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