Foreign Affairs Committee on April 28th, 2014

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

It sounds as if there's good advice to be had. Do they have a reflex to come to see you, or is that something that happens by happenstance?

[Duane McMullen]

It's hard for us to get a detailed statistical sample of what I would call our market share of Canadian companies that speak to us. As my rough estimate, about 40% will speak to us at missions abroad as a matter of routine. The rest tend not to.

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

I was staggered to find out that perhaps as many as five million women work in Bangladesh in the textile industry—a truly staggering figure. It really dwarfs anything that I can think of anywhere except perhaps in China.

I've been told by some people from Bangladesh that there are companies, retailers, that go to manufacturing outlets in Bangladesh that are complying with safety standards and generally charge a certain price, say $7 or $8 for a shirt, but that there are also non-compliant manufacturers where you can get the same shirt made for about three and a half dollars. It may sell for $35 in Canada, but it only costs about three and a half dollars to make it there, and they are working on such thin margins that they do not consider themselves as having enough money to make sure they are safety compliant.

This person pointed out that quite a few Canadian firms go to these non-compliant ones, because it's a very fierce market and that they will go for the three-and-a-half-dollar shirt, as opposed to some other companies that will go for a more expensive shirt but from a compliant manufacturer. What are your thoughts on that? Does that kind of thing happen? This comes from fairly reliable sources.

[Duane McMullen]

I'm not aware specifically of that happening, but it would not surprise me if that were the case, which is why my colleague, Peter MacArthur, and I have mentioned that we strongly encourage Canadian companies to sign up for one of the two standards bodies that the international businesses created to ensure that this kind of thing doesn't happen, whether it's the alliance or the accord. We work with both standards bodies to further strengthen the protections they have in place for worker rights and worker safety.

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

From what I've heard, by some estimates two-thirds of factories in Bangladesh are left out of both of these initiatives or alliances. Is that a realistic assessment?

[Peter MacArthur]

I'm a little surprised to hear that, Mr. Chairman. We can verify that with some data as a follow-up to this testimony.

I do want to point out, though, that the Rana Plaza disaster has brought to the world's attention—including companies sourcing in countries such as Bangladesh—the point that there are corrupt practices that, in terms of the value chain, lead to what you would call “subcontracting” by a reputable firm. You think you're dealing with a reputable firm, but they're subcontracting to non-reputable firms, and because of the corrupt environment, with not enough inspectors.... One of the positive things that's happening, although it's happening too slowly, is the hiring of 200 additional inspectors on top of the 175 that already exist, so that these subcontractors are found out and knocked out of business.

Some of these factories have been closed as a result of Rana Plaza. It's important to state that a number of factories are closed. That of course affects employment, so workers are looking for a way to transit through that. That's one of the complicating issues in this regard.

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

Thank you.

What about other countries? Bangladesh is obviously very visible to everybody. Are there other examples that one can compare to Bangladesh, where work is done at very low wages and possibly in some conditions that we would not consider to be safe in terms of corporate and social responsibility? Are there other countries that you're focused on, other than the very visible Bangladesh? Perhaps you've talked about that.

[The Chair, Conservative, Dean Allison]

That's all the time we have, but go ahead, Mr. McMullen. Answer the question. That would be fine.

[Duane McMullen]

Yes. I won't name any specific countries, but you can look at a map and figure out which ones they are.

There are many countries that would have challenges similar to those that the Government of Bangladesh has in creating and enforcing the kinds of standards that we as Canadians would expect, both for their workers and for their factories. That is why we have efforts in our missions in those countries to try to give advice to Canadian companies about the kinds of problems they could face in operating in those markets, the kinds of risks to their reputation, the practices that they could end up being involved in without their knowledge and would not want to be involved with, and how to avoid those practices.

My colleague Peter MacArthur, for example, mentioned the idea of hiring a reputable subcontractor, or one who you think is reputable, who then offloads the disreputable work to somebody else. You might not be aware of that, but we explain to companies in all of these difficult markets that these are the sorts of practices that happen. We give them practical advice about how they can make sure that ultimately this is not what is happening in their case.

[The Chair, Conservative, Dean Allison]

Thank you.

Thank you, Mr. Garneau.

We're going to start the second round, which will be five minutes, and we're going to start with Mr. Anderson, please.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

First I want to follow up on a question that Mr. Garneau asked.

Are the initiatives aimed at factories of certain sizes? If you have a factory of 4,000 people working on two or three floors, is that treated differently than a factory of 50 or 100 people on a single floor is? Are the building codes being applied right across the board or are they specific to the bigger factories dealing internationally with purchasers from abroad?

[Jeff Nankivell]

On the work of the ILO, I think the ambition is to cover everybody. The laws apply to everybody. As for factories that sign up for the alliance and the accord, it is far short of all the factories in Bangladesh. As you would expect, it's typically the larger operations that are dealing with brand-name buyers. There's a lot of clothing that goes around the world that never gets a brand attached to it or gets a brand attached to it in some local shop after passing through many hands anonymously. There's a priority on the bigger operations where you can reach the most workers. That's the obvious kind of place to start.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

On the accord and alliance, are they both positive initiatives or are there negative consequences of not being part of them? Is it a big enough and strong enough initiative such that when companies and manufacturers choose not to participate there are negative consequences?

You were talking about people coming to the embassy and consulates and us giving them good advice about what they might do if they want to deal with Canadian companies or being comfortable getting into Canada. I'm just wondering about it. Do we have both sides of the equation working here or just one?

[Jeff Nankivell]

They're both voluntary arrangements as to of whether or not one joins them. Once you've joined them, you have obligations, but which differ between the two associations.

In terms of the negative consequences, those would be in regard to your access as a supplier to the kind of reputable large-volume buyers around the world for your business. In that sense it's like other standards, ISO standards or other kinds of voluntary codes. I mean, compliance with the law is compliance with the law. Signing up for these types of arrangements is a way for you, as a factory owner, to get access to the buyers who represent a huge share of the market and who pay a better price for the product.

If I may, I would come back to the question about what's happening in the rest of the world. Canada does support what's called the Better Work initiative of the International Labour Organization, a global initiative that is working at these issues and that funds, among other things, research that can demonstrate to factory owners in different countries—this is part of the program we're supporting in Bangladesh—that if you improve the conditions and if you pay better wages and provide a better environment for your workers, you can actually become more profitable.

They're now working with the International Finance Corporation arm of the World Bank to develop financial products that can provide working capital to factories in different countries around the world. They're just starting up the program for...thinking about the program for Bangladesh, but the hope is that in future you can develop lending instruments that will provide working capital to factories who agree to upgrade their standards.

One of the barriers they face in doing that is often lack of access to working capital. Because of the terms they have with their suppliers and their buyers, they're chronically short of capital. So that provides an incentive for the factory owners to join these kinds of arrangements.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I'm going to run out of time here quickly, I think.

[The Chair, Conservative, Dean Allison]

You have about 30 seconds left.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Okay.

The people who have probably suffered the most are those who were severely injured and find themselves in a really difficult situation. Would you just comment a bit more on the project funding that we've put into this? Someone mentioned a centre for the paralyzed; I'm not sure of the name of the institution.

Could you just talk a little bit about our commitment to that?

[Peter MacArthur]

Yes. We can provide the exact numbers to you separately, but a relatively small level of funding has gone into those two initiatives for those who were injured. The private sector is more involved in that area. You can ask other witnesses about that.

In terms of the trust fund, $15 million of the requested $40 million has been donated so far. The goal is $40 million and we're only at $15 million. Loblaw has provided funding to this trust fund, and also some funding that you can ask about in terms of short-term compensation to the workers in the Rana Plaza factory disaster; they were producing for Joe Fresh.

[The Chair, Conservative, Dean Allison]

We'll go back to Mr. Dewar for five minutes.

[Paul Dewar, NDP, Ottawa Centre, ON]

Thank you, Chair.

To our witnesses, in terms of the database that's being set up, you're doing these evaluations and trying to track things. Is it something where you're actively going out and trying to figure out who's doing what? How do you gather information to get the database moving?

You mentioned the database, and I just want to understand how it works.

[Peter MacArthur]

It's a local database of I think almost 4,000 factories. The one thing they haven't met, which we keep pushing through our high commissioner and our high commission, is that they are not noting in that database which factories have been inspected. That's something we've been asking for that we're not yet getting.

[Paul Dewar, NDP, Ottawa Centre, ON]

Okay, because I would think a goal would be to try to first get Canadian companies to establish some sort of connection with you, ideally; you've offered, and maybe there are some ways to look at that in terms of policy options. Then it would be to give them the information about who's doing what, whose standards are up to speed, so to speak. So the first thing is getting Canadian companies to register, if you will, and the second is providing them with the information about who the good actors are and then supporting those who are the good actors, because I think what we're getting into here....

As you said, it's very complicated. I get that. We're going to hear from industry in a second, and they have responsibilities, but I think it's pretty straightforward that you wanted those three things to happen: first of all, Canadian companies to sign on and sign up; second, to give them the information; and then to improve standards. That seems to me to be a good path forward. Would you agree?

[Peter MacArthur]

Yes, I would agree. I think that the industry is doing this itself, but we are overseeing this. As I mentioned, our high commissioner is one of the advisers keeping an eye on the accord as well. We remain very much engaged. It's a top priority of the High Commission Dhaka, and was even before the disasters struck.

[Paul Dewar, NDP, Ottawa Centre, ON]

But I also note that it's a resource issue, which is not for you to speak to, which I understand. You get resources, you do the best you can with them. But understanding what the challenge is for you to be able to do what I just laid out.... I think everyone has a role to play here, clearly.

[Jeff Nankivell]

Yes, and that database has been started up and is being maintained by a government body of Bangladesh, the Department of Inspections for Factories and Establishments. They're in the process of identifying in the database—which you'll be able to see—the factories that have been inspected by the government and those that have been inspected under the alliance or the accord. So as a buyer of garments, you'll be able to look online and see that. It's on a website, and it's available for the whole world. So labour unions and individual workers—everyone—will be able to see the inspection status of the factories—