The USITC estimated that in 2006, 96% of Panamanian exports were exported duty-free to the United States under these various preferential regimes under Normal Trade Relations (MFN). Ibid., 1-5. The Panamanian dollar economy was a cornerstone of its long-term economic stability. It has protected Panama from currency risks, currency asymmetries and speculative attacks in other developing countries and eliminated the monetization of deficits, thereby reinforcing fiscal constraints and price stability. See Juan Luis Moreno-Villalaz, “Financial Integration and Dollarization: The Case of Panama,” Cato Journal, Winter 2005. For more information on trade preferences, see CRS RL33951, U.S. Trade Policy and the Caribbean: From Trade Preferences to Free Trade Agreements, by [author name scrubbed]. However, other issues emerged, which further impeded Congressional action on the agreement and not all of which fell within the scope of the free trade agreement. Shortly after the May 10 agreement, the election of Pedro Miguel Gonzalez Pinzén as President of the National Assembly of Panama on 3 September 2007 contributed to a new year of delay.4 Although he had been a member of the National Assembly since 1999, his election as head of the National Assembly increased his profile and drew the attention of Congress to his alleged role in the assassination of an American soldier in Panama in June 1992. A Panamanian court acquitted him of the charge in 1997, but the United States does not recognize the verdict and maintains an outstanding arrest warrant.5 This issue was effectively resolved with respect to the September 1, 2008 free trade agreement, when Gonzalez Pinzén refused to run for a second term as President of the National Assembly. The U.S.-Panama Free Trade Agreement is a comprehensive and reciprocal trade agreement that replaces the unilateral preferential trade treaty of the United States, extended by the Caribbean Basin Economic Recovery Act (CBERA), the Caribbean Basin Trade Partnership Act (CBTPA) and the General Preferences Regime (APS).

Approximately 88% of U.S. commercial and industrial exports will be duty-free after implementation, with the remaining tariffs maturing over a 10-year period. More than 50% of U.S. agricultural exports to Panama will also benefit from an immediate duty-free regime, with tariffs and tariff quotas (trQs) for certain agricultural products expiring until the 17th year of the agreement (year 20 for rice).