Evidence of meeting #26 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 fta.
A recording is available from Parliament.
11:40 a.m.
Conservative
The Chair Conservative Rob Merrifield
I call the meeting to order.
We have with us by video conference from Toronto, Mr. Grinspun. Can you hear me, sir?
11:40 a.m.
Ricardo Grinspun Associate Professor, Department of Economics, York University, Fellow and former Director, Centre for Research on Latin America and the Caribbean, As an Individual
Yes, good morning, I can hear you.
11:40 a.m.
Conservative
The Chair Conservative Rob Merrifield
Very good.
We also have from California, Rosemary Joyce. Rosemary, can you hear me?
11:40 a.m.
Rosemary Joyce Professor of Anthropology, University of California, Berkeley, As an Individual
Yes, I can, thank you.
11:40 a.m.
Conservative
The Chair Conservative Rob Merrifield
Very good.
We have enough of our members here to proceed. We just had a vote in the House, so the remaining committee members will be coming in as we proceed.
We have a bit of an abbreviated time so let's get started. We're dealing with Bill C-20.
11:40 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
On a point of order, Mr. Chair, do you want to go over the agenda? I'm not sure how it's changed.
11:40 a.m.
Conservative
The Chair Conservative Rob Merrifield
What I will attempt to do is to give the witnesses the respect they deserve and listen to their testimony. We can do the first round of questioning and then move on to clause by clause. I have been assured that we should be able to accommodate the time we have.
11:40 a.m.
Conservative
The Chair Conservative Rob Merrifield
We are doing clause by clause after the testimony and questioning on Bill C-20, An Act to implement the Free Trade Agreement between Canada and the Republic of Honduras, the Agreement on Environmental Cooperation between Canada and the Republic of Honduras and the Agreement on Labour Cooperation between Canada and the Republic of Honduras.
We have with us Mr. Grinspun, associate professor in the department of economics at York University, and fellow and former director of the Centre for Research on Latin America and the Caribbean.
We'll yield the floor to you first, sir, and look forward to your testimony.
11:40 a.m.
Associate Professor, Department of Economics, York University, Fellow and former Director, Centre for Research on Latin America and the Caribbean, As an Individual
Thank you very much.
I appreciate the opportunity to participate in this session. I will speak about the topic from the perspective of someone who studies the political economy of trade and investment.
I'll start with the question of whether the expansion of trade and foreign investment, and more broadly economic integration, can bring about sustained improvements in human development in a developing country that has two-thirds of its population living in poverty.
If I had to summarize in two points what I know about this topic, I would say the following. First, trade and investment arrangements are important policy tools that can contribute to sustained, broad-based processes of economic growth and expanding prosperity. Second, those broad benefits will be obtained only if trade and investment are not seen as goals in themselves, but as part of a larger institutional policy framework, a national development plan that places at the centre the needs of the poorest and most disempowered sectors of the population, as well as ecological sustainability.
I will argue that the Canada-Honduras FTA, although certainly providing benefits for a few specific business interests, does not meet this broader test. I will explain briefly why, and would be glad to expand later on. I will also argue, time permitting, that the FTA is not a good idea for Canadians.
Trade and investment create economic benefits, but who ends up with those benefits? In Honduras the answer seems clear. It is now the country with the most unequal distribution of income in Latin America, and 43% of the labour force is working full time without receiving even the minimum wage. A study by the Centre for Economic and Policy Research in Washington found that in the two years after the 2009 coup, over 100% of all real income gains went to the wealthiest 10% of Hondurans, and the per capita income of the other 90% went down, despite the economic growth.
Why do we trust that the benefits from the FTA will be distributed any differently, or that it will help nudge the country into a more humane model of development? What measures are included in the agreement to make sure that's the case? The answer is none.
For starters, the FTA is designed to limit the policy space available to policy-makers who wish to expand services, improve infrastructure, and promote well-being if doing so may affect business interests. No doubt the most powerful contribution of the FTA to a policy strait jacket is the investor-state lawsuit mechanism. You've heard about the lawsuit in a World Bank tribunal against El Salvador originally launched by Vancouver-based Pacific Rim Mining under the terms of the CAFTA-DR. Although Pacific Rim was Canadian, it moved its subsidiary from the Cayman Islands to Nevada, which it used to sue El Salvador under CAFTA-DR, demonstrating one of the troubling aspects of investor-state jurisdiction shopping. The legal process is now continued by the purchaser of this company, the Australian-Canadian company OceanaGold. Since jurisdiction shopping didn't work, it continued litigation based on an outdated El Salvador investment code, now revoked, which allowed companies recourse to an international tribunal. Although Pacific Rim never fulfilled the requirements to obtain a mining permit under Salvadorian law, it has continued for over a decade to try to get at the El Dorado gold deposit, ignoring the democratic expression of El Salvador's people who have repeatedly asserted that they're not interested in more open-pit mining, particularly cyanide-laden gold mining.
Perhaps during the discussion we can touch on the also-revealing case of the Infinito Gold lawsuit against Costa Rica under the terms of the 1999 Canada-Costa Rica FIPA, the bilateral investment treaty.
I’ll move to my next point.
The FTA does not enhance the fiscal capacity of the state to capture rents from foreign investors. Actually, its purpose is the opposite; to lower the cost of foreign investors. By eliminating barriers to the movement of capital and eliminating performance requirements on investors, it diminishes bargaining power vis-a-vis foreign investors and the ability to tax them. That fiscal capacity is crucial if there is going to be investment in education, health, social services, and the like. It is revealing that social spending as a share of GDP decreased from a high of 13.3% in 2009 to 10.9% in 2012, whereas in the prior period, 2006 to 2009, it had increased.
Free trade arrangements such as for the export processing zones already demonstrate such fiscal effect. In the case of Gildan and other companies located in those zones, we've heard how they're exempt from paying any taxes to the Honduran government and that the beneficial economic effects through wage income are small, as there are two legal minimum wages in the country and the companies are required to pay the lower one. For Gildan, often workers are paid by production not by hour, which makes a mockery of minimum wages altogether.
There is also a long history linking Gildan factories and suppliers to verbal, physical, and sexual abuse of workers, forced pregnancy tests, labour rights violations, blacklisting of troubling workers and, most recently, allegations of tacit approval or collusion by management, with threats of violence and other forms of intimidation and harassment against union leaders. Needless to say, such threats need to be taken seriously in Honduras. Make no mistake. Labour-intensive investment, such as in textiles and garments, is very important for Honduras and should be encouraged. However, there's nothing in the FTA that addresses the serious developmental shortcomings of this sector.
A key ingredient for sharing the benefits of trade and development is the political will to bring it about. The current political regime in Honduras lacks that will. There is much to suggest that an underlying motivation for the military coup in 2009 was discontent among elite sectors who saw their economic interests threatened by reforms brought about by President Manuel Zelaya. Before the coup, the discussion about changes to the mining code that would give greater voice to affected communities and to environmental concerns, thus creating potential restrictions on investment, was certainly an area of concern.
After the coup, Canada’s partnering with the government of Porfirio Lobos to change the mining code so as to achieve a change in the opposite direction stands out as a sad chapter in Canada's relations with the Latin American region. Lobos was elected while his predecessor Manuel Zelaya was in house arrest at the Brazilian embassy and the elections were ruled as highly irregular by credible international observers.
By entrenching investor rights in an international instrument, the FTA amplifies the harm on those human rights that are not entrenched, such as respect for basic labour rights, access to clean water and a clean environment, to prior and informed consent among affected communities and, more generally, the ability to make democratic choices.
The experience with the San Martin mining operation by Goldcorp in Honduras between 2000 and 2009 provides some light. Although Goldcorp claims high praise for the way it has closed this mine, a report from Oxfam paints a different picture, asserting that the mining project caused excessive social conflict, criminalization, and persecution of environmentalists, and that affected communities were not consulted on decisions before or during the operation of the project or during the closing phase.
One of the issues highlighted is health impacts, such as a 2007 forensic medicine report that confirmed that at least 62 community members in the neighbourhood of the mine had heavy metals in their blood. The results of this medical report were given to the affected people four years after the exams had taken place, in 2011, when the mine had already closed its operations. Furthermore, it claims that over a five-year period the inhabitants of San José de Palo Ralo drank water from a source contaminated with cyanide.
This brings me to the question of CSR, corporate social responsibility, which in the view of industry and government in Canada really stands for “corporate self-regulation”. There's little doubt that if Canadian investment in Honduras is going to have beneficial impacts, it needs to be driven by CSR principles, ethically conducted, respectful of human rights, and nurturing of the environment. But if CSR is going to be more than a branding and public relations exercise, it requires enforceable standards and regulations, independent monitoring mechanisms, and appropriate filters on investment approval. Any effort to bring this into reality would face an additional barrier in the FTA. If, for example, a future Government of Honduras decided to assess the human rights or environmental record of foreign investors prior to the approval of their projects, that might be interpreted as a contravention of the terms of the FTA.
My time is running out, so I'll summarize.
11:55 a.m.
Associate Professor, Department of Economics, York University, Fellow and former Director, Centre for Research on Latin America and the Caribbean, As an Individual
I have argued that the idea that the FTA will bring jobs and assure prosperity to Honduras is not a substantiated claim. Indeed, the idea that Canadians can help the most needy people in Honduras through this FTA is a public relations message, nothing more. Moreover, an FTA would provide international legitimacy to a political regime and economic model that is oligarchic, oppressive, and unjust. There are other more effective ways in which Canada could contribute to poverty alleviation, human security, and environmental sustainability in that part of the world, which we could discuss.
That leaves the question of the Canadian interest in an FTA. Since I am out of time, I address that in point form. This FTA does not serve any substantial or strategic Canadian interest. Trade and investment flows are small. To understand the minuscule proportions, Canadian merchandise exports to Honduras are less then one in 10,000 of the total to all countries. I hope I got that calculation correct.
Yes, there are business interests in Canada that would benefit from an FTA, but there are strong reasons why further entanglement with such a troubled and conflicted regime may hurt larger Canadian interests over time. For example, if the FTA encourages additional flow of Canadian mining capital to Honduras, it is almost a certainty that Canadians will be pulled into violent and conflictive situations in that country. More probably, Canada's role in the world, supposedly based on adherence to principles of democracy and good governance, will be tarnished by even closer partnering with a regime that so clearly does not adhere to them.
Thank you very much.
11:55 a.m.
Conservative
The Chair Conservative Rob Merrifield
Thank you very much, and you were right, you were out of time. I let you go on because it's been a long morning for you, and we wanted to hear your presentation.
Rosemary Joyce, Professor of Anthropology, University of California, Berkeley, you are here. I understand that you have spent some time in Honduras. We look forward to your testimony. Please go ahead.
11:55 a.m.
Professor of Anthropology, University of California, Berkeley, As an Individual
Thank you for giving me the opportunity to speak. I'm a professor of anthropology who has been a member of the faculty at Berkeley for 20 years and was a member of the faculty at Harvard for nine years before that.
During that entire time and before, for a total of 37 years, my research has been about Honduras and has involved long periods of residence in Honduras. I lived in Honduras during the period in the late 1970s and early 1980s when its last open military dictatorship turned over power to civilian authorities, wrote the first version of the current constitution, and initiated a long period of building civil society and governmental institutions.
External trade has been critical in that process, yet I come before you to argue against the completion of this agreement. Events in Honduras over the past five years have reversed the progress seen in civil society and government in the prior period. The checks and balances that would ensure that the rights of most Hondurans are respected continue to be dismantled. At this point it is difficult to see how intensifying external trade will avoid the pitfalls of worsening the situation of the average Honduran. It will also remove the important leverage on the Honduran government to strengthen the rule of law, combat impunity, protect human rights, and improve the standard of living for all its people.
The breakdown in these conditions has its roots in the increasing concentration of wealth and political power in the hands of a very few families throughout the 1990s and into the 2000s. But the immediate cause of the severe deterioration was the coup of 2009 and its aftermath.
The National Congress of Honduras convened against its own procedures, retroactively authorized the forceful removal from office of President José Manuel Zelaya Rosales. It then, with no authority in law or the constitution, appointed its own leader as the leader of a de facto regime, which defied international pressure and remained in office through the remainder of 2009.
The de facto regime soon embarked on policies that including using the army and police in actions against citizens exercising their right to protest. Numerous suspensions of the right to assembly and protest were put in place, all of them out of compliance with the requirements of Honduran law and its constitution. Protestors were shot, beaten, and some died in open conflict with the military or police.
Concurrently, a still ongoing wave of assassinations began, targeting members of the press—not one of whose murders has been solved—opposition activists, and minorities who opposed the de facto regime.
The de facto regime was still in power when a national election was held in November 2009. That election saw no recognized international monitors. First-hand reports by international NGOs concerned about peace and indeed reports in the Honduran press showed that citizens protesting the election were subjected to attack by the police. For example, in San Pedro Sula, the second-largest city in the country and the centre of commerce, voter turnout reported declined from the previous election. The opposition had called for a boycott of the election and there is evidence that many who turned out at polling places defaced ballots as a form of protest.
Initial reports of vote counts were later revised sharply downward and the procedures of the Supreme Electoral Tribunal give no confidence in those results whether in their original or revised form.
The candidate thus designated as elected by the Honduran authorities, Porfirio Lobo Sosa, entered office under a cloud of illegitimacy, although he was recognized by a number of international governments concerned to move on from the coup. He spent his entire presidency initiating a series of steps to try to erase the stigma of the coup. He did not, however, remove from their places all the individuals who had been appointed during the de facto regime and some of them remain in power today. And more significant for the present proceeding, the Lobo Sosa government continued a process initiated under the de facto regime in which Honduran governmental institutions were used in the service of the wealthy, removing protections of the environment, of human rights, and citizen participation in decision-making.
While appointing individuals to posts charged with protecting human rights, Lobo Sosa never provided those offices with sufficient resources to do their jobs.
Lobo Sosa greatly strengthened the now militarized police administration, while engaging in an ineffective process purporting to cleanse corrupt police. He deployed the armed forces against peasants protesting land expropriation and supported legislation that established a new policing drawn from the military, which is used now against civilians, something not seen since the end of the military dictatorship.
His minister of security, who continues in office under the current president, presides over investigative police who ignore most crimes, who bungle those investigations they undertake, and who are routinely implicated in violent crimes. Most recently the same individual repudiated the independent institution recognized by the UN as the source of reliable murder statistics for the country in an attempt to institute a new definition of murder that would lower the reported crime rate.
Lobo Sosa's successor as president, Juan Orlando Hernàndez, who is from the same political party, was the head of congress during the Lobo Sosa administration. His congress took steps that weakened the separation of powers already imbalanced in Honduras and, in particular, undercut the Supreme Court, which in Honduras is appointed for terms and thus already highly vulnerable to political influence. Hernàndez and Lobo Sosa collaborated in passing legislation, repeatedly deemed unconstitutional, that would allow construction of model cities in places where Honduran laws would not apply to Honduran residents allowed to live there, to provide labour for international corporations.
In his first months in office, Hernàndez instituted a reorganization of government that has demoted to a lower position many of the key civilian offices and eliminated others, including the ministerial level office under the Lobo Sosa administration for human rights. Meanwhile he's aggressively pursued the same legislative agenda that he initiated as head of congress.
While the election in the fall of 2013 did see international observers, it was also flawed. Independent analyses showed that the vote-count process included many questionable results, with more than 100% of registered voters recorded in some districts, and these were overwhelmingly credited to Juan Orlando Hernàndez. Even so, Hernàndez entered office with a minority of votes in an election that was split between four parties, two of them newly created in protest of the status quo.
Starting the very day of the coup in 2009 and continuing today, the most salient governmental issues have been the steps taken to enrich a small wealthy elite at the expense of the majority of the Honduran population, leading to the highest level of inequality in Latin America.
While international press credited the coup to fear that President Zelaya intended to remain in office, the actual triggers of elite opposition to his policies were economic actions, including the raising of the minimum wage, which marginally eroded the income enjoyed by Honduran companies marketing their goods internationally.
The economic interests behind the coup are self-evident in the legislative agenda that was pursued the very same day as the coup, that consisted of passing laws authorizing a variety of government contracts beneficial to the elites. During the de facto regime, other laws were passed dismantling environmental protections, changing the way that contracts were issued, and generally opening up economic development from government oversight.
In sum, beginning with the break in the rule of law in June 2009, Honduras has seen a remarkable reversal of its previous 20 years of progress in governmental and civil institutions, and this continues. The process is one that is transparently designed to increase power of the wealthy elite. It disadvantages the majority of the Honduran people. Some of the changes, such as restrictions in rights and militarization of civilian policing, having been given the mirror of justification based on the presence in Honduras of active drug cartels, has been a smokescreen for other actions, such as legislation allowing congress to investigate and remove from office any government official, creates impunity and concentrates power in the hands of the congress.
In this environment it's difficult to see any way a free trade agreement would avoid being co-opted as a tool of the concentration of wealth and the continued decline of the status of the majority of the Honduran people. We're hoping this agreement would allow the Government of Canada to bring to bear pressure on Honduras to restore civilian rights, to reign in police and military over-reach, and to protect the common good.
Thank you.
12:05 p.m.
Conservative
The Chair Conservative Rob Merrifield
Thank you very much.
We'll now turn to our question and answer.
Madam Liu, the floor is yours.
12:05 p.m.
NDP
Laurin Liu NDP Rivière-des-Mille-Îles, QC
Thank you to our witnesses for coming in and for your patience this morning. Unfortunately, our committee time has been cut short by votes in the House, but we appreciate your testimony.
I want to start off by saying that we've had many witnesses come before committee speaking to us about human rights. Among them was Ms. Bertha Oliva from COFADEH, who was quoted by Mr. O'Toole in the last committee meeting thus:
We are not proposing isolation for Honduras. We don't want that. We don't want Honduras to be isolated from Canada or from the world. What we are saying is that we want governments of the world and the Government of Canada to monitor the situation more regularly....
However, when pressed further on whether or not she supported engaging Honduras in trade, she said:
No. What I am saying is that businesses cannot be placed above development and the production and advocacy for human rights and respect for human rights. Things cannot be that way. There cannot just be economic progress if at the same time there is a violation of human rights.
I wanted to put those on the record because I think it's unfortunate that some of our Conservative colleagues are trying to make our witnesses say things they are not in fact saying.
12:05 p.m.
NDP
Laurin Liu NDP Rivière-des-Mille-Îles, QC
Staying on the question on the topic of human rights, Bertha Oliva of COFADEH, also said:
But what we are talking about...is not linked to organized crime or drug trafficking. It really has to do with human rights violations generated by state authorities against political dissidents.
I'd like to pose a question for Ms. Joyce. I was wondering if you could clarify for the members of this committee the difference between human rights abuses and the issue of general crime and narcotics trafficking. I was wondering if you could clarify more precisely the role of the Honduran government in these human rights abuses.
12:05 p.m.
Professor of Anthropology, University of California, Berkeley, As an Individual
Thank you.
To begin with, I would reiterate that under the government of Porfirio Lobo Sosa, in 2011 there was a ministerial level office established for human rights and Ana Pineda was appointed to that office. That ministerial level cabinet position is no longer a cabinet level position under the Hernández government. But even when it existed, it was an ineffective governmental institution.
Ms. Pineda did attempt to bring attention to human rights violations, many of which are carried out by the Honduran police and military. In fact, the President of Honduras, Porfirio Lobo Sosa, went on record publicly with an argument that safety was more important than guarding the rights of people to such things as free assembly, and that's been echoed by Juan Orlando Hernández.
So, essentially, the claim of a threat to public order represented by drug cartels is used to intervene against the Honduran population. The presence of drug cartels in parts of Honduras is undeniable and is obviously responsible for a certain amount of lawlessness, including corruption of government and police. However, human rights abuses that were—
12:10 p.m.
NDP
Laurin Liu NDP Rivière-des-Mille-Îles, QC
Sorry, because my time is limited, I want to have time for a question for Mr. Grinspun. But if I have time later, I'll go back to you.
Mr. Grinspun, what policy makes basic economic sense for the vast majority of Hondurans at the moment? You spoke about this briefly in your presentation. Do you think that for the vast majority of Hondurans a free trade agreement with Canada is preferable to increased investments in social services and an end to the economic and political domination of the country by 10 ruling families?
12:10 p.m.
Associate Professor, Department of Economics, York University, Fellow and former Director, Centre for Research on Latin America and the Caribbean, As an Individual
Thank you for the question.
As I expressed, I don't think the proposed FTA is going to help to address the tremendous need in Honduras. Actually, what are required are policies to strengthen state initiatives in the social sector, including education, training, promotion of small enterprises, and protecting labour and social rights. Many of these aspects are not part of the FTA. The strengthening of investors' rights by disregarding other rights actually works in the opposite direction.
There is no doubt that Canada could have a much larger presence in the country, not through an FTA, but by developing a series of relationships at the civil society level, by increasing cooperation, and by strengthening the judicial system and the rule of law and democratic development. There are also many other ways that would be profoundly more important to meeting the needs of the needy in Honduras.
12:10 p.m.
NDP
Laurin Liu NDP Rivière-des-Mille-Îles, QC
Thanks.
I think it's worth noting that funding for public education, health care, and justice have also plummeted since the coup. I think those are issues we need to study carefully as well.
I'll go back to you, Ms. Joyce. I'd like to quote Bertha Oliva again. She said in her testimony: I would also like to tell you about the internal displacement of communities, of people from one community to the other, due to the reigning state of terror. Since the elections there have also been murders among the political dissident community.
She added:
We are not making this up. This is actually happening.
So could you talk about who in Honduras is benefiting from the mass displacement and terrorizing of civilians?
12:10 p.m.
Professor of Anthropology, University of California, Berkeley, As an Individual
There are two kinds of interests that are benefiting from the displacement of common workers in Honduras. One of these is large landowners who are developing industries, particularly around African palm oil and minerals.
In the Lenca traditional indigenous territory of Honduras, communities are being forced out of their locations by the development of gold mining and hydro-electric projects. The government has passed legislation that now allows the direct sale of most of the resources of Honduras to international companies, resources that were previously much more protected.
Where peasants have tried to hold the line against these kinds of displacements, the private landowners have mobilized their own militias, and the Honduran police have assisted, as well as the Honduran army, in moving peasants off of what have traditionally been their lands—
12:15 p.m.
Conservative
The Chair Conservative Rob Merrifield
I'm going to have to cut you off there because of our time. That questioning is over.
We'll go to Mr. O'Toole. The floor is yours.
May 1st, 2014 / 12:15 p.m.
Conservative
Erin O'Toole Conservative Durham, ON
Thank you, Mr. Chair. Thank you to both of our witnesses for appearing, and apologies for our tardiness given our requirement to vote.
I'll start with Dr. Joyce. I appreciate your joining us. I look at your bio here and see that your professional expertise is in pre-Hispanic inhabitants of Central America and art and ceramics.
I take it your testimony here is based more from your time in the country and not from your professional field of study.