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Bernstein writes: "In 2011, President Obama and Hillary Clinton, then Secretary of State, sold the U.S./Panama Free Trade Agreement as a fix for Panama's secret tax haven and money laundering operations. However, some analysts say that relevant regulations were skillfully concocted to facilitate certain privileged interests."

Hillary Clinton. (photo: Getty)
Hillary Clinton. (photo: Getty)

Clinton's Pro-Free Trade Policies Lead to Wider Illegal Money Laundering in Panama

By Dennis J Bernstein, Reader Supported News

15 April 16


An Interview With Lori Wallach

n 2011, President Obama and Hillary Clinton, then Secretary of State, sold the U.S./Panama Free Trade Agreement as a fix for Panama’s secret tax haven and money laundering operations. Obama asserted at the time: “Thanks to the leadership of President Martinelli, there have been a range of significant reforms in banking and taxation in Panama. And we are confident now that a free trade agreement would be good for our country.”

Last week, President Obama appeared to be singing a different tune. Obama said that activities like those exposed by the release of the eleven million plus Panama Papers were a result of poorly designed laws. However, some analysts say that the relevant regulations were not exactly poorly designed, but were skillfully concocted to facilitate certain privileged interests.

Lori Wallach, director of Public Citizen’s Global Trade Watch, said this week that the Panama Papers show, once again, how entirely cynical and meaningless are American presidents’ and corporate boosters’ lavish promises of economic benefits and policy reforms from trade agreements.

Dennis Bernstein: Lori Wallach, you actually say that those actions in 2011, strongly supported by Obama and Secretary of State Hillary Clinton, made it safer and easier to launder money?

Lori Wallach: Absolutely. It’s important for listeners to understand the history of Panama and how outrageous it would have been for the United States to even contemplate a free trade agreement with the country. In the 1970s the Omar Torrijos dictatorship was eager to pursue a new industrial policy. All they had were some banana exports. And so he literally recruits some University of Chicago-trained economists to come down to Panama and design laws that can make the country’s comparative advantage a financial crime. They take the Swiss version of banking secrecy, and they cook up what are called “bearer” shares stock certificates, where the corporate entity is issued paper. So I can subscribe as a lawyer as the official owner of those shares and now I sell them to whomever. And they are never tracked. The tracks are not tracked. So whoever has the paper is actually in charge of the companies, so you have no idea what the company is.

And then they have a dual taxation system, where all of these foreign, fake, double-hidden companies can have secret banking and secret ownership, plus there are foreign registered companies that are subject to no reporting, no taxation, in no country or any place else. And that designed program was what we were saying to the Bush administration that the free trade agreements were. Not surprisingly, the majority in Congress in 2009 said, “We’re not going to pass that, that’s ridiculous.”

So the Obama administration came in and instead of actually setting out to fix the Panama disaster, and actually make some demands of Panama about really changing things, they set out on a mission to figure out what to do to pass this free trade agreement. They did a lot of talk and not a lot of action and ultimately had a list of important improvements, as President Obama said, that now made it worthwhile to pass the agreement.

Meanwhile the agreement itself makes it safer and easier for particular U.S. companies to use Panama to hide their money from taxation, to basically obscure who owns what. And the specific rules are Chapter 9 of that agreement. You can see that online at This e-mail address is being protected from spambots. You need JavaScript enabled to view it in the investment chapter. It guarantees things like inflows and outflows of capital without limitation. Compensation from the government of any policies that an investor relied on to make an investment were changed, i.e. incentives not to clean up any of those criminal laws that drive the investments. And, moreover, compensation from the government if anything happens with your money, against the rights given in the agreement.

That provision serves like a risk-free insurance to offshore your money to Panama. So the chickens have now come home to roost, with the Panama Papers. Because you can see, number one, nothing’s changed and number two, the extent of the criminality.

DB: Well, just help us understand the extent of the criminality referenced in these papers. And it’s just beginning to unfold. We haven’t heard a lot about the U.S., and I’m going to ask you about that in a moment. Explain how people use this stuff and how it works against us common folk.

Wallach: Well, there are a couple of different things that happened. There are legitimate U.S. businesses creating offshore tax haven shells to move money through and have profits earned through the companies that are incorporated in those shells, just to simply avoid taxes, and avoid paying their fair share. That’s the least nefarious. There are individuals who hide income and assets by creating various shell corporations that become the earners of assets that would otherwise be subject to U.S. taxation.

But then there’s the even more nefarious stuff. Panama is the financial nerve center for Colombian narco-traffickers and paramilitaries. They pass freely across the unguarded border between the two countries. And because they can very easily register a foreign subsidiary in someone else’s name … you have Pablo Escobar, who is actually holding the paper for some of these bearer shares. The first time it gets registered, whoever is the first issue, could be a Panamanian lawyer who gives it to whomever. And then the entity suddenly can be doing banking in secrecy.

There are so many layers of non-transparency. That’s a great place for money laundering. It’s a great place to basically wash money. When the FTA was put into place there were somewhere between 350,000 and 400,000 offshore corporations, which is the highest number of subsidiaries of foreign investors outside of Hong Kong.

DB: Say a little bit more about what these corporations are doing in Panama.

Wallach: Some of them were doing some of the run of the mill tax evasion. Some of them were laundering drug money, weapons running money. There was a period where people thought there was a lot of terrorism-related money getting washed through Panama. And that is the country where, like the TPP we now face, promises of “Oh, if we do a trade agreement, that’s all gonna get cleaned up, and this is our leverage.” And you’re hearing the same kind of thing about Malaysia and their horrible human trafficking and human rights abuses. Or Bruni, and their policy of stoning to death single mothers and gay people. “So this agreement is going to fix those things, don’t you worry.”

This Panama Papers revelation is really unfortunate for the boosters of the TPP. It makes it scandalously clear how these promises are just crap.

DB: Now these laundering operations in Panama, Cayman Islands, it’s sort of like everybody is treated equally. You’ve got banks like HSBC, Colombian drug traffickers … and we know, for instance, the banks are busy floating the drug trade. So this is a place where everybody does business together. Right?

Wallach: Well, the main economy of Panama, the comparative advantage is financial crimes, money laundering, tax evasion. That’s the service they offer. They are a service economy and those are the services they specialize in.

DB: You talk about a way of hiding money offshore to avoid paying taxes. The implications, of course, are that ... right now I’ve been investigated twice in the last 8 years. I gross about $40,000 a year, and I’ve been investigated a couple of times. I owe money, whatever. But these evasions are what cause major troubles. We don’t have good schools, hospitals; this is all part of a product and a process by which these corporations suck the money out of our country, right? Am I exaggerating? And don’t pay their fair share. So we don’t have schools and hospitals and infrastructure. Is there a connection there?

Wallach: Well, when we were fighting against the Panama FTA, it was along with the Korea FTA, it was the same time the votes were happening. And what we said was, the Korea FTA is going to further gut our manufacturing base, increase our trade deficit, and we’re going to see a lot of manufacturing firms close. In addition to the jobs that we lost, it is the income of all of those workers, and then the taxes they would have paid. And it’s the taxes those companies would have paid that will have a second whammy, in a community that doesn’t just lose jobs, but then loses the tax revenue necessary to support public infrastructure, from roads and bridges, to schools, to hospital construction, etc.

And that FTA, we said, would cause that problem vis-à-vis hurting on the jobs end. And, yeah, three years into the agreement the trade deficit with Korea doubled. In the first three years, using the formula the administration used to claim that 70,000 jobs would be created, we have lost 90,000 jobs. It’s not trade deficit increase. And then you add to that Panama.

Now Panama’s trade balance is small. It’s a small country, not a lot of trade, about the same as it was before. But the difference there is just what you said. We may not be losing manufacturing jobs to Panama, but our quality of life and our community is getting undermined, because the U.S. companies and wealthy individuals that are still here can dodge having to contribute to the common good and the infrastructure that we all rely on, by making sure that they find ways to use offshore in havens like Panama, to avoid paying taxes.

DB: Yeah. Let’s talk about that a little bit more in terms of how difficult it’s going to be to untangle it. I have been watching the Pritzker family for many years. Liesel Pritzker’s name just came up, I guess it was reported. This is Penny Pritzker’s niece or cousin. She’s the Secretary of Commerce, Penny Pritzker is. Her name came up doing business in Columbia. Some import/export in places where the FARC were formerly operating. Now I don’t know what kind of business, what they were doing, what was in there. But the point is that here’s the Pritzker family, and we don’t know about Penny. It seems that most of their stuff is in the Cayman. But how do I phrase this question without being too vicious? How can we expect there to be any change when you have, for instance, I’m referring to a 2003 Forbes magazine article, the Secretary of Commerce coming from a family that has structured and set up, set the tone, been on the forefront of putting money offshore to protect themselves from paying taxes? Now we have people like the Pritzkers, Secretary of Commerce ... she already crashed the Superior Bank in Chicago, engaged in all kinds of subprime stuff. She was part of that structure that marketed these instruments to Wall Street, the packaging of these subprime loans with other loans.

So the point I’m making here is that somebody inside, right inside, is benefiting from it. Can we expect anything but the free-trade agreements that you’re describing, that are continuing to devastate poor and working people? How’s that for a question?

Wallach: Well, I think we can expect something different, and I’ll tell you why. Because we the people ultimately can stop an agreement like the TPP. Let us have the horrible past agreements serve as a lesson and a motivator to just say “No! No more of these agreements.” And we have it at this point within our grasp to box and bury the TPP, and really start a turnaround to unravel the agreements that are so rotten, the captured agreements that aren’t even mainly about trade, and try to shift over to having trade agreements that are actually about trade. Meaning they are aimed at harvesting the benefits of trade expansion, without being Trojan Horse operations for all of these non-public interests agendas, all these retrograde policies now being catapulted into place via trade agreement vehicles.

And the reason why it’s within our grasp is we’re seeing in the presidential primary this enormous bipartisan trade revolt. And it is affecting the prospects of the TPP. The TPP was signed, NAFTA on steroids, with 12 countries. It was signed. The administration thought they could whiz it right through. But actually, thanks to a huge bunch of public activism last year, the procedure needed for a TPP, the fast track, hardly squeaked through Congress. It’s a procedure that basically makes it much harder to stop when it comes to a vote. But the fast track is not that helpful if in the end you just don’t have the votes. It’s going to actually come down to something that your listeners have a lot of say over: The vast majority of Congressional House Democrats are against the TPP. There are just a handful of them who aren’t.

But Nancy Pelosi, the Democratic leader and a very important member of Congress from California, has yet to come out against the TPP, much less rally her troops and stand up and say, “Hey, we’re the Democrats. We’re against this, this is bad. That’s why the presidential candidates are against it. We’re not going to let this happen. We’re not going to let it get snuck by in a lame duck session after the election. We’re not going to have it go, as is, in 2017. This is not an agreement we can be for. And all of our presidential candidates are saying that. And all the Democrats are unified on that point.” Her standing up and saying that would be one of the final nails in TPP’s coffin. But if she does not do that, if she does not unify the last remaining Democratic House members, if she waits until the very last minute to say anything about it like she did when fast track came for a vote, then there is a real chance it could slime through in the lame duck, with just a few votes. The same way fast track limped through. But you know you only need to pass it by one vote, and it’s now the law. It is within this listening audience’s power to make a huge difference.

Frankly, if you look at all of California ...there’s a guy, Ami Bera, the guy who’s trying lose his seat over his vote for fast track who had told a lot of people he’d be against fast track, and then he flipped. He’s lost his union support, he couldn’t get Democratic Party support, the environmentalists are on a warpath against him, and he basically is all by himself. All the environmental groups have come out against TPP, and he hasn’t said where he is. So maybe he’ll realize how bad his fast track vote was, and he’ll come out against TPP like everyone else.

But the whole rest of California, you’ve got to go all the way down to San Diego to find any Democrats who are contemplating supporting the TPP. And that’s the two Democrats down there, Scott Peters and Susan Davis. Otherwise, you look at the rest of the state, there are a couple of people who are saying, “Hmm, what would this mean for ...” way up north, or Congressman Thompson saying, “What does this mean for wine?” Well, wine may have some tariff cuts in its future, under the TPP, but what would it mean for the rest of country, for the rest of the state, for the environment? And those are the kinds of issues that Congressman Thompson is judging. That and the whole set of California Democratic members, those are your only guys who are out there contemplating. Everyone else is pretty much with the program.

Also, frankly, a big handful of the Republicans in California and the House of Representatives are against the TPP. Just on a commercial basis the agreement is just crap. It doesn’t have disciplines against currency cheating, even though it includes a lot of countries that are notorious for cutting their currency values in order to cheat on their imports, making their stuff unreasonably, unfairly cheap, and then making our goods too expensive just by dropping the currency value of their currency.

DB: Now, I have to jump in here. You said that Nancy Pelosi hasn’t come out against it?

Wallach: Correct. She’s one of the very, very few Congressional House Democrats who have not.

DB: This is a very powerful House Democrat. Now, how can we possibly explain that? What could possibly be holding her back from this vote that would be so beneficial to all of us working and middle-class and poor people?

Wallach: Well, I think there’s an interesting scenario. She’s a great champion on the climate, on the environment, on human rights, and for working people, and that is what she believes in. And she has been a great champion advocate for those issues.

DB: Yeah, but this is a climate killer, isn’t it?

Wallach: All of these would be severely attacked and undermined by the TPP. So, on the merits, everything she cares about is at risk. She also has a role as the leader of the Democratic Party. So often she will wait to see where the Party is going. You know, part of being a good leader is to see where your troops are. And so at the point that the TPP attacks had just come out, and there are a lot of important members, the most senior Democrat on the trade committee, a guy named Mr. Samuel Levine, was reviewing it. I can understand why she wouldn’t want to get ahead of him. He’s the trade expert under the House Democrats. He’s come out against it. So have other members of the Democratic leadership. Xavier Becerra from California, the Chairman of the Democratic House Caucus is against it.

So now almost all the Democrats are out against it, and that is why it is mysterious and worrying … not worrying, but disappointing, that Leader Pelosi is not leading the troops. Because there still are a couple dozen House Democrats that sort of have their finger in the wind, trying to figure out which way this is going to go. And when Leader Pelosi steps up and says, “This is the way it is going, ladies and gentlemen,” those guys are going to follow her right to victory in stopping the TPP.

In the beginning I understand why she, as a leader, as a smart leader, a strategic leader, wanted to not get out way ahead of her troops. But now her troops, including the folks with the most expertise on the issue, have all gotten out against TPP and I think a lot of folks are really eager for Leader Pelosi to step up and lead to the final victory against the TPP.

DB: Should I be concerned that these problems, her resistance or others’ resistance, or the flip/flops, have something to do with the extraordinary amount of money coming into Congress to have this thing pass?

Wallach: Well, I think that there is a pretty ridiculous corporate campaign for TPP because in one fell swoop every big moneyed interest gets what they want. Normally, you know, they have to have this bill for the pharmaceutical companies, and this bill for the oil, gas and mining guys, and this is the bill for the chemical guys, and this is the bill for the manufacturing companies that want to avoid liability and make it easier to leave the country, etc. Big content wants this bill, you know, Hollywood, etc. And the thing with this trade agreement is they all have it in one place. So it’s like a corporate Christmas tree. And as a result you have all of those trade associations, all of those organizations, all in love within the TPP path.

So for instance, with a guy like that Ami Bera, I’m sure a lot of corporate guys are throwing money at him. Because from their perspective he’s a guy who, even though he’s in Sacramento, northern California, was willing to basically cross his entire political base. You had the unions who are against, the family farm groups are against, the faith groups are against, the internet freedom groups are against, the LGBT groups are against, the seniors are against, the consumer groups are against, all the people who basically got that congressman elected, the people who voted for him, he’s willing to just abandon them and throw them under the bus.

And so he’s going to need other supporters. So I’m sure all the agri-business, the internet, the content, Hollywood folks, and the chamber of commerce, and the big industrial companies, and the oil and gas guys are all running up there saying, “Boy, you know, we may not like what he does on this environmental thing, but boy is he going to be our guy for trade. Let’s just see if we can get him re-elected.” Now a lot of unions have just walked away from him and said, “We’re done. We’re done.” Some of them have even endorsed the Republican. So I can imagine in those kind of circumstances the corporate money is flooding in trying to save those guys who betrayed everyone.

DB: Well, I’ve got one final question for you, Lori Wallach. When you look at this campaign do you see anything in the debates, information, people, any candidate saying things that encourage you, inspire you, seem to be the right thing in this context?

Wallach: I think it’s incredibly inspiring that we’re seeing a bipartisan, nationwide trade revolt against more of the same trade agreements. And that energy is part of how we can stop the TPP. But to do that folks in northern California are going to have to get Leader Pelosi to lead the House Democrats into a firm, unified “No.” We’re all going to need to put the pressure on all the presidential candidates to say publicly, number one, they don’t support the TPP and will not move that deal towards Congress for a vote, and number two, they don’t want it voted on before they get there in a lame duck session of Congress. Because they think that agreement is bad for the country.

If we can achieve those things with Leader Pelosi and with the presidential candidates, we’re going to stop the TPP. And a big part of the reason why is this incredible, powerful wave of public excitement of knowing, “Hey, I’m not the only one whose life has been undermined by these bad trade agreements. Hey, they’re not inevitable. They’re just one way of doing ... and it ended up failed. Hey, we can do better. And united together, we will.” That is the power, and it needs to get translated into our missions of Leader Pelosi’s leadership and the presidential candidates doing the right thing. And then we’re going to turn the corner on this.

Dennis J Bernstein is the executive producer of Flashpoints, syndicated on Pacifica Radio, and is the recipient of a 2015 Pillar Award for his work as a journalist whistleblower. He is most recently the author of Special Ed: Voices from a Hidden Classroom.

Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News. your social media marketing partner
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