Rhetoric vs. Reality: Legislative Gifts Posing as "Tough Sanctions"

I read this encouraging rhetorical stance from the G-20 in last week's AP dispatch [1]:

An estimated $7.3 trillion is stashed in offshore financial centers worldwide by corporations and wealthy individuals seeking to shield their operations and lessen their tax burdens. Now these havens are under scrutiny like never before. Leaders of the Group of 20 nations meeting in London warned Thursday that countries refusing to share tax information would face tough sanctions. Hammered by the financial meltdown, the world's richest countries say they are serving notice they won't tolerate shady offshore operations anymore.

There's just one problem: rather than such tax havens "facing tough sanctions," we might see a big one - Panama - face the opposite of "sanctions." We might see it be rewarded [2] with a coveted corporate-written trade pact from the United States, a G-20 member.

Trade and tax expert Peter Riggs long ago [3] started asking why the United States would liberalize trade with a country that would likely use trade preferences to increase its tax haven business. Now, as the G-20 says it wants to crack down on tax havens like Panama, we're going to see if there's a difference between tough rhetoric and legislative reality. Should the Obama administration move the Panama Free Trade Agreement forward after participating in the G-20 meetings that resulted in such anti-tax-haven tough talk, it will have a lot of 'splainin to do.

NOTE: Dow Jones [4] reports that Rep. Sander Levin (D-MI), top Democrat on the Ways and Means Committee, "says one of the major obstacles [to the Panama FTA's passage] is the fact the country is a haven for companies seeking to avoid paying U.S. tax." So congressional opposition to the pact may, in fact, be organizing specifically around this tax-haven issue.