International Trade Committee on April 8th, 2014

[The Chair, Conservative, Rob Merrifield]

We will call this meeting to order.

We want to thank the department for being here.

We are studying, pursuant to the order of reference on Monday, March 31, 2014, Bill C-20, an act to implement the free trade agreement between Canada and the Republic of Honduras. That is an environmental agreement as well as a labour agreement. We have with us the department, which is sort of tradition to have a department here to kick us off on this for the first hour. Then maybe we'll get into witnesses in the second hour.

So with that I believe it's Cameron MacKay. You are going to lead us in that and you have an entourage with you. Welcome to committee and we look forward to your testimony and we'll follow it up with some questions. The floor is yours.

[Cameron MacKay, Director General, Trade Negotiations, Department of Foreign Affairs, Trade and Development]

Mr. Chair, thank you very much.

I thank the committee for this opportunity to speak to Bill C-20, the Act to implement the Free Trade Agreement between Canada and the Republic of Honduras, and the parallel Agreements on Labour and Environmental Cooperation.

I am currently the director general for trade negotiations at the Department of Foreign Affairs, Trade and Development. From 2010 to 2012, I was Canada's ambassador to Honduras.

I'm joined at the table today by my colleagues Henri-Paul Normandin, who is the director general for the Latin American and Caribbean bureau; Paul Huynh, deputy director for tariffs and goods market access; Vern MacKay, director of investment trade policy; and we also have Pierre Bouchard, director of bilateral and regional labour affairs at Employment and Social Development Canada.

Mr. Chair, members of this committee are well aware that to compete and succeed in international markets in this hemisphere and beyond, Canadian companies need a level playing field with respect to tariffs and market access. The Canada-Honduras free trade agreement achieves that goal. It is a concrete demonstration of the government's commitment to an ambitious pro-trade plan, as well as our strategy for engagement in the Americas.

Of course Honduras is a relatively small trade partner, but there is potential for long-term growth, and several Canadian companies are already active there.

Indeed our bilateral trade is already growing. From 2009 to 2013, Canada's two-way merchandise trade with Honduras grew 59%—from $176 million to $280 million. Just over last year, from 2012 to 2013, Canada's exports grew by almost 17% with imports growing more than 7%. To support Canadian businesses operating in Honduras, Export Development Canada, EDC, has assisted 28 Canadian companies and had a business volume in Honduras of more than $23 million in 2013.

But Canadian companies face some stiff competition in Honduras. Honduras already has free trade agreements in force with eight partners: the United States, the European Union, Mexico, the Dominican Republic, Chile, Taiwan, Panama, and Colombia. It is also negotiating free trade agreements with Peru and Korea. Each of these agreements gives the businesses from those countries a measurable competitive advantage in Honduras over their Canadian counterparts, including clear price advantages in terms of lower tariff rates. Once our FTA enters into force, Canadian exporters will be able to compete with them head to head.

Today Canadian exports to Honduras face, on average, tariffs of 10.5% for agriculture products and 4.8% for non-agricultural goods. If Parliament agrees to implement this free trade agreement, it will help Canadian companies take advantage of Honduras' growing economy by immediately eliminating duties on almost 70% of Honduran tariff lines, with most of the remaining tariffs to be phased out over periods of 5 to 15 years.

The range of products that would benefit includes: agricultural and agri-food products, forestry products, plastics, chemical products, vehicles and auto parts, and industrial machinery.

This agreement will have benefits for communities across Canada, and especially with respect to the agriculture and agrifood sector. For example, pork producers from Quebec and Ontario; processed potato product producers from New Brunswick, Prince Edward Island, and Manitoba; linseed producers in Saskatchewan; and beef producers in Alberta will all benefit from the removal of Honduran tariffs as high as 15% on their products.

With the Honduran approval last fall of Canada's beef and pork inspection systems, Canadian producers and exporters of beef and pork can take advantage of the tariff reductions on day one of the implementation of this free trade agreement.

This agreement will also eliminate tariffs on a wide variety of Canadian industrial goods exports such as chemical products, wood, pulp and paper products, vehicles and auto parts, as well as fish and seafood. The gains in goods market access will benefit companies in diverse sectors right across Canada.

Canada's service sector also stands to benefit. The FTA goes further than Honduras' existing commitments under the World Trade Organization's General Agreement on Trade in Services in sectors of export interest to Canada, including professional services and information and communications technologies. Overall, the FTA will provide secure, predictable, and equitable treatment for Canadian service providers.

Investors will also benefit. The Canada-Honduras free trade agreement includes provisions designed to protect bilateral investment through legally binding obligations, and to ensure that investors will be treated in a non-discriminatory manner. Through the FTA, investors will also have access to transparent, impartial, and binding dispute settlement. The investment provisions of the FTA will support a stable legal framework that protects Canadian investments in Honduras and vice versa, including guaranteeing the transfer of investment capital and protecting investors against expropriation without prompt and adequate compensation. The investment provisions also include an article on corporate social responsibility, which recognizes that both governments expect and encourage their respective companies operating abroad to observe internationally recognized standards of responsible business conduct.

The FTA also contains strong provisions with respect to government procurement. Honduras has numerous infrastructure projects under way, which relate to ports, airports, and the production of energy from renewable sources. These projects aim to improve, among other things, access, quality, and sustainability of infrastructure services for the rural poor. The FTA will expand access for Canadian suppliers to these types of procurement opportunities, reduce the risk of doing business in the region, and create attractive opportunities in areas such as environmental technology, engineering, infrastructure projects, and construction services.

Finally, in keeping with Canada's overall approach on free trade negotiations, Canada has negotiated parallel agreements on labour and environmental cooperation. The agreement on environmental cooperation, like others that Canada has signed, commits both Canada and Honduras to effectively enforce our environmental laws, and to ensure that we do not relax or weaken those laws to encourage trade or investment. Similarly, the agreement on labour cooperation ensures that increased business between our two countries does not come at the expense of labour rights.

Canadian companies that do business abroad rely on fair, transparent, predictable and non-discriminatory trade rules. With the Canada-Honduras Free Trade Agreement, we are helping to provide Canadian companies with the rules they need to compete and win abroad, and build a stronger Canadian economy here at home.

Of course, Hondurans will also benefit from this FTA. Canadian companies invested in Honduras, and Canadian importers buying Honduran exports, are already providing jobs and opportunities there. Over time, this FTA will create the conditions for more such opportunities for Hondurans. Committee members are well aware that Honduras is a country facing challenges on all fronts—with respect to poverty, violence, narco-trafficking, and respect for human rights, to name a few.

Honduras needs help, and Canada is responding. Canada is engaged with the government, civil society, and other international donors on the ground in Honduras to address their human rights, security, and development challenges.

The Canadian government's view is that prosperity, security and democratic governance—including full respect for human rights—are interconnected and mutually reinforcing.

The governments of Canada and Honduras agree that increased prosperity through trade and investment, supported by a strong free trade agreement, can contribute to the reduction of poverty and social exclusion in Honduras.

Thank you, we will be pleased to take any questions the committee might have.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Before I turn it over to questioning, I want to welcome our committee back together. Last week, a number of them were down in Peru. I see some of them are a little darker than before they left. I don't know what they were doing there exactly. Nonetheless, welcome back and we look forward to your questions.

We'll start with Mr. Davies, the floor is yours for seven minutes.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

Thank you to the officials for being with us today.

In 2009, the Honduran army overthrew the democratically elected government of president Manuel Zelaya. Following the coup, the military government suspended key civil liberties, including freedom of the press, expression, and assembly; responded with violence to peaceful demonstrations of citizens, causing injuries, deaths, and thousands of arbitrary detentions; shut down media outlets; and kidnapped and murdered political opponents. Mere months later, in January 2010, the coup leaders were installed in an election that was overwhelmingly described as illegitimate, and condemned by all Latin American nations, the European Union, the United States, and the General Assembly of the United Nations.

That is a government that was in place until October 2013. Can you tell me if DFAIT conducted negotiations with that Honduran government from 2009 onwards?

[Henri-Paul Normandin, Director General, Latin America and Caribbean Bureau, Department of Foreign Affairs, Trade and Development Canada]

Mr. Davies, thank you very much for your question.

Following the 2009 events, the Canadian government first of all condemned what happened at that time.

The Canadian government was very active in the months that followed, working together with other countries in Latin America, including working with and through the OAS to try to bring back democratic order and peace in Honduras. Honduras, at the time, was suspended from participation in the Organization of American States. Following a lot of work that was done by the OAS, including the work of the truth and reconciliation commission, Honduras was finally readmitted to the OAS by all members of the region.

There was an election that took place, as you mentioned, in 2009, and there was an election more recently. The recent election was deemed by the observers to be generally free and fair. There were some issues that—

[Don Davies, NDP, Vancouver Kingsway, BC]

Monsieur Normandin, I'm sorry to interrupt you. I will get to that, but my question was, between 2009 and 2013, was DFAIT negotiating the free trade agreement with that government?

[Henri-Paul Normandin]

Oh, negotiating the free trade agreement...I'm sorry.

[Cameron MacKay]

We had no contact with the interim government. I mean, between the time of the coup and election in 2009, there was no negotiation and no contact.

[Don Davies, NDP, Vancouver Kingsway, BC]

You bargained in 2010.

[Cameron MacKay]

Once the Lobo government took office in 2009—and that was an election that was recognized by Canada, the United States, the European Union, and most other countries as being legitimate—we recognized that government and we did continue negotiations with that government.

[Don Davies, NDP, Vancouver Kingsway, BC]

I'm sorry to interrupt you. I want to get this straight.

I think you misspoke. There was no election in 2009. The election was in 2010, right? That's when the Lobo government was installed—

[Henri-Paul Normandin]

The fall of 2009.

[Don Davies, NDP, Vancouver Kingsway, BC]

—and that government was not recognized immediately by us. That election was condemned.

It was the fall of 2009 and the government took office in 2010.

[Cameron MacKay]

The president took office, I believe, in January 2010, and we recognized that government and worked with them, including on the free trade.

[Don Davies, NDP, Vancouver Kingsway, BC]

My only question is, was DFAIT negotiating a free trade agreement with that government in 2010 and 2011 and 2012? That's all I'm asking.

[Cameron MacKay]

With the Lobo government, yes, we did. When we concluded negotiations it was with the Lobo government.

[Don Davies, NDP, Vancouver Kingsway, BC]

We have conducted research on Honduras, canvassing a wide array of respected sources, including the U.S. State Department, The Economist, Human Rights Watch, the United Nations, PEN, and many others. Here's a sample of what we found.

Honduras is not considered a democracy but a hybrid regime. It has slid from 74th to 85th from 2008 to 2012, so it's going in the wrong direction. Transparency International ranks Honduras as the most corrupt country in Central America. The U.S. State Department estimates that 79% of all cocaine shipments originating in South America, the world's leading producer of cocaine, land in Honduras.

According to The Economist, the countries in the northern triangle of the Central American isthmus, which include Honduras, form what is now “the most violent region on earth”. The United Nations Office on Drugs and Crime reports that in 2011 there were 92 murders per 100,000 people, making it the most violent country in Central America. The next year, in 2012, Honduras became the murder capital of the world, recording 7,172 homicides. In 2013, just last year, there were, on average, 10 massacres per month. A massacre is defined as an instance where three or more people are killed at once.

According to the Americas Policy Group, less than 20% of homicides are even investigated, never mind prosecuted, and they say this high level of impunity serves to mask political violence. Since 2010, there have been over 200 politically motivated killings. According to a 2013 Human Rights Watch report, Honduras is the most dangerous place in the world for journalists. According to the Honduras human rights commission, 36 journalists have been killed between 2003 and 2013, 29 since President Lobo—the one you just said that you were negotiating with—took office illegally in 2009.

Over 149 documented cases of extrajudicial killings by police were recorded in 2011 and 2012. In the last 18 months alone, at least 16 candidates and workers for the opposition party, Libre, have been assassinated. In June 2013, 94 members of the U.S. Congress called on the U.S. State Department to halt all military aid—

[The Chair, Conservative, Rob Merrifield]

Get to a question, because your time's about gone—

[Don Davies, NDP, Vancouver Kingsway, BC]

I'll get to that.

[The Chair, Conservative, Rob Merrifield]

—and I want to leave time.

[Don Davies, NDP, Vancouver Kingsway, BC]

—and in January the UN Special Rapporteur on the Independence of Judges called the Honduran government's dismissal of four Supreme Court justices a violation of international norms and “a grave threat to democracy”.

Let me ask you this. Is this the kind of country—one that does not respect democracy, violates its citizens' most basic rights, intimidates judges, commits atrocities and human rights abuses, murders journalists and political leaders, is corrupt, is a drug smuggling centre, is unable to maintain the rule of law—that DFAIT believes Canadians want our government to extend preferential trade access to?

[Cameron MacKay]

Well, I'm not going to speak for the department. Let me go back and address some of the allegations that you raised.

You mentioned that the Lobo government took office illegally in 2009. The position of the Government of Canada, like that of the United States, the European Union, and other industrialized countries, is that the election through which President Lobo took office was legitimate. We recognized that government and worked with them—and it wasn't just us. Other western countries did as well. We worked with them to conclude a free trade agreement. We also worked with them to implement programming with respect to development, cooperation, and security.

Frankly, Honduras is a country that suffers from all of the things that the member described: the cancer of narco-trafficking, violence in the region that is bordering on out of control, serious human rights concerns. It's for that reason that the Government of Canada, along with other like-minded governments, is working with the Government of Honduras to try to address these issues, both directly and through tools like the negotiation, in our case, of a free trade agreement, which the United States and the European Union also have in force with Honduras.

[The Chair, Conservative, Rob Merrifield]

Okay. Thank you very much.

Mr. O'Toole.

[Erin O'Toole, Conservative, Durham, ON]

Thank you, Mr. Chair.

Thank you all very much for appearing this morning.

As opposed to my colleague across the way, I'll be asking questions as opposed to giving a speech.

Since he focused on a couple of years of our relationship with Honduras, could you take us back a little further to talk about the origin of these discussions? I believe they actually began as part of Canada's engagement with the Central American four. Could you walk us through from the origins of these discussions to the FTA today?

[Cameron MacKay]

Thanks for the question.

The negotiations were launched back in 2001 with the Central American four; that is, Honduras, Guatemala, El Salvador, and Nicaragua, as a group. We made good progress for the first few years of those negotiations. Shortly after we began negotiating, that group of countries also began negotiating a free trade agreement with the United States. They got a little distracted, and they were unable to carry on two major negotiations at the same time. They concluded their agreement with the United States, and that was implemented in 2006.

We made an effort again to begin negotiations. We tried off and on for a few years. About 2008 we started again in earnest with the Central American four. Once again they got a little distracted in their negotiations with the European Union. Back around 2009 we had conducted a couple more rounds with the four countries. Then there was the coup in Honduras, and the Canadian government stopped contact with the Honduran government during that period. When we re-engaged after a legitimate election in Honduras, it became very apparent that we would be unable to conclude a single free trade agreement with all four of the CA-4 countries.

Frankly, the other three parties were simply not ambitious enough. They were not willing to offer Canada the same kind of market access package they had agreed to with the United States and the European Union. The Hondurans, on the other hand, were more ambitious in their negotiating posture. For that reason the Canadian government moved on and concluded a bilateral agreement with Honduras.