Years before more than a hundred media outlets around the world released stories Sunday exposing a massive network of global tax evasion detailed in the Panama Papers, U.S. President Barack Obama and then-Secretary of State Hillary Clinton pushed for a Bush administration-negotiated free trade agreement that watchdogs warned would only make the situation worse.
Soon after taking office in 2009, Obama and
his secretary of state — who is currently the Democratic presidential
front-runner — began pushing for the passage of stalled free trade
agreements (FTAs) with Panama, Colombia and South Korea that opponents
said would make it more difficult to crack down on Panama’s very low
income tax rate, banking secrecy laws and history of noncooperation with
foreign partners.
Even while Obama championed his commitment to raise taxes on the wealthy, he pursued and eventually signed the Panama agreement in 2011. Upon Congress ratifying the pact, Clinton issued a statement lauding
the agreement, saying it and other deals with Colombia and South Korea
"will make it easier for American companies to sell their products." She
added: "The Obama administration is constantly working to deepen our
economic engagement throughout the world, and these agreements are an
example of that commitment."
Critics, however, said the pact would make it
easier for rich Americans and corporations to set up offshore
corporations and bank accounts and avoid paying many taxes altogether.
“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 noncooperation with other
countries on exchanging information about tax matters,” Rebecca
Wilkins, a senior counsel with Citizens for Tax Justice, a nonpartisan
nonprofit that advocates changes in U.S. tax policy, told the Huffington Post in 2011. “Panama has all three of those. ... They’re probably the worst.”
The Panama FTA pushed for by Obama and
Clinton, watchdog groups said, effectively barred the United States from
cracking down on questionable activities. Instead of requiring
concessions of the Panamanian government on banking rules and
regulations, combating tax haven abuse in Panama could violate the
agreement. Should the U.S. embark on such an endeavor, it could be
exposed to fines from international authorities.
“The FTA would undermine existing U.S. policy tools against tax haven activity,” warned consumer watchdog group Public Citizen
at the time, saying the agreement would encourage corporations to
thwart any U.S. efforts to combat financial secrecy. The group also noted
that U.S. government contractors, as well as major financial firms
supported by taxpayer bailouts, stood to gain from the trade deal's
provisions that could make it harder to crack down on financial secrecy.
Then-Secretary
of State Hillary Clinton listens to President Barack Obama speak during
a Cabinet meeting at the White House in November 2012. Photo: Reuters
Despite the warnings from watchdog groups,
some Democratic lawmakers urged the Obama administration to aggressively
push for the Panama agreement. According to a 2009 email
sent to Clinton by her top State Department aide, high-ranking
then-Sen. Max Baucus, D-Mont., was pushing for passage of the Panama and
Colombia free trade pacts, and Rep. Charles Rangel, D-N.Y., said "the
president had to lend his star power to pushing them through." Obama
ultimately did just that, hosting Panama's president at a 2011 Oval Office event touting the proposed trade pact.
Major corporations also lobbied for the deal,
including, among others, Rupert Murdoch's News Corporation, which at the
time maintained 136 Panamanian subsidiaries, according to the Huffington Post.
Obama and Clinton’s support of the FTAs,
however, was not universally shared within the Democratic Party. Obama
received criticism from many lawmakers, including then-Rep. Mike
Michaud, D-Maine, who wrote an op-ed in the Hill two months after the new president was sworn in in 2009.
“Talk about a double whammy: another
job-killing Bush trade agreement, and with the country that a Government
Accountability Office study identified as one of only eight countries —
and the only current or prospective FTA partner — that was listed on
all of the major U.S. and international tax-haven watchdog lists,”
Michaud wrote then, noting that Obama had promised as a candidate that
he would renegotiate the trade agreements. Panama’s unwillingness to
sign a tax information treaty with the U.S. is just the tip of the
iceberg, he said.
Before the agreement was ratified, the Obama administration did forge
a tax information sharing agreement with the Panamanian government that
it said would increase financial transparency. Public Citizen, however,
asserted
that the separate agreement "does not remedy these problems" of
secrecy, noting that it "merely requires Panama to stop refusing to
provide information to U.S. officials on specific cases if U.S.
officials know to inquire."
The Sunday reports on the so-called Panama Papers exposed
nearly 40 years’ worth of information that included more than 11
million documents on more than 210,000 companies, trusts, foundations
and world leaders with offshore dealings in Panama where money
laundering, tax avoidance and crime (including funding terrorism) are
made easy. The leak, from financial services firm Mossack Fonseca, shows
that the organization helped clients perform all of those acts.
The leaks have revealed a suspected
billion-dollar money laundering ring that includes many close allies and
associates of Russian President Vladimir Putin, and showed that
Icelandic Prime Minister Sigmundur David Gunnlaugson has been hiding
interest linked to his wife’s wealth. A total of 12 current or former
heads of state and 60 people linked to current or former leaders have
been revealed to have had secretive dealings in Panama.
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