Just when we thought we'd heard almost everything there is to know about the American International Group (AIG), from its bailouts to its bonuses, many may not know AIG is suing U.S. taxpayers claiming it "overpaid" U.S. taxes on activities in Panama, a country which applies low to no regulations and taxes on firms registered there. AIG wants to get back those taxes it dodged with this Panamanian front. And for some reason it seems as though the Administration wants to move forward with a free trade agreement with Panama.
Panama's industrial policy is premised on obtaining a comparative advantage by banning taxation of foreign corporations, hiding tax liabilities and transactions behind banking secrecy rules and the ease with which U.S. and other firms can create unregulated subsidiaries. According to the State Department, Panama has over 350,000 foreign-registered companies.
The New York Times recently ran an expose about how AIG is currently suing the U.S. government for $306 million in back taxes it claims it does not owe thanks to its use of one of its Panamanian corporate entities called Starr International Company Inc (SICO). SICO is AIG's largest shareholder. It is also the manager of a compensation fund for AIG employees, who are paid in AIG shares. SICO's chairman is a former AIG chairman.
AIG, the same company that received the government bailout and used taxpayer dollars for the outrageous bonuses, is now suing the American taxpayer for twice the amount of the bonuses. And they are using Panama's tax haven status to do it.
If Congress passed the Panama Free Trade Agreement (FTA), it would make matters worse. In fact, it would allow AIG-tied firms in Panama the right to challenge U.S. regulations in foreign tribunals, including laws designed to crack down on offshore havens. This is an unacceptable outcome to say the least.
I recently spoke on the House floor about my concerns over comments made by the United States Trade Representative who recently said that the Administration wants to move the Panama and Colombia FTAs through Congress "sooner rather than later." This is absolutely outrageous and a serious mistake.
Why would we be moving forward on flawed FTAs during a time when our economy is struggling? This makes no sense whatsoever. It does not represent a new model on trade. It represents a recycled NAFTA model that has already cost Maine 23 percent of its manufacturing base and thousands of jobs.
During a severe economic downturn, and when the government is asking the U.S. taxpayer to foot the bill for Wall Street's mess, the last thing we need to do is pass FTAs that promote offshoring, tax dodging, and special privileges for foreign investors. The Panama and Colombia FTAs take us in the wrong direction at a time when our energy should be devoted to getting our economy moving forward again.
We have an historic opportunity with a new administration to reset the course on trade policy. I look forward to working with the Administration to change that course.