Canada has signed off on a free-trade agreement with Panama, which will immediately slash tariffs on a number of Canadian exports.

The trade deal was announced by Prime Minister Stephen Harper and Panamanian President Ricardo Martinelli at the presidential palace in Panama City.

Harper congratulated Martinelli on his recent electoral win and saluted his interest in breaking down trade barriers.

"You talked about the need, especially during these difficult times, to open doors to neighbours and allies," said the prepared text of Harper's speech.

"I couldn't agree more. We must remember that the prosperity generated around the world in the last part of the 20th century and the beginning of the 21st has been unprecedented in human history."

"Removing protectionist barriers and easing trade restrictions helped to usher in this extraordinary era."

Harper travelled to Panama City after leaving the North American Leaders' Summit in Guadalajara, Mexico, on Monday afternoon.

The new agreement with Panama will cut more than 90 per cent of tariffs on various Canadian exports, including agricultural exports and high-tech machinery. Any remaining tariffs will be eliminated within 10 years under the terms of the deal.

Beef producers will also benefit, as Panama will lift a six-year-old ban on Canadian beef as part of the deal, CTV's Roger Smith said Tuesday.

Canada sent $128 million worth of exports to Panama last year, a total that was 48 per cent more than the year before.

The Panamanian economy grew 9.2 per cent in 2008, and the Central American country has seen its poverty levels drop in recent years.

Panama's boom has been tied to successes its banking and shipping sectors, as well as services related to its transport sector.

Beyond reducing tariffs on export goods, the deal will help Canadian businesses gain greater access to the Panamanian market, Smith said.

The deal still has to be approved by Parliament.

Panama is the eighth country to reach a trade pact with Canada in the past year. Canada has also reached trade deals with four European countries and Peru. Similar deals with Colombia and Jordan have been signed, but not implemented.

In 2008, Canada's top goods exports to Panama were:

Vehicles, including diesel

Electrical and electronic equipment

Aerospace (primarily flight simulators)

Pharmaceuticals

Pulses (primarily lentils)

Frozen potato products

The top exports to Canada from Panama were:

Mineral fuels and oils

Fruits and nuts

Fish and seafood products

Spices

Coffee

Mineral ores (primarily silver ores and concentrates)

In 2008, Canada exported six times the amount of goods that it imported from Panama.

With files from The Canadian Press and a report from CTV's Roger Smith