Prime Minister Stephen Harper, left, and Panamanian President Ricardo Martinelli wave while touring the Panama Canal in Panama City on Tuesday after signing a free-trade deal. (Chris Wattie/Reuters)

Prime Minister Stephen Harper and Panamanian president Ricardo Martinelli signed a free trade agreement in Panama City on Tuesday, the eighth such deal Canada has signed in the last year.

Once enacted — the pact still needs to be ratified by Parliament — the deal would immediately eliminate more than 90 per cent of tariffs on Canadian exports like potatoes and other agricultural exports, and such high-tech machinery as flight simulators. Other tariffs would be eliminated within 10 years.

With Panama's economy red hot — it grew 9.2 per cent in 2008 — the country is a lucrative market for Canadian goods and services.

Panama's economic boom stems largely from banking, shipping and services related to the transport sector. The expansion of the Panama Canal is a key element of the economic growth forecast for the country over the coming years.

Canada exported six times more merchandise than it imported from Panama in 2008, a total of $128 million, which represents a 48 per cent increase from the previous year.

At a news conference after the signing ceremony at the presidential palace in Panama City, Harper said Canada is pursuing trade deals with individual countries because global trade talks do not seem to be making progress.

"When we came to office in 2006, Canada had only five bilateral trade agreements in the entire world," Harper told reporters.

Carlos Dade of the Canadian Foundation for the Americas said Canada has been slow to see the writing on the walls.

"With the death of the Free Trade Agreement of the Americas process, countries in the hemisphere move toward bilateral agreements as a substitute. As part of this process, Canada is in a catch-up mode."

Such deals are important because developing economies such as Panama's have a lot of opportunity on the horizon, Dade added.

"They are widening the Panama Canal, a multibillion-dollar project. The ability of Canadian companies to compete on the same footing as American companies and others is crucial."

Canada has also reached trade deals in recent months with four European countries — Iceland, Liechtenstein, Norway and Switzerland, as well as Peru. Agreements with Colombia and Jordan have also been signed but not yet implemented. Canada also plans trade pacts with the EU, India, South Korea and a number of countries in the Americas.

With files from The Canadian Press