Panama and American Super Power Growth
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Since the time of Panama Canal’s opening in 1914 up to 1977, when it was transferred to the nation of Panama by the U.S., the canal served as a symbol of the United States might as well as influence in the world and America. There were disagreements over the canal’s transfer to Panama, which were amplified by the fear of the foreign takeover of the territory that came up after the official control that Panama took over Panama Canal on December 31, 1999. It is one of the significant points where the world’s oil supply flow passes a thin passage that is susceptible to attack. Even though the idea of canal continued to be a topic of debate, its establishment has much significance (Hudson 154).
Panama has three significant western hemisphere ports, including the largest free trade zone in the world. Transfer of containers for the United States shipment takes place in these ports. This makes it a vital location for checking the US bound cargo, but Panama has collaborated with ICE to initiate container security initiative (CSI) in these major ports. Activities of CSI began in 2007 with the main aim of preventing WMD from entering United States through container mode of shipping. To monitor, DHS puts container scanning gadgets in ports of Panama (Gray 39).
There is a Panama express agreement that was made between the United States and Panama, which states that the suspects apprehended by the United States surveying ships in navigable international waters are brought to the Panama shore in order to be shipped to United States. This is significant since it aids in termination of shipment of drugs at the sea. Suspects cannot enter Panama before going to SAN base, where USG later takes them. Therefore, this reduces drug trafficking (Kaushik 76).
Panama Canal is not only viewed as significant source of income generation and job creation in Panama alone, but this canal is also significant to the economy of the US. Over ten percent of U.S. shipping exports and imports pass through this canal. Exports provide job opportunities to the U.S. workers in the production process, and through import, the country’s citizens obtain the products they demand (Gray 39).
Meanwhile, the U.S. is the world’s single superpower interested in the smooth running of the economic growth. In case of any interference with the world trade, there can be universal problems in the economy. Thus, any disruption in transportation of commodities through the canal can significantly upset global economies. For example, if Peru was purchasing products from England, its economy would be affected negatively if the canal was ineffective. Export costs from England would considerably increase if there was no access to the Panama Canal, because England had to incur the additional cost of navigating around the South America. Due to the increased price of goods, Peru would not be able to purchase England’s commodities in bulk; hence, England’s revenue added from exports would reduce. Due to the decrease in revenue, England would run out of money to buy commodities products from U.S. and other nations. Similar effect will arise if the U.S. and other nations will experience the same import and export problems. The above example shows the immense significance the Panama Canal has in the worldwide economies and more so in the United States (Hudson 154).
The Panama-U.S. free trade agreement plays an enormous role in promotion of the U.S. economic growth and job creation. The Panama-U.S. FTA creates jobs and increases exports through elimination of tariffs and nontariff barriers in trade. Panama is the second largest partner of the U.S., and upon enactment of the agreement, 88% of the U.S. export goods received duty-free dealing (Gray 39).
The U.S. exported more than 450 million dollars worth of agricultural products to Panama in 2010. Less than 40 percent of these products received duty free treatment at the Panamanian market, whereas more than 99% of Panama’s duty-free exports are imported to the U.S. The agreement eliminates tariffs on 56% of the U.S. agricultural exports, thus equalizing the exports and imports (Hudson 154).
The accessibility of the U.S. firms to Panama’s growing service sector benefits from the U.S.-Panama FTA. The accessibility of some sectors like express delivery was improved by the agreement of Panama to eliminate measures that hinder investment in retail trade, which led to availability of new expert services that before were set aside for Panamanian nationals. This agreement also improves the protection of the U.S. intelligent property rights in the U.S. (Kaushik 76).
Furthermore, the agreement gives the U.S. a chance to participate on an economical basis in the provision of goods and services for Panama Canal Modernization construction project, which it plans to complete in 2014. There has been an increase in tax transparency and openness in both countries since the Panama Government signed a Tax Information Exchange (TIEA) in 2010. The information will become more accessible when TIEA comes into force; this is significant in implementation of tax laws, investigation or trial of offenders involved in tax matters, and collection of taxes (Gray 39).
Taking into consideration the number of ships passing through the Canal annually and the effect the closing of the canal will have on the world’s economy, one can understand the significance of the canal. Therefore, the Panama Canal and activities associated with it are critical to both the United States and global economy (Hudson 154).
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