International Trade committee  Honduras is considered a developing country, yes.

International Trade committee  No, I don't think there will be any significant change.

International Trade committee  Sure. Market access is determined as the average applied tariff rate in the trading partners that country X has. So what you do is you take the trading partners for Honduras, you look at the average tariff rates for the lines of products that Honduras exports to them, and then you make a weighted average for that.

International Trade committee  They export services, of course. They have a lot of call centres, and there are a lot of offices that provide back-office accounting for financial services, and so on.

International Trade committee  The major export is textiles that come from the free zone, the region of San Pedro Sula where Gildan, among other firms, has factories.

International Trade committee  Canada has a large deficit with Honduras, but if you ask me about Honduras and the world, Honduras has a small surplus, once you count in services.

International Trade committee  Yes.

International Trade committee  I think it's both. I think the market in Honduras is very limited. It's not growing. It might be shrinking because inequality is growing and the economy is not growing sufficiently. Also, on the Honduran side, there are problems of what we call supply, right? There is no growing international investment, and there is not much investment from the domestic side.

International Trade committee  Yes. That keeps Hondurans from going hungry.

International Trade committee  Well, in principle, yes, the Canadian economy and the Canadian government have resources that are enormously bigger than those of the Honduran economy and government and yes, I made the argument that Canada could have a tremendous influence, but that requires a level of determination and also expenditure.

International Trade committee  No. In general the international practice or international experience of using FTAs as leverage is not very successful, not even for countries that have a much bigger domestic market to offer access to, such as the U.S. or again the EU, or Japan, for example. I don't think Canada can leverage with an FTA, but it can leverage with aid because the Honduran government is a government that is very much stripped of resources.

International Trade committee  Okay. Thank you. My recommendation is that the Canadian government should support a strategy of security, democracy, and prosperity in Honduras by increasing its international aid, particularly aid that supports better economic regulation, administration of the court system, and control of corruption and that supports an improvement in basic social services.

International Trade committee  In principle it's a very troubling idea. The international practice with regard to these measures in other developing countries does provide a very bad result. We know that it has already been done in some sub-Saharan African countries, and in some Latin American countries to some extent, and it hasn't really worked.

International Trade committee  Yes, I think Canada ought to engage with Honduras. It's just that I don't find signing an FTA at this point to be an effective way of engaging with Honduras if the purpose is to bring development and security and stability to Honduras. It also won't be effective for Canadian businesses.

International Trade committee  Yes, the reputation of Canada would suffer, particularly because Canada has a comparative advantage as an investor in natural resources for the most part, and that would perhaps produce an increase in the investment in the mining industry in Honduras. As we know from experience of the mining industry of Canada in the rest of Latin America, when you invest in jurisdictions that have very high levels of violence, you get in general low economic results and lots of problems, lots of political problems, and lots of damage to your reputation, also to the reputation of the country.