In 2003, Panama completed a
free trade agreement (FTA) with El Salvador. Negotiations are under way
for a FTA agreement with the rest of Central America. Another FTA is
being negotiated with Taiwan. Panama also has bilateral preferential
trade agreements with Costa Rica, Honduras, Guatemala, Nicaragua and
the Dominican Republic. These accords are limited in scope and for
some products are based on quotas. Panama also has limited preferential
agreements with Mexico and Colombia. Previous negotiations with Chile
and Mexico are now on hold. Panama has also agreed to negotiate a more
broad preferential agreement with the Andean Free Trade Agreement (Pacto
Andino). For the past three years Panama has shown a strong interest in a
FTA with the United States. Following a presidential visit to the U.S. in
June 2003, the U.S. expressed its willingness “to explore options for
free trade” with Panama.

Panama is a beneficiary of the Caribbean Basin
Economic Recovery Act, better known as the Caribbean Basin Initiative
(CBI), which provides for one-way free trade access for specific
Panamanian exports to the U.S. In 2000, the U.S. Government enacted
new legislation enhancing the CBI program. The new CBI Law permits more
liberal treatment of textile imports from CBI countries. Since Panama
is not an important textile exporter, the new legislation has limited
value for Panama.