Panama Plays U.S. Off against China in FTA Talks, but Has Limited Hand

By Mat Youkee

"Let’s figure out a way to link Panama more meaningfully into the North American economy," said AS/COA's Eric Farnsworth to Diálogo Chino. 

In April 2019, Panamanian trade representatives met their Chinese counterparts in Beijing for what was billed as the fifth and final round of negotiations towards a free trade agreement (FTA) between the two countries. Following a whirlwind diplomatic romance – which began when former president Juan Carlos Varela cut ties with Taipei in favor of Beijing in 2017, and culminated in Xi Jinping’s visit to Panama a year later – the trade deal was seen as an important milestone for Panama’s shifting economic and foreign policy.

Three months later, the deal appeared to be dead. A new president, Laurentino “Nito” Cortizo, paused talks and said that his government would revise the content of the negotiations, “in detail and with caution”. However, while in Los Angeles for this year’s Summit of the Americas, Cortizo told media that FTA talks with China were set to resume. […]

“I don’t think the Cortizo government is reading the tea leaves effectively,” says Eric Farnsworth, vice president of the Council of the Americas, a US-based think tank. “I don’t think anyone in Washington has any interest in reopening the Panama FTA. To do so would mean Peru and Colombia lining up for the same, then Morocco and Jordan.”…

Varela’s courtship of China created significant diplomatic blowback. “From a US perspective, Varela went too far, too fast,” said Farnsworth. “He got a lot of negative attention, a lot of pushback in Washington.”…

It would also highlight the lack of a clear US trade agenda in the hemisphere, according to Farnsworth. He believes Panama should instead look to incorporate itself into the United States-Mexico-Canada Agreement (USMCA).

“Panama would be a terrific partner, and its services-based economy could really benefit,” he said. “I think they’re shooting the wrong target. You know, instead of looking at the past, let’s look in the future. Let’s figure out a way to link Panama more meaningfully into the North American economy.”…

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