WASHINGTON, Oct 31 (Reuters) - A U.S. free trade agreement with Panama went into force on Wednesday, five years after it was originally negotiated, opening the way for increased U.S. exports as the Central American country continues its canal expansion project.
Senior U.S. lawmakers and business groups welcomed implementation of the agreement, which was signed in June 2007 when George W. Bush was still president.
``This trade deal will guarantee access to Panama's $20.6 billion services market and more than $15 billion in infrastructure projects ... That is the type of boost our economy needs right now,'' Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said.
Congress approved the pact last year after President Barack Obama's administration negotiated side agreements with Panama to address concerns raised by many congressional Democrats about Panama's labor protections and tax haven laws.
``We must build off this success and continue to promote a robust and ambitious trade and investment agenda that will increase American prosperity and allow us to lead again,'' House of Representatives Ways and Means Committee Chairman Dave Camp, a Republican, said in a statement.
Critics such as Lori Wallach, director of Public Citizen's Global Trade Watch, said they expect the pact, which locks in Panama's current duty-free access to the United States, to destroy more U.S. jobs than it creates.
The U.S. Tax Information Exchange Agreement with Panama also has ``a large loophole'' that allows the country to deny tax information requests about U.S. firms and citizens, she said.
The United States is already Panama's largest trading partner and the two countries share a long and sometimes rocky history, linked to the Panama Canal.
About 10 percent of U.S. imports and exports of goods pass through the Panama Canal, and that percentage could rise as Panama completes its $5.3 billion canal expansion project.
The free trade pact immediately eliminates Panama's tariffs on 86 percent of U.S. consumer and industrial goods, including autos, chemicals, electrical equipment, information technology and medical technology, Sapiro said.
It also will immediately eliminate Panama's tariffs on roughly 50 percent of U.S. agriculture exports and guarantees U.S. companies access to Panama's highly services-dominated economy in areas like financial services, telecommunications, energy and professional services.
Panama's remaining agricultural, industrial and consumer product tariffs are phased out over longer periods of time.
The country's National Assembly recently passed the final piece of legislation to implement the agreement.
The U.S. Congress approved two other Bush-era trade deals with South Korea and Colombia last year that have already gone into force.