Democrats Support Secret Trade Deal that Lets Corps Evade Taxes

M. Tedesco has offered me the chance to post here from time to time and I’m taking advantage of his – misplaced, probably – generosity by discussing Bush’s truly rotten trade deal with Panama and the Democratic leadership that is hip-deep in the drive to make sure it passes.

David Sirota has another round-up of the latest on the secret trade deal the Democratic leadership is developing with Bush out of the range of cameras or witnesses – or its own rank and file. The deal as a whole involves Peru, Panama, South Korea and Columbia(sp) Colombia, with different provisions that apply to each country separately as well as a group of provisions they hold in common. Sirota lists half-a-dozen articles and they’re all disturbing but I want to key on the one that is most indefensible: the deal with Panama.

Economist and investment/globalization specialist Peter Riggs of the Tax Justice Network, which describes itself as an outfit devoted to “combating tax evasion by corporations and the rich”, took a good long look at the Panama trade deal. After noting that the Panama and Peru deals have been considered “relatively non-controversial and will probably pass”, he explains that the deal with Panama has nothing to do with trade.

Indeed, the proposed bilateral trade agreement with Panama has skated through without much attention at all. But the agreement with Panama is highly significant. The problem is, the trade agreement with Panama isn’t really about trade. It’s about foreign investor rights, money laundering, and tax dodging. And the United States should in no way reward this notorious offshore tax haven with a “gold star” Free Trade Agreement.


Panama has two major areas of “economic comparative advantage” in the region. One, obviously, is the Canal. But the other is much more insidious-and major U.S. corporations are hoping that no one draws any attention to it.

Panama’s other economic comparative advantages are in the area of tax and banking secrecy, and the ease with which U.S. companies can create subsidiaries in Panama for purposes of dodging taxes.

Panama is already home to a lot of U.S. corporate subsidiaries. How many? Tens of thousands of U.S. corporations have hung out a shingle-or should we say, set up an email box-in that country.

Panama boasts a total of 400,000 registered corporations-second only to Hong Kong as a home to corporations and corporate subsidiaries. Subsidiaries whose sole purpose, in many cases, is to help transnational companies avoid taxes.

(emphasis added)

In the last few years, Panama has been consistently condemned by the G-7’s Financial Action Task Force for “resisting international norms in combating tax evasion and money laundering.” The Clinton Administration several times “vigorously expressed its concern about loose corporate accountability standards in Panama, and the murkiness of the Panamanian banking sector.” But the Bush Administration’s deal with Panama – a deal the Democratic leadership is pushing hard – is not only enshrining those low standards and “murkiness” in law, it’s going one step further and allowing corporations to evade both trade laws and courts.

[W]ith the text of the Free Trade Agreement as it now stands, Panamanian investors would get new rights in the United States, with no new disclosure responsibilities at home. We have a situation where it is very, very easy to set up a business subsidiary in Panama. Panama’s “corporate” specialists advertise the country has having the most favorable and flexible incorporation laws in the world, in addition to some of the strictest banking secrecy laws available.

So the FTA will just encourage more U.S. businesses to pursue a strategy for tax purposes, designed solely to evade taxes in the United States. But then the text of the Panama agreement allows corporations and investors with a “substantial business presence” in Panama-that is, registered subsidiaries of multinational corporations-to use provisions found in Chapter 10 of the agreement to bring a claim against U.S. laws using an international investor tribunal. Panamanian-registered corporations would be able to bypass the U.S. courts system altogether in the case of an investment dispute involving the United States.

That’s right, Panamanian corporations – as well as Panamanian subsidiaries of U.S. corporations – would be able to bypass the U.S. legal system, and take their claims to an international investor tribunal. Historically, these tribunals have proven much more sympathetic to corporate interests than they have to public-interest regulation.

The case is heard before an ad-hoc panel of three international investment lawyers, working without a system of formal legal precedent. Panamanian investors would be empowered to challenge U.S. federal, state, or local laws, citing an “expropriation” of expected profits or a failure to provide Panamanian investors with a “minimum standard of treatment.”

(emphasis added)

Sirota explains what this means.

So, if U.S. federal, state, or local laws tried to close tax loopholes or prevent corporations from evading taxes through tax havens like Panama, those corporations could cite their subsidiaries in Panama and the Panama Free Trade Agreement as grounds to have an international tribunal strike those laws down. Such cases have already been brought under NAFTA by corporations seeking to strike down American environmental laws. But thanks to Panama’s tax haven status, the Panama deal would take such abuse to a whole new level.

Charlie Rangel has a long and distinguished history in the House, but his overt advocacy for and determination to pass the FTA is putting a blot on his reputation he’ll be hard-put to erase. He has publicly announced that he intends to see the FTA passed whether the rank-and-file like it or not, and that he will ram it through over their objections and the objections of its progressive opponents no matter what.

I never thought, a few years ago, that I would ever see Charlie Rangel pimping for corporate crooks but what else can you call this?

There is absolutely no way to explain away the Democratic leadership’s actions over this bill as anything other than a deliberate collusion with the Bush White House to clear the way for more corporate theft of the public Treasury by legalizing tax evasion for multinationals. There is no possible excuse that can be made for their rabid support of the Panama “trade” deal when its sole purpose is to enable corporate thievery. It can’t by any measure you like be rationally justified as an “accident”, incompetence, or electoral fear.

Would any of our Democratic apologists like to try explaining why we shouldn’t dump the Dems over this?

10 Responses to “Democrats Support Secret Trade Deal that Lets Corps Evade Taxes”

  1. Welcome aboard Mick!

    As for the post… as a Dem apologist myself… um… no?

    Seriously, can we get a list on who’s planning on supporting this? Globalization is already set to play hell on the economy, specifically, on the middle class who don’t have the option of moving themselves to a foreign PO box to dodge taxes, so this is the last thing we need at this time.

    Good post.

  2. Mick,

    I knew you wouldn’t let me down!

  3. Mick Arran says:

    Seriously, can we get a list on who’s planning on supporting this?
    Apart from Rangel, the ones publicly named who were involved in the secret negotiations with the WH were Pelosi, Reid, and Steny Hoyer. There’s been at least one report that Rahm Emanuel is pushing from backstage as per usual, but this hasn’t been very well-covered by the MSM – no surprise there – so other than general statements to the effect that “there isn’t much opposition”, we don’t really know and probably won’t until the hearings open later this month.
    Having said that, there’s a good deal more rank-and-file opposition to the Colombia and SK trade deals in which, on WH orders, the Dem leaders dropped their insistence on worker and environmental safeguards. Those same reps might likely also oppose thr Panama and Peru deals if they find out what’s in them. (I’ll put up my post on the Peru FTA tomorrow, if you want.)
    But I must say, as someone who doesn’t think the incompetent/scared Democrats meme is any longer credible and that the DLC/Blue Dog Alliance in control of the party is doing exactly what it wants to do, I don’t think there’s any chance of stalling passage of the 4 parts of the FTA. I fully expect that just enough Dem arms will be twisted by the leadership to pass them short of a revolt against the leaders – which I don’t expect.

  4. Lister says:

    COLOMBIA. The country’s name is COLOMBIA, not Columbia. That is the name of the distinguished Ivy League university in New York. It’s not that difficult to grasp!

  5. Thanks for the editorial work Lister. We’ll get on it right away. Did it bother you so much that you could not read the rest of the post or is that all you have to say?

  6. Yeah, I would very much like to see a follow up on this one, Mick. Econ and free trade are one of those few topics I don’t get into much, but I’m always willing to go deeper.


    secret trade deal huh.

    check this link out for the real stinkeroo.

    this deal has been proceeding since march, 2005 and no one knows about it.

    bush was up at the latest conference in quebec during his vacation under the radar.

  8. barb taylor says:

    my only hope is that no Congress person or Senator gets re elected…we need to throw them all out…and think seriously about one or two term limits so they can’t get too cosy in D.C. and continue to pull stunts like this….

  9. Mick Arran says:

    Golly. Alan Smithee (an infamous Hollywood alias) apparently thinks Karl Rove pays me to dump on Dems. News to me. If he is, his checks got lost in the mail, goddammit.

    You know, when your enemies act like douchebags, you sort of expect it. When people who are supposed to be your friends act like douchebags, it’s betrayal. Am I supposed to pretend they’re not and it isn’t?

    This is the reality-based community, Alan, and we don’t invent fantasies to cover, excuse, or hide douchebag-like behavior, not even when it comes from us.

  10. What in the h… good is posting on these boards. You might get your anger out , but it will not do a thing to stop Cheney , Bush , Republicans and the DEMOCRATS from screwing you over.
    The whole d…. democrat party should be told to go to h…. and replaced. They are just like Cheney now with the secret meeting to do things behind our backs the same as Bush has.. We are electing people to protect us , that are doing political favors for Corporations. People should flood the streets with protests , democration and boycotts. We should boycot the corporations. This TAKEOVER of our country has to have been planned and talked about by both democrats and republicans BEHIND CLOSED DOOR meeting many , many times.
    Our whole goverrnment is full of it. Here they are raising taxes on your house , car , sales tax and every other source they can get their dirty hands on while deleting tax on the very wealthy. People have to put a stop of this corporate takeover of our nation. Right now their are spewing their BS and propagand about Iran to invade it , while flooding the news media with terrort thread the same as before elections and times when they wanted to do something illegal and use the FEAR card so people would say it was ok….
    Your representatives should be flooded with mail and calls to stop this elimination of citizens from the process of our government. No wonder they are not worried about fixing the elections they must be part of it also.
    Why are we electing them to offices and paying them a salary to steal and take ours….


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