Talks over China Panama Free Trade Agreement Lead to Latin America Trading Hub - Talks over China-Panama Free Trade Agreement Lead to Latin America Trading Hub

Panama and China launched free trade talks on July 9 with the aim of developing an agreement to turn the Central American country into the center for Chinese goods across Latin America. It is only one year since the establishment of diplomatic relations between the two countries. The first round talks lasted to July 13 and laid the foundation for the rest of the negotiations.

China is the second largest user of the Panama Canal and the biggest supplier of the Cologne Free Trade Zone, which is a large export center near the Atlantic entrance to the Panama Canal. As of the end of 2016, China’s direct investment in Panama was nearly 250 million U.S. dollars, concentrated in the fields of shipping, trade, communications, and finance. At present, more than 40 Chinese-funded enterprises have established institutions in Panama. China has been expanding its influence in Latin America, while Panama is committed to attracting new investments and promoting the entrepot trade of Chinese goods in the region.

Panama is an important economic and trade partner of China in Central America. In recent years, bilateral trade has maintained a relatively fast growth momentum. According to the China Customs date, the trade volume between China and Panama was 6.69 billion U.S. dollars in 2017, of which the Chinese export volume was 6.628 billion U.S. dollars and the import value was 62 million U.S. dollars, up 2.8%, 2.4% and 67.6% respectively. Today, about 6.5% of Panama’s exports go to China, and if industry leaders take the right steps, this figure could grow.

Hector Cotes, president of the Panamanian Association of Business Executives, said, “This is an opportunity for us to review our processes to become more competitive when it comes to exports, not just with China, but also any other country.”

Panama also plays an important role in the Latin American extension of the “Belt and Road”, because Panama has a canal and railway connecting the Pacific and Atlantic Oceans and is a regional aviation hub. Panama is also the first Latin American country to sign China’s “Belt and Road Cooperation Agreements”. On that occasion, it has proposed a number of infrastructure cooperation projects, including “the Panama-Chiriquí Railway” project. Panama’s economy is based on logistics and trade. This project will be a huge investment, and the return will not be very fast, but it will become an important driving force for Panama’s economic growth.

The second round of trade talks is expected to be held in August. Establishing mutually beneficial relationships is the guiding principle for China to negotiate with partners. The goal of trade talks is to establish a win-win relationship that benefits both countries.

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