Thank you, Chair Richardson and honourable members, for the opportunity to appear this afternoon to discuss Bill C-46.
The Canada-Panama FTA is in the best economic interests of Canada. The free trade agreement that has been negotiated on behalf of Canadians is comprehensive and of high quality. It will benefit the Canadian and Panamanian economies and will provide positive employment opportunities. The agreement will contribute to political stability, democracy, and greater openness and integration in the western hemisphere. It will also contribute to Canada's overall priority to enhance economic cooperation in the region.
The Canada-Panama FTA will improve market access in Panama for Canadian farm products, particularly wheat, as well as industrial and other non-agricultural goods and services. The agreement provides a framework for expanded two-way trade opportunities. While our bilateral trade and investment is modest, this agreement will help Canadian farmers, manufacturers, service providers, contractors for government procurement, mining and resource companies, and consumers.
The reality is that Panama is not a large market for Canada. At about $132 million in total two-way trade, one could easily conclude that this agreement has limited potential for Canadian businesses and workers. But such thinking would dismiss the potential of this market for growth and investment in the future, as well as the strategic importance of the country.
Panama has experienced exceptional economic dynamism in recent years, with average annual GDP growth of 7.5% from 2002 to 2008. Panama's main engines of growth are in the construction and financial services sectors. Panama demonstrated extraordinary resilience in the global financial crisis. The country avoided recession in 2009, growing by 2.4% in real terms, and it is expected to grow by 4% this year. Panama has the most open economy in the region, with a diversified and buoyant export base.
According the Hong Kong and Shanghai Bank, the Government of Panama's investment plan could reach 7.5% of GDP annually for the next five years. This would provide tremendous opportunities in government procurement contracts for companies such as SNC-Lavalin, Hatch Ltd., and other engineering construction firms and service providers.
The government's investment centrepiece will be to expand the Panama Canal to deal with increased traffic to Asia and back. Members of this committee understand very well how strategically located this country is as a global logistics hub. The Government of Panama is in reasonably good fiscal shape, with a prudent approach to expenditure increases and better than expected revenues. Panama's deficit of 1% of GDP is well below its legal limit of 2.5% of GDP.
Panama is on a clear and disciplined path to sustainable growth and development. Over the next five years, the administration of President Martinelli will dedicate $13 billion to public investments in education, roads, airports, mass transport, and other projects. Public finances will remain stable to lower the debt-to-GDP ratio to 35% or better by the middle of the decade. Social investment in reforms will further improve the standard of living of Panamanians, primarily focused, of course, on infrastructure and activities that will stimulate employment and foster sustainable development.
Finally, through accumulation of financial reserves from the Panama Canal expansion, establishment of a sovereign wealth fund will become a national priority.
This committee and this Parliament should act expeditiously so that the FTA can come into effect as soon as possible. Almost 100% of tariffs on non-ag Canadian exports to Panama will be eliminated. This will make Canadian exports of machinery, motor vehicles and parts, pharmaceutical equipment, and pulse crops even more competitive with respect to Panama.
Incidentally, about 90% of tariffs on manufactured goods exports from the U.S. to Panama will be eliminated under their agreement, once their agreement is ratified by Congress.
The Canada-Panama FTA will eliminate tariffs on 94% of ag exports from Canada to Panama. Panama maintains tariffs on agricultural products, as you've heard before this committee before, that average 13.4%, but with tariff peaks as high as 260%. In the still to be ratified U.S.-Panama FTA, half of America's agricultural products will enter Panama duty-free immediately, while most of the remainder will be eligible for free access over a 15-year period.
The Canadian market is already open to Panamanian imports. In 2007, 97% of imports from Panama entered Canada duty-free. So this FTA is not likely to have a detrimental impact on our competitiveness. An FTA would give Canadian businesses, farmers, and workers market access commensurate with that achieved by the U.S. with its FTA with Panama, to level the playing field with our major competitors.
As indicated in FOCAL's analysis submitted to this committee this past Monday, the Canada-Panama FTA includes chapters on investment, intellectual property rights, government procurement, temporary entry for business persons, and side agreements on labour and environment. This more comprehensive style of agreement presents a framework for modest growth in Canada and Panama, and through this agreement, Canada and Panama should expand their dialogue and cooperation on a variety of issues, including security, democratic governance, as well as economic prosperity—important priorities in this hemisphere. Effective dispute settlement provisions are essential to ensure that trade agreements are implemented and enforced fairly, transparently, and in a binding fashion. This agreement provides access to such a dispute settlement process. Positive prospects for growth, increased access, security, openness, transparency, predictability, protection, rules, recourse--all seem to be present in this agreement.
I'll end on this. Not so long ago, Canadian trade, investment, and even foreign policy priorities for Latin America were heavily tied to the free trade area of the Americas. It was an attractive proposition at the time that had the support of the Canadian business community. We have all come a long way since then, since those heady, visionary days of big ideas of negotiating a well-meaning but ill-fated regional arrangement for the hemisphere.
Fortunately, Canada did not stand still. We are indeed in the process of forming a Pacific arc in the hemisphere. Over the past two decades, Canada has negotiated a number of FTAs—from Chile, to Peru, to Colombia, to Costa Rica, to Mexico, the United States, and hopefully soon, Panama. What an accomplishment to be closer to completing a puzzle, at least on the Pacific side of this hemisphere, with a Canada-Panama FTA.
As a final comment, this FTA does not appear to be that controversial and deserves your expedited approval.
Thank you.