The Ministry of Economic Affairs and Panamanian trade officials said yesterday that the two nations have concluded negotiations on signing a Free Trade Agreement (FTA) after a fifth round of talks.
The agreement will be the first FTA to be concluded by Taiwan.
The agreement will be officially signed on Aug. 21 by President Chen Shui-bian (陳水扁) and Panamanian President Mireya Moscoso, during the latter's trip to Taipei. It will take effect on Jan. 1 next year.
"It's a milestone for both countries," Minister of Economic Affairs Lin Yi-fu (林義夫) told reporters yesterday.
"I expect the signing of the pact will raise the relationship between the two nations to a higher level." Lin said.
Lin's counterpart, Panama's Minister for International Trade Joaquin Jacome, was also delighted by the conclusion of what is his country's second FTA.
"The treaty will not only strengthen the two countries' diplomatic ties, but also help Panama's economy by providing a gateway for Panamanian goods to the rest of Asia," Jacome said.
Under the treaty, both countries agree to open their markets in agricultural and industrial commodities and the service and financial sectors
The immediate impact of the agreement on the economies of both sides will be in customs revenue.
When the agreement goes into effect, 6,200 categories, or 71 percent of Taiwanese products exported to Panama will become duty free, while the same tariff-free measure will also applied on 4,160 categories, or 48.49 percent of Panamanian goods exported to Taiwan.
Overall, 97 percent of exports from Taiwan to Panama will be duty free, while taxes on 95 percent of Panamanian goods in Taiwan will also be cut to zero by 2014.
Academics praised the conclusion of the FTA, saying that Taiwan will gain more from the agreement owing to the larger quantity and variety of goods it exports.
"Exports from Panama will not be significantly grow because of the duty-free measure since Panama only exports 24 categories of products to Taiwan," said Wu Rong-i (吳榮義), president of the Taiwan Institute of Economic Research. "Also, they have to compete with goods from China, Hong Kong and South Korea."
Currently, Panama ranks 70th among Taiwan's trading partners, with over US$42 million in bilateral trade for the year to May. Last year, imports of Taiwanese goods in Panama amounted to US$123 million, and Panamanian exports to Taiwan US$4.8 million.
Taiwan, however, can also use Panama as a channel to exploit and integrate the massive South American market, Wu said. The economic benefits will multiply after Panama is included in the Free-Trade Agreement of the Americas, which is the biggest inter-regional trade zone in the world, Wu said.
Another academic said, however, that the political benefits brought by the trade pact will be much larger than any economic ones.
"The move will enhance a willingness among other countries to sign FTAs with Taiwan; many were reluctant to be Taiwan's first free trade partner out of political considerations," said Daniel Liu (
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