The United States and Panama announced Tuesday that they have completed negotiations on a free trade agreement with the understanding that it is subject to further discussions regarding labor.

This comprehensive trade agreement will eliminate tariffs and other barriers to trade of goods and services, expand trade between the U.S. and Panama, and promote economic growth and opportunity, said a statement released by U.S. Trade Representative Office.

"This historic agreement between two good friends and close partners will promote economic growth and development in both of our countries," said U.S. Trade Representative Susan C. Schwab.

"The agreement will provide new economic opportunities for U.S. exporters, including significant opportunities to participate in the 5.25 billion dollar expansion plan for the Panama Canal," said Schwab. The Panama Canal expansion is due to begin in 2008 and finish in 2014.

In April 2004, the U.S. and Panama launched negotiations on a free trade agreement. Bilateral trade between the two countries totaled 2.5 billion dollars in 2005.