Foreign Affairs Committee on April 28th, 2014

[The Chair, Conservative, Dean Allison]

Pursuant to Standing Order 108(2), we'll get started on our study of the corporate practices by companies supplying and manufacturing products in developing countries for Canadian consumers.

I want to thank our officials from the Department of Foreign Affairs for being here today. We have Duane McMullen, director general of the trade commissioner service for operations and trade strategy. Welcome, sir. He will be speaking first. Then we have Mr. Peter MacArthur, director general of the South, Southeast Asia and Oceania bureau. Welcome, sir, to you as well. We also have Jeff Nankivell, director general of Asia Pacific, who won't be speaking but is here to answer any questions we may be able to put to our witnesses.

Why don't we get started? Welcome, Mr. McMullen, and thank you again for being here. We'll turn it over to you. You have up to 10 minutes for your opening statements, and then we'll have Mr. MacArthur follow up. Then we'll go around the room and ask some questions for the remaining part of the hour.

[Duane McMullen, Director General, Trade Commissioner Service Operations and Trade Strategy, Department of Foreign Affairs, Trade and Development]

Thank you very much, Mr. Chairman, and honourable deputies.

My focus today is on the Government of Canada's overall effort to support responsible business practice among Canadian firms operating and sourcing abroad.

Responsible business practice is embedded in Canadian values. Canadian businesses operating responsibly increase their chances of success and contribute to prosperity and development in the countries in which they operate. The Government of Canada expects and encourages Canadian companies operating internationally to respect all applicable laws and international standards, to operate transparently and in consultation with host governments and host communities, and to conduct their activities in a socially and environmentally responsible manner. This includes sourcing responsibly.

Many countries in which Canadian businesses operate lack the capacity to ensure that business operates responsibly there. Consistent with Canadian values, we help fill the gap through a variety of initiatives to assist Canadian companies with the challenges they face operating responsibly abroad. Canada's adherence to the OECD's guidelines for multinational enterprises in 1976 was a significant early step.

The Government of Canada engages interdepartmentally on a variety of cross-cutting issues impacting responsible sourcing, including widely varying standards of regulation and widely varying standards of enforcement in other markets.

The work addressing the challenges involved in responsible business practice in the ready-made garment sector is coordinated through an interdepartmental working group, including the Department of Foreign Affairs, Trade and Development; Industry Canada; Employment and Social Development Canada; the National Research Council of Canada; and Public Works and Government Services Canada.

We also engage with industry, civil society partners, and multilaterally to explore how to encourage good practices. Recently, both my department and Employment and Social Development Canada held separate information sessions specifically focused on responsible supply chain practices in the ready-made garment sector. Some of our partners are witnesses today.

We welcome industry initiatives and encourage companies to consider signing onto those that support improving working conditions, such as the Accord on Fire and Building Safety in Bangladesh or the Alliance for Bangladesh Worker Safety.

Canada's missions abroad are core to our efforts to help Canadian business operate responsibly. Through a variety of initiatives, they can have a tangible impact. My colleague, Peter MacArthur, will illustrate some of the roles our missions play using the example of our high commission in Bangladesh. One example is the high commission's publication of a book for companies in Bangladesh on how to operate responsibly.

While attention has recently been focused on the ready-made garment sector in Bangladesh, responsible sourcing applies to numerous global supply chains in a variety of manufacturing sectors. Therefore we remain committed to assisting Canadian companies with responsible business practice wherever they are active and in whatever sector.

The Government of Canada will continue to promote responsible business practice across all sectors and provide tools and advice to help Canadian companies operate responsibly and successfully abroad.

Thank you for the opportunity to present to you today, and I look forward to your questions.

[The Chair, Conservative, Dean Allison]

Thank you, sir.

Mr. MacArthur.

[Peter MacArthur, Director General , South, Southeast Asia and Oceania Bureau, Department of Foreign Affairs, Trade and Development]

Mr. Chair and honourable members, you have heard from my colleague Duane McMullen about how the Government of Canada promotes corporate social responsibility, or CSR, globally. I will now outline for you how the Government of Canada responded to the collapse of the Rana Plaza building, housing several ready-made garment factories outside Dhaka, Bangladesh, on April 24, 2013.

At the time of the collapse, our embassy in Dhaka had been active in following developments in the ready-made garment sector and in promoting corporate social responsibility. In January 2013, it hosted a seminar titled Social Responsibility as a Safe Factory, which highlighted the importance of practising CSR in factories, with an emphasis on occupational health and safety, and fire safety. As Mr. McMullen mentioned, some 8,000 copies of a bilingual book—in English and Bengali—were produced and distributed to key contacts in Bangladesh in support of this Canadian-based values initiative.

Following the collapse, our department was contacted by Loblaw, owner of the Joe Fresh brand that had garments produced in Rana Plaza, and we provided advice and logistical support for senior executives who visited Dhaka in early May 2013. The Canadian High Commissioner to Bangladesh, Heather Cruden, arranged meetings for Loblaw executives with key stakeholders, including local government ministers and labours unions. A Loblaw executive returned to Bangladesh this past February and met again with our embassy. Loblaw and our department remain in close contact, and this relationship is a testament to the benefits of government responding to Canadian industry to collaborate in the improvement of working conditions in the Bangladesh ready-made garment sector.

The Canadian government has also been very engaged in policy dialogue and advocacy in this field. High Commissioner Cruden is a member of a group of ambassadors resident in Dhaka, ambassadors of like-minded countries of Canada, which meets monthly with high-level officials from the Government of Bangladesh, including the deputy ministers of foreign affairs, commerce, and labour.

The meetings provide an opportunity to monitor progress by the Government of Bangladesh on its commitments to improve conditions in the ready-made garments sector and for pressing for positive reforms. The Canadian High Commission also participated in stakeholder consultations regarding the minimum wage law in this sector and a needs assessment of the victims of the Rana Plaza.

I'd like to point out as well that the Canadian High Commission recently hosted a seminar on March 1, 2014, on social responsibility and the international standards implementing ISO 26000 in Bangladesh.

The Government of Canada has also tabled statements through our high commission in Dhaka to two separate Government of Bangladesh standing parliamentary committee hearings that addressed safe work environments and proposed amendments to the Government of Bangladesh's labour law.

Canada also intervened at the International Labour Organization's committee on the application of standards in June 2013, in Geneva, to express concern that Bangladesh's proposed updates to its labour law did not conform to international obligations under ILO Convention C087 with respect to freedom of association and protection of the right to organize.

At the most recent governing board of the ILO held in Geneva in March, just last month, Canada joined a statement by the Netherlands and the UK on trade unions in Bangladesh.

Last autumn, my colleague, Jeff Nankivell, and I travelled to Bangladesh for bilateral foreign policy consultations with the Government of Bangladesh, at which time we discussed in some detail the RMG sector at senior levels, including the deputy minister of foreign affairs and commerce minister. We emphasized the need for further reform to reinforce a message that has already been passed by our high commissioner in Dhaka, but also by me, as director general here in Ottawa, to the Bangladeshi high commissioner and the high commission here in Ottawa.

This trip demonstrated our newly integrated approach as an amalgamated department featuring foreign policy, trade, and development, during which we also visited a model factory.

As Mr. McMullen has alluded to, Employment and Social Development Canada hosted a tripartite round table on international labour issues on April 9, 2014, comprising government representatives, and labour and business organizations.

Jeff Nankivell and I, along with representatives from the ILO's better work program, the Retail Council of Canada, and the United Food and Commercial Workers Union, participated as panellists in the discussion on the ready-made garments sector in Bangladesh.

In April High Commissioner Cruden in Dhaka was appointed to the advisory board to the board of directors of the private Alliance for Bangladesh Worker Safety. As high commissioner she is actively engaged with both the alliance and the separate accord on fire and building safety in Bangladesh. Her appointment provides the opportunity for us to further influence and enhance coordination between the alliance and the accord to make sure that both efforts are more accountable and more effective.

In addition, Canada through official development assistance is providing $8 million over four years to a joint ILO-led initiative focused on improving worker conditions in Bangladesh's ready-made garment industry, together with our partners, the United Kingdom and the Netherlands. This project aims to strengthen the Government of Bangladesh's governance, regulation, and inspection of the garment sector; to implement labour legislation and policies, including those related to occupational health and safety at the factory level; and to facilitate coordination amongst stakeholders including the Government of Bangladesh, the accord, and the alliance.

As I draw my comments to a close I would like to point out that Canada has also funded two smaller projects related to this collapse, a research project with the Centre for Policy Dialogue on workers' rights and compliance and, with the Centre for the Rehabilitation of the Paralyzed, the socio-economic integration of nine persons severely injured in this terrible disaster.

Improving working conditions in Bangladesh is a major collective effort between governments, brands and buyers, workers and factory owners. Canada will continue to remain engaged on this issue.

Thank you for the opportunity to speak to you today.

[The Chair, Conservative, Dean Allison]

Thank you very much, Mr. MacArthur.

We're going to start with Mr. Dewar for seven minutes please.

[Paul Dewar, NDP, Ottawa Centre, ON]

Thank you, Chair. Thank you to the members of the panel for their intervention. They have provided us with some updates from a year ago when we were seized with this issue, Chair. Of course, it's the anniversary of the collapse of the Rana Plaza this past week.

When we were seized with it last year I tried to put it in a human context. From reading the witness statements and some of the articles in the press, I was really taken with the story of the 11-year-old girl, Tahmina, who I think represented what was going on here for the many people trying to understand. Of course, her case scenario was that she didn't want to go to work because she was concerned about her safety—an 11-year-old girl. Those of us who are parents try to conceptualize having our kid at 11 years of age having to go to work, and then, to add to that, having to go to work in a place they felt was unsafe.

So I think if you put this in the right context that is what we're dealing with. To be very blunt, they are going to work to give us cheap clothes. I'm not saying I'm for or against it, but that it just seems to be the fact.

So I think, Chair, our responsibility is a collective one. We must have our government doing the right thing and being engaged, as we hear from our friends from the department. But we also have to say that we must have some goals here. So what are those goals? My goal on this auspicious day—because today of course is the day that we commemorate those who have died and been injured in the workplace in Canada—would be that a young girl like Tahmina at 11 years of age doesn't have to choose between going to work and dying.

So to the departmental officials, I'm glad that we're engaged. I'm hearing some of the things that they are doing. But when it comes to these two initiatives, we have the one initiative, the Alliance for Bangladesh Worker Safety, and the accord. In regard to the accord, I acknowledge and give credit to Joe Fresh and Loblaws for signing on to that accord. But I also note that the Alliance for Bangladesh Worker Safety is a voluntary process. I would like to get from our guests an explanation for the following. We have our high commissioner participating over there, but are we not concerned that we are taking part in a process that doesn't have teeth right now at a time when this is an urgent issue? In my opinion this isn't about studying the situation, but about trying to study how we deal with this situation. So my concern is that while the government is supporting both of these processes, why do we feel we're going to be able to make a difference in a process that's voluntary in nature? And are we, including the high commissioner, asking for something that involves absolute compliance like the accord on fire and building safety?

[Peter MacArthur]

Mr. Chair, in response to that very good question I'd like to say that our position is that the Canadian private sector and the international private sector have a right to choose the vehicle. The Retail Council of Canada has done a very good analysis of the differences between the two organizations we're talking about.

I wanted to point out that in terms of the alliance, for example, this is a fast-moving situation, as we've just received word in the past couple of days that it has just amended its members' agreement to include the following statement, which speaks to the example of the 11-year-old girl you mentioned. It's short and reads as follows:

Further, Alliance Members shall require that the Factories they work with respect the right of a worker to refuse work if he/she has a reasonable justification to believe that a safety situation presents an imminent and serious danger to his/her life....

This is an improvement on the alliance's earlier members' agreement. Some prominent international companies have elected to join either of these two organizations. It is a very complex and large problem, and in our view it's useful to have two means of attacking the problem.

It's an extremely corrupt environment. A lot of what we're seeing in Bangladesh is related to a high degree of corruption. There are people on the take in terms of inspections. There are many members of the Bangladesh Parliament who own factories, for example, and there's a conflict of interest at the political level, which you may be aware of.

In our view, we leave it to the private sector. I think one of our companies, Loblaws, has decided to go the route of the accord, and you'll be hearing from them in more detail.

[Paul Dewar, NDP, Ottawa Centre, ON]

We laud them for that.

[Peter MacArthur]

I think if you speak to Loblaws, they do believe that the private sector has a right to go in either direction. They've made their choice and are taking a leadership role of some sort.

[Paul Dewar, NDP, Ottawa Centre, ON]

I really do appreciate that.

That statement that you provided us with is fair enough. I would also put this in the context or the reality that for an eleven-year-old girl, doing work refusals on her own is going to be tricky, frankly. I know this is just an update from you. I'm not casting aspersions about what you're telling us, I'm just laying out the actual challenge.

To that end, you mentioned some of the resources we have on the ground. Can you tell me—just as a ballpark—how many people we actually have within our missions abroad who are working on the whole issue of CSR and compliance issues?

[Duane McMullen]

Answering a ballpark question like that would be difficult.

I'm going to say that we have in the order of 80 missions, just so you can understand my math, and then figure out later where I got the numbers wrong.

[Paul Dewar, NDP, Ottawa Centre, ON]

We can follow up with this later.

[Duane McMullen]

We can follow up; that's actually a good idea.

We have in the order of 80 missions that would be in what I would call challenging countries, where the governments themselves lack the capacity to provide the kind of regulatory infrastructure we wish they would have. In those missions we would have, depending on the site of the mission, at least one person who is concerned with and tracking those issues.

[Paul Dewar, NDP, Ottawa Centre, ON]

Can I just ask for some follow-up information?

Can you provide us with how many people are actually doing trade promotion at the same time? I'll leave that with you to inform us.

[Duane McMullen]

Yes, we'll follow up on those.

[The Chair, Conservative, Dean Allison]

Thanks, Mr. Dewar.

We're going to move over to Ms. Brown, please.

You have seven minutes.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

Thank you very much, Mr. Chair.

Thank you, gentlemen, for being here.

I was in Bangladesh four years ago, so I have a little bit of a picture in my head of some of the things we're talking about. We visited one of the garment factories while I was there, and I was struck by some of the construction.

I worked as a draftsman in an engineering company for a number of years, and I understand some of the robust building codes that we have implemented in Canada to ensure safety for our own workers. Even though I know, from a little bit of research, that Bangladesh has a very good building code—through my research, I also discovered that it was reviewed as recently as 2007 by the University of Tokyo, so I have to assume that engineers in Tokyo know what they're looking at—the problem really is the enforcement piece of the building code.

My understanding—and perhaps you can verify this from your knowledge—is also that Bangladesh does not have gravel of its own. It's all imported. I'm assuming that the strength of the concrete being produced for these buildings is questionable. When I drive past any of these buildings and I see rebar sticking out of the top of the buildings—because as long as you don't finish the top floor, you don't pay taxes—I know that the rebar is being compromised every time it rains. The water will run down. It doesn't take an engineering degree to know that rusted rebar and compromised concrete are going to create more of a problem.

My question really is this. Following this terrible tragedy a year ago, are we working with any of the building departments in the Government of Bangladesh to, first of all, help them improve what's being built and, second, take a look at what has already been constructed that is not safe?

If we're not doing that or assisting with that, are we not then just waiting for another tragedy to happen?

[Jeff Nankivell, Director General, Asia Pacific, Department of Foreign Affairs, Trade and Development]

Mr. Chairman, I can speak to that with reference to the project that my colleague, Mr. MacArthur, mentioned. The Government of Canada is providing $8 million for a larger project, a $24-million project also being funded by the United Kingdom and the Netherlands in a tripartite initiative, which the International Labour Organization is managing, as they typically do, with government, employers, and unions.

A major component of that program is specifically focused on both short- and longer-term measures to address the issues around enforcement of building codes and building standards. The fact that Bangladesh is also in an earthquake zone, on top of everything else, poses additional challenges. One challenge—and Rana Plaza is a good example of this—is that what was meant to be a shopping mall had industrial equipment and thousands of workers put into it. So you can have the right codes but the wrong use. That outlines the challenges.

In the context of that project, there are very specific targets that have been set and measurements that we have set with the ILO, the Government of Bangladesh, and the other partners. So over the next few years, as a partner in this project, we're going to be tracking things such as the number of building remediation orders issued and the number of factory inspections completed.

As I said, there are short- and long-term measures being taken. The first is a big push to get out to the factories. A major component is training inspectors, and there are both short- and long-term aspects to that. It's about getting out and doing initial inspections, and setting up a database of thousands of factories.

The database is now constructed, but information about how factories do on these inspections has to be filled in and made available online. Structural integrity of the building and safety are significant parts of that, as are fire safety measures, fire safety equipment, and those kinds of things.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

And the reality....

Sorry, you were going to--

[Peter MacArthur]

I wanted to add that the government, through the Bangladesh University of Engineering and Technology, working for the accord and the alliance, has already begun inspections of structural integrity and fire electrical safety at hundreds of factories. The database that Mr. Nankivell mentioned contains 3,497 factories. It gives you an idea of the extent of the problem that needs to be monitored.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

That is very encouraging to know, because you said a person has the right to refuse work if they perceive—I think this is the quote—“imminent and serious danger to his or her life”. A person walking into a factory is going to assume, as we do, that the integrity of this building is sound and that the people who have done the inspection are people who are qualified to do so. If you don't have that demographic or that component within your society, it leaves everything to question. So that is very encouraging news.

How receptive have they been to this? It's not being imposed on them. Obviously, they've joined hands with us to do this. How receptive have they been and how are we doing with the training?

[Jeff Nankivell]

I think the government is very receptive. Of course, it's a complex situation. As Mr. MacArthur mentioned, you may have people sitting in the parliament there who are factory owners. Obviously, there are deep-rooted systemic problems that will not be fixed overnight, but the government is very keen to get on top of this and, as in many other places around the world, the reputable, serious, long-term players in the industry understand that their markets are under threat.

They understand that, in part, because of conversations we had with them when we met jointly with our counterparts in Bangladesh last fall to deliver the message that, on the one hand, we're prepared to roll up our sleeves and help and contribute financially to building their technical capacity and drawing on the best international experience to help them to do so in a way that involves government and employers and labour, while at the same time letting them know that Canadian consumers are paying a lot of attention to this issue. They know there are some countries where the status of their tariff regime has been affected by these measures. As a result, they're very alert to that.

What makes me optimistic is that we have a lot of serious partners who are committed to addressing the problems, but it's a cautious optimism, because the main achievements are still ahead of us. It has been a year since the Rana Plaza collapse. It has been about six months since we embarked on this project with the ILO and the partners in Bangladesh and there are a lot of long-term issues to be addressed, so the good news is still ahead of us. However, there are serious partners to work with in the industry and in government and in the labour sector.

[The Chair, Conservative, Dean Allison]

Thank you.

Thank you very much. That's all the time we have. We go now to Mr. Garneau.

You have seven minutes, sir.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Chair.

I apologize for missing your presentations, but let me ask a basic question.

If a company in Canada wants to source manufacturing of garments in Bangladesh, how do they have to interface with government? Can they simply go straight to Bangladesh and work out a deal over there, or do they have to come and check with you? Are there conditions?

[Duane McMullen]

No interface with government is required if, for example, a Canadian company would like to source ready-made garments in Bangladesh. However, we like to think that the advice we offer in our missions abroad is so useful—and it's also so low cost because it's free—that it's a really good idea for companies to talk to our offices, whether it's the development program or the political program or the trade program of the embassy.

We regularly survey Canadian companies, who tell us that our advice has been extremely useful for them in revealing things they didn't even know about the market and that prevented them from making expensive mistakes, or mistakes that could have had a significant negative impact on their reputation because they were unaware of issues. I'll use the Bangladesh example. This is a relatively recent lesson that many Canadian companies have learned. You can check, say, the labour practices of your supplier, and that's good, but you also need to check whether the supplier is using a building that's not going to collapse. Fire safety is another example.

These are things that you are not going to think about if you're doing business with Germany, but become issues that you need to be aware of if you're doing business in a market like Bangladesh. One of the functions of our missions abroad for those Canadian businesses that choose to speak to us is that we alert them to those issues that might otherwise be invisible to them.