Evidence of meeting #24 for International Trade in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was honduras.

A recording is available from Parliament.

MPs speaking

Also speaking

Karen Spring  Honduras-based Coordinator, Honduras Solidarity Network
Carmen Cheung  Researcher, International Human Rights Program
Tasleem Thawar  Executive Director, PEN Canada
Jennifer Moore  Latin America Program Coordinator, MiningWatch Canada
Pablo Heidrich  Senior Researcher, Governance of Natural Resources program, North-South Institute

12:40 p.m.

Liberal

Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC

Those are significant amounts.

12:40 p.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

Yes.

That keeps Hondurans from going hungry.

12:40 p.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you very much.

Mr. Hiebert.

April 10th, 2014 / 12:40 p.m.

Conservative

Russ Hiebert Conservative South Surrey—White Rock—Cloverdale, BC

Thank you, Mr. Chair.

Thank you both for being with us this afternoon.

Mr. Heidrich, you've provided fascinating testimony about the existence of free trade agreements with multiple countries and potential or, from your perspective, lack of potential for a free trade agreement between Canada and Honduras.

Your recommendations are good in terms of calling on Canada to increase aid to deal with the issues that are plaguing Honduras. But in your closing statement you said that you do not believe it would be effective for Honduras or for Canadian companies to have this free trade agreement. Yet, at the same time, you've said that the U.S. has had a free trade agreement since 2006 and it's the largest trading partner with Honduras.

Has it been effective for the U.S. to have a free trade agreement with Honduras?

12:45 p.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

The American research that I've seen indicates, no. We should take that literally. It hasn't helped. It hasn't provided them with an additional advantage. The trade preferences that Honduras has now with the FTA they have signed with the U.S. are trade advantages that it already had for several years; it could be close to a decade and a half. Honduras was receiving this as part of the U.S. policy to contain the expansion of regimes that were against the U.S., such as Nicaragua, El Salvador, and so on. Honduras was given a very generous market access in textiles and it was simultaneously encouraged to establish free trade zones where those factories would set up shop and from there they would sell to the U.S. market.

All that was renewed on a temporary basis every now and then by the U.S. Congress. Eventually, the U.S. decided to make it permanent by signing an FTA with Honduras and also with the other central American countries.

12:45 p.m.

Conservative

Russ Hiebert Conservative South Surrey—White Rock—Cloverdale, BC

Has trade increased as a result of the FTA?

12:45 p.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

It has not increased above the averages for those lines of trade, even if you take U.S. imports, for example, textiles, or you take global exports. In general, textiles tend to be ruled by other global dynamics that are much more important than the level of tariffs in these bilateral diet of trade.

12:45 p.m.

Conservative

Russ Hiebert Conservative South Surrey—White Rock—Cloverdale, BC

In your words, it may not be effective for Honduran or Canadian companies. Would you view the free trade agreement with Honduras as being harmful, or neutral?

12:45 p.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

I would say with all respect, but trying to be as precise as possible, that it is useless. It doesn't really help. I don't really see the point in economic terms. It provides increased levels of certainty for investors but the biggest investor from Canada in Honduras is in a free trade zone so it is already under a totally different set of rules. For the most part it's there because it hasn't paid any taxes for 20 years. It accrues the tax credit in Canadian taxes so it pays a 3% effective tax rate in Canada. That's why it's there.

12:45 p.m.

Conservative

Russ Hiebert Conservative South Surrey—White Rock—Cloverdale, BC

Would it have any impact on extractive industries from Canada operating in Honduras?

12:45 p.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

Yes.

I tend to agree with Jennifer that it could increase the level of certainty for Canadian firms in mining by going there. But I think the Canadian mining industry has already evolved to a point where it's not going to get burned again by going into these kinds of jurisdictions. There are many other places in the world that are safer and less controversial. Besides, the level of reserves that exist in Honduras that are already known are just not sufficient to justify the risk. There is already very little investment.

12:45 p.m.

Conservative

Russ Hiebert Conservative South Surrey—White Rock—Cloverdale, BC

You went over quite quickly the exemptions that were kept out of the agreement. You mentioned construction and oil refining.

Could you elaborate on what those exemptions are and provide more detail about the family connections associated with those exemptions?

12:45 p.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

I'm sorry I do not know the names of the families involved. I read it the day before yesterday while I was preparing this, but I haven't memorized it and I didn't write them down. Yes, they are related to some of the wealthiest families in Honduras who have significant participation in both of the biggest political parties—Partido Nacional, the National Party, and also the Liberal Party of Honduras.

Construction is, for the most part, controlled by two large firms in Honduras. Oil refining is one firm, fuel distribution is one firm, and casinos are two firms, and so on. It is very interesting for me that those sectors are excluded. Every country, when it signs an FTA, does make some exclusions, but usually they are for public policy grounds, like public health or issues like that. In this case, there is no reason given. They just want these things to be out of the agreement. So, I am very surprised.

12:50 p.m.

Conservative

Russ Hiebert Conservative South Surrey—White Rock—Cloverdale, BC

Ms. Moore, have you had a chance to review the environmental protections associated with this FTA?

12:50 p.m.

Latin America Program Coordinator, MiningWatch Canada

Jennifer Moore

I read the environmental assessment that was updated prior to the FTA.

12:50 p.m.

Conservative

Russ Hiebert Conservative South Surrey—White Rock—Cloverdale, BC

I'm referring to the agreement on environmental cooperation.

12:50 p.m.

Latin America Program Coordinator, MiningWatch Canada

Jennifer Moore

It's a side agreement. It's useless.

12:50 p.m.

Conservative

Russ Hiebert Conservative South Surrey—White Rock—Cloverdale, BC

Why do you say that?

12:50 p.m.

Latin America Program Coordinator, MiningWatch Canada

Jennifer Moore

It's because there's no enforcement. It's trumped by the international arbitration mechanism that companies can resort to and that communities have no access to that could be used to undermine greater protections to the environment and to their water supplies, in particular.

12:50 p.m.

Conservative

Russ Hiebert Conservative South Surrey—White Rock—Cloverdale, BC

Is that your view of the labour agreement, as well? The side agreement on labour....

12:50 p.m.

Latin America Program Coordinator, MiningWatch Canada

Jennifer Moore

I believe there is no strong protection for human rights, be they environmental, labour, economic, social, or cultural rights built into this free trade model that you're currently discussing.

12:50 p.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you very much.

Mr. Davies, five minutes.

12:50 p.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

Thank you, Mr. Chairman.

Thank you to both witnesses for being here.

Mr. Heidrich, we know that the U.S. is Honduras' biggest trade partner, and we know that they have had a free trade agreement with Honduras since 2006—that's eight years. We're approaching a time, almost a decade, where I think we can start making some analysis of the impacts of that agreement. Have Honduras' poverty rates, institutional integrity, governance structures, rule of law, or the welfare of its people improved demonstrably over that last eight years as a result of the U.S. free trade agreement?

12:50 p.m.

Senior Researcher, Governance of Natural Resources program, North-South Institute

Pablo Heidrich

No.

There are two elements. One is that all of those indicators have since deteriorated. The second point is this. Whether there is a causal relationship between one thing and the other, I'd be hesitant. I'm in economics and I work in international trade, but I wouldn't overplay my hand on the relevance of international trade on the general development of an economy.

12:50 p.m.

NDP

Don Davies NDP Vancouver Kingsway, BC

Thank you.

I happen to agree with you. I think drawing a causal line between trade and the kinds of benefits that the Conservative government often claims—that it'll create jobs, improve the welfare of people, that a free trade agreement will boost GDP and create wealth—I personally think that those causal relationships are not made. But they're made all the time by this government.

We do have data from the U.S. agreement that certainly suggests that, from my reading of all the data, the conditions in Honduras have gotten much worse. Some of the social spending over the last number of years has gone down. Economic inequality, which decreased for four consecutive years starting in 2006, began trending upward in 2010. Poverty and extreme poverty rates decreased by 7.7% and 20.9% during the Zelaya administration, which was overthrown in the coup in 2009, and the poverty rate has increased by 13% and 26% since. Unemployment has gone up. Minimum wage and wages have gone down. So, all of the metrics look poor.

Ms. Moore, I'd like to ask you a question.

My reading of the environmental side agreements that Canada generally signs is that they generally follow the format that the parties agree that they will not reduce their present environmental standards in order to attract investment. That, of course, is predicated on the fact that the environmental standards that are in place now are firm. Can you describe for us, briefly, what the state of environmental protection is in Honduras currently?