With the Panama Papers’ revelations of transnational financial skulduggery now burning up the Internet, Bernie Sanders’ many fans have started passing around this video of a fairly prescient speech the presidential candidate delivered back in 2011. At the time, the U.S. was considering a free trade agreement with the charming Latin America tax haven, supported by President Obama and his then–secretary of state, Hillary Clinton. But progressive activists argued that the deal would only make it harder for the U.S. government to deal with bank secrecy and tax avoidance. Sanders brought those concerns to the Senate floor:
Panama’s entire annual economic output is only $26.7 billion a year, or about two-tenths of one percent of the U.S. economy. No one can legitimately make the claim that approving this free trade agreement will significantly increase American jobs.
Then, why would we be considering a stand-alone free trade agreement with Panama?
Well, it turns out that Panama is a world leader when it comes to allowing wealthy Americans and large corporations to evade U.S. taxes by stashing their cash in off-shore tax havens. And, the Panama Free Trade Agreement would make this bad situation much worse.
Each and every year, the wealthy and large corporations evade $100 billion in U.S. taxes through abusive and illegal offshore tax havens in Panama and other countries.
According to Citizens for Tax Justice, “A tax haven … has one of three characteristics: It has no income tax or a very low-rate income tax; it has bank secrecy laws; and it has a history of non-cooperation with other countries on exchanging information about tax matters. Panama has all three of those. … They’re probably the worst.”
Mr. President, the trade agreement with Panama would effectively bar the U.S. from cracking down on illegal and abusive offshore tax havens in Panama. In fact, combating tax haven abuse in Panama would be a violation of this free trade agreement, exposing the U.S. to fines from international authorities.
While I haven’t seen any proof that the free trade deal exacerbated the problems with Panama—the recent leaks cover 40 years of history, after all—Sanders was broadly on point. The U.S. could have forced Panama to significantly reform its secretive banking sector before rewarding it with a trade deal that was probably a tad more important to them than to us. Instead, it inked a relatively weak side deal on tax transparency, making it somewhat easier, theoretically, to uncover instances of evasion. But years later, Panama is still marketing its services as a well-hidden safety deposit box for the world’s rich. You don’t have to think the whole effort was a conspiracy on behalf of American billionaires—which Sanders sort of lightly implies here—to agree that, at the very least, this was a botched opportunity that demonstrated the U.S.’s lack of commitment to dealing with these issues. If you’re going to sign a trade pact with a tiny, economically marginal tax haven and don’t use it as an opportunity to clamp down on hard on its worst behavior, what, exactly, is the point?