CODEL LEVIN DISCUSSES OVERCOMING FTA ROADBLOCKS

UNCLAS PANAMA 000323

SENSITIVE
SIPDIS

WHSR PLEASE PASS TO USTR RAN KIRK, AUSTR DAN SEPULVIDA,
USTR GENERAL CONSEL TIM REIF;
TREASURY PLEASE PASS TO DAS MICHAEL MUNDACA AND
INTERNATIONAL TAX COUNSELOR JOHN HARRINGTON

E.O. 12958: N/A
TAGS: OREP OVIP ECON ETRD EFIN PM
SUBJECT: CODEL LEVIN DISCUSSES OVERCOMING FTA ROADBLOCKS
WITH PRESIDENT TORRJIOS


1. (SBU) Summary. Codel Levin, composed of Representative
Sandy Levin (D-MI and Chairman of the Trade Subcommittee of
the Ways & Means Committee),met with Panamanian President
Martin Torrijos on April 20. The discussion centered on the
U.S-Panama Free Trade Agreement (FTA) and the two core issues
that present obstacles to passage in Congress - labor and tax
haven status. Levin emphasized that he was on a fact finding
mission on workers' rights to augment the current U.S.-Panama
discussion at USTR of implementation of labor rights pursuant
to the FTA. On the tax haven issue, specifically whether or
when Panama should negotiate a Tax Information Exchange
Agreement (TIEA),Levin noted that he expected this matter to
be decided in discussions between the GOP and Treasury
beginning April 21. End Summary.


2. (SBU) During a cordial April 20 meeting at the annex to
the Presidential Palace, President Torrijos hosted
Representative Sandy Levin, Trade Counsel, Committee on Ways
& Means Jennifer McCadney, and Ambassador Stephenson. GOP
participants included First Vice President and Foreign
Minister Samuel Lewis, Minister of Commerce and Industries
Gisela de Porras, Minister of Labor Edwin Salamin and
Panamanian Ambassador to the U.S., Frederico "Freddy"
Humbert.


3. (SBU) The discussion quickly turned to the fate of the
FTA. Rep. Levin explained that he was on a fact-finding
mission on worker rights. "We want to make sure that enough
information is provided to those conducting this discussion
(at USTR)." "Worker rights are the path to the future,"
continued Levin. "Unless workers are part of economic growth,
we face growing inequality and the growing appeal of people
like Chavez." Rep. Levin reminded his hosts that only 45%
percent of Democrats voted for the Peru FTA and that the U.S.
political dynamics had changed since that time. President
Torrijos noted his government's commitment to make the
necessary labor reforms to ensure compliance with the FTA and
touted his record of economic progress, reduction in
unemployment, and poverty alleviation. Touching on the
sensitive issue of temporary labor contacts, Torrijos noted
that for the first time in his nation's history, the rate of
permanent work contracts was growing faster than the rate of
temporary contracts. He also stressed the growth of new
unions and settlement of a recent strike against a large
dairy enterprise (La Estrella),that employees were pleased
with.


4. (SBU) While emphasizing the need to resolve the tax
haven/TIEA issue, Rep. Levin noted that a way forward will be
determined between Treasury and the GOP. He stated that he
did not want this complex issue to become a weapon against
the FTA. Nonetheless, he urged Panama to negotiate a TIEA,
noting that revenue collection at a time of financial
downturn and increased government expenditures has become a
public priority. Levin distanced himself from the Public
Citizen stance against the FTA, noting that "making the issue
a political football" was "no way to deliver" it.


5. (SBU) President Torrijos denied that Panama was a tax
haven and noted that Panama's $63 billion in banking deposits
paled in comparison to hundreds of billions of dollars in
deposits in certain Caribbean jurisdictions. With 70 days
left in office, he stressed that he could not deliver a TIEA,
but could deliver promises relating to the regulation of
bearer shares of anonymous corporations. In addition, he
asked for a level playing field, noting that without more
unified multilateral action, the money would simply move to
other jurisdictions. Both Torrijos and First VP Lewis
stressed that a TIEA would not be achievable if perceived as
the U.S. imposing a condition on the FTA. Lewis opined that
"a TIEA will happen at some point," but should be addressed
at the G20/OECD level to avoid affecting the bilateral
relationship. Rep. Levin replied that a TIEA was important,
but "that we are not looking for an excuse not to take action
on the FTA." He also noted that the tax haven matter has
become prominent enough so that the U.S. cannot just defer to
the G20/OECD. "Let's see how the discussions (with Treasury)
go." Rep. Levin, acknowledged sensitivities, but expressed

optimism that both sides can find a way forward.


6. (SBU) The parties also discussed the just-completed Summit
of the Americas. President Torrijos was clearly pleased with
his meeting with President Obama, noting that the U.S. leader
expressed a commitment to the FTA at the meeting of Central
American Presidents. Torrijos also lamented the current
political campaign in Panama as devoid of substantive issues.
STEPHENSON