf. 
35 UNCTAD, Generalized System of Preferences, List of Beneficiaries.  Consulted at:  
http://www.unctad.org/en/docs/itcdtsbmisc62rev1_en.pdf.