Mr. Chair, thank you very much.
I thank the committee for this opportunity to speak to Bill , 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.
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—
Thank you very much for giving me 10 minutes to speak. I will try to make the best possible use of those 10 minutes. I will tell you what we are concerned about as human rights defenders and about my organization, COFADEH.
I'd like to give you a bit of context about the situation in that respect. For COFADEH, the situation in Honduras is of great concern. There has been a great deterioration of the human rights situation and that is why we're here. The fact that you are listening to us sends a good message that human rights should not just be a matter of words on paper. They must be made a reality. It is also necessary for you to know that, after the coup in 2009, the situation has gotten worse. It is also important for you to know, and I'm sure that you already know this, that democracy cannot be sustained if there is no full support for human rights.
That is why I would like to tell you what we've been doing and why we're concerned. We have been busy and because of greater and greater human rights violations we are obviously becoming more and more alarmed.
State institutions in Honduras exist, but in fact they do not work. There is no institutional sphere. I'm giving you this as part of the context because investors might think that if the institutions in a country are so weak, how can it be possible to invest? How can there be guaranteed returns on investment?
Another essential element to my mind is that in a country like Honduras and with people like you, how can you believe that the human rights situation is not the priority? It has to be the priority. That's what we have to say.
We have data on human rights violations that scare us. In recent times—and when I say times, I mean since last year—more than 600 women have been murdered. That's not just because they're women. It's because women have devoted themselves fully to defending the rights that have been taken away from them. Over 30 journalists have been murdered. That was not the case in our country. We did not suffer from that phenomenon before. This is a clear message that freedom of expression and the right to information are being violated.
Over 400 young people have been recently murdered. Over 120 peasants in the Bajo Aguan region alone have been murdered. The state and the agents of the state are showing absolutely no interest in investigating these murders. When there is no serious, independent, responsible investigation in a country, what you have is impunity.
We are not here to talk about the state of insecurity and the violence in the country, because Honduras is one of the most violent countries in the world. We are here to talk about serious human rights violations because violence is generalized. There is even more than what I've given you in the data that I presented, but there is also the fact that work is being done and those who speak out and who try to change things are countered by a culture of fear.
Those who defend human rights face a situation in which we are being paralyzed. In the corporate media those who defend human rights are called destabilizing elements. We help victims. We help the people. We speak out about our concerns and we try to consolidate and strengthen the rule of law in Honduras.
Right now there is a formal rule of law, but it is not there in essence. This worries us. There has been a profound worsening of the human rights situation. We are also concerned about something else. According to the work that we've been doing for years, we thought that we had overcome political intolerance and militarization.
Furthermore, we must deal with poverty. When people are poor, militarization will not solve the problem. Military intervention exists throughout the country. That is a very serious situation and we want to draw attention to that fact. We are worried because we want to strengthen this state. We want to guarantee a country with full enjoyment of human rights for the Honduran people and we have not achieved that yet; we do not see that. We have seen a consolidation of power for the party in power and that makes it impossible for the powers of the Honduran state to be independent. When power is consolidated, the logical result is necessarily harmful for human rights, and that is the situation now. It is striking and I want to draw your attention to it.
Those who want to invest in Honduras must know that the situation does not make it possible to guarantee your investments. The conditions are not there to strengthen the people either—quite the contrary. Communities are trying to put on as much pressure as they can because they are not consulted, and that leads to human rights violations.
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. We are not making this up. This is actually happening.
I would also like to draw your attention to the exodus of people from the country, not because they want to leave their country but because they are afraid of being murdered. The exodus of Hondurans continues, be it for political reasons or because they do not agree with what is going on, because when they speak out they are persecuted, threatened, and they face hostility.
Right now there is another worrying phenomenon that is a product of the concentration of state power. Most people are being persecuted through legal means. That makes it impossible for people to exercise their right to disagree with what is going on in Honduras.
I'm not sure whether I've used up my 10 minutes, but I will finish now. If you want to ask questions, I will be pleased to answer them.
Let me begin by expressing my sincere gratitude for the invitation to appear today. We have tremendous respect for the work of your committee. In particular, we are excited to contribute to your examination of the Canada-Honduras economic growth and prosperity act.
My name is Peter Iliopoulos and I am the Senior Vice-President, Public and Corporate Affairs, at Gildan.
I would like to start by giving you a brief overview of Gildan's operations. Gildan was founded in 1984 by the Chamandy family and is a publicly-traded company on both the Toronto Stock Exchange and the New York Stock Exchange with its headquarters based in Montreal, Quebec.
The company employs over 34,000 people worldwide and distributes its products in over 30 countries. We pride ourselves on our ability to deliver a high-value quality product to our customers, leveraged against our leading social and environmental practices and Canadian corporate governance profile.
We are a vertically integrated apparel manufacturer with our manufacturing headquarters located in Honduras. Our manufacturing operations include facilities in Honduras, the Dominican Republic, and Nicaragua. We also recently acquired a small vertically integrated manufacturing facility in Bangladesh.
As part of our vertical integration business model, we also conduct yarn-spinning operations in the United States. We distribute our products in two primary markets, namely, the wholesale channel in Canada, the United States, and other international markets, and more recently, the retail channel in the United States. We sell T-shirts, sport shirts, and fleece products in the wholesale distribution channel. For the retail channel we have expanded our product line to include socks and underwear in order to provide a full product line offering.
With respect to our operations in Honduras, they first started in 2001 and they represent the most significant piece of our overall manufacturing production. We operate four textile manufacturing facilities, two integrated sock manufacturing facilities, four sewing facilities, and a screen-printing facility, which are responsible for producing active wear, hosiery, and underwear product. In total this represents a capital investment of over $700 million. We have over 24,000 employees in the country, which makes us the largest and most important private sector employer in the region.
We established our manufacturing operations in Honduras given its strategic location in servicing our primary market in the United States. Our experience has shown that there's a very skilled workforce in Honduras, resulting in the development of a strong decentralized local management team to run our operations in the country. In Honduras we can also leverage the CAFTA-DR trade agreement, which provides goods manufactured in Honduras and the Dominican Republic duty-free access into the U.S. market.
The negotiations for the Canada-Honduras free trade agreement were completed in the summer of 2011 and the subsequent signing of the agreement occurred in November 2013. Accordingly, we are now looking forward to the upcoming ratification of the agreement that, once implemented, will allow us to effectively service the Canadian retail market, particularly against competing Asian imports.
Our corporate social responsibility program, the Gildan genuine stewardship commitment, has been evolving for over a decade and is based on four core pillars: people, environment, community, and product. CSR represents a key component of our overall business values and strategy and we believe our practices position us as a leader in the apparel industry. Our social compliance program includes a strict code of conduct and ethics based on internationally recognized standards and encompasses a very thorough audit process that includes the conducting of both independent and third-party audits at each of our facilities on a regular basis.
In 2007 Gildan became the first vertically integrated apparel manufacturer to be accredited by the Fair Labor Association, which was a stepping stone to what is now our comprehensive and robust corporate social responsibility program. In addition, each of our sewing facilities has been certified by the Worldwide Responsible Accredited Production program.
Since 2009, Gildan has been annually recognized by Jantzi-Macleans as one of Canada's 50 best corporate citizens. Furthermore, in 2013 Gildan was included in the Dow Jones Sustainability World Index and is one of only two North American companies, as well as the only Canadian company, named to DJSI World under the textiles, apparel, and luxury goods sector. The annual DJSI review is based on a thorough analysis of corporate, economic, environmental, and social performance, which covers issues such as supply chain standards and labour practices, environmental management systems, corporate governance, and risk management.
Specifically, in Honduras, Gildan was awarded for six consecutive years the seal of the Foundation for Corporate Social Responsibility, which recognizes our high standards and strong commitment to CSR in the country.
The working conditions that we offer to our employees at our worldwide locations include competitive compensation significantly above the industry minimum wage; 24-hour access to on-site medical clinics, staffed with a team of 22 doctors and 37 nurses; free transportation to and from work; and subsidized meals. We are also currently in the process of implementing a best-in-class ergonomics program in collaboration with the Ergonomics Center of North Carolina, which we expect to complete in Honduras by the end of 2014 and subsequently at each of our other locations. Most recently, we inaugurated three schools for back health in Honduras, which was a first for our industry in the country.
Overall, the working conditions that we offer our employees, who represent our greatest asset and success factor, are of paramount importance to us. After almost 15 years in the region, we have undertaken numerous initiatives in order to contribute in a meaningful manner to our employees' well-being and their communities' well-being. The following are just a few examples.
Since 2003, Gildan has partnered with the Honduran ministry of education and the U.S. Agency for International Development to offer primary and secondary education to underprivileged regions in Honduras, which has also benefited 900 of our employees. In 2010, Gildan facilitated the opening of a drug store adjacent to our on-site medical clinics at our facilities in Honduras, which in 2013 alone, provided medicine to fill more than 57,000 prescriptions issued by our on-site doctors. In 2011, one of the nurses at our on-site medical clinics developed a workshop to benefit all pregnant employees, in which close to 500 employees have participated.
From an environmental perspective, we have a strict environmental policy, an environmental code of practice, and an environmental management system. Similar to our labour compliance program, we conduct regular environmental audits at each of our facilities. We also operate highly efficient biological waste water treatment systems as well as biomass steam generation facilities, to produce energy resulting in a significant reduction of our greenhouse gas emissions.
From a community perspective, our emphasis has been on partnering in the communities in which we operate, with a focus on youth education and humanitarian aid. As one example, in 2005, we spearheaded the development of an industry-wide initiative for the creation of a technical school in Honduras. To date, this represents an investment of over $1.6 million and has resulted in 7,000 students graduating from the school.
With respect to product sustainability, all Gildan-branded products are OEKO-TEX Standard 100 certified, thus assuring consumers that our products are safe and that no harmful chemicals or materials are found in their composition.
Unfortunately, due to our time constraints, I can only present a brief summary of Gildan and our CSR practices.
I would like to conclude by addressing the importance of the Canada-Honduras free trade agreement to Gildan and its operations in Canada. Once implemented, we, as a Canadian company, will be able to compete on a more level playing field in our home country, in particular against competing Asian imports, some of which already enjoy duty-free access into the Canadian market. More specifically, this agreement will provide us with the opportunity to seek entry into the Canadian retail market, which we have not yet penetrated up to this point. Today our sales into Canada account for only 3% of our total consolidated sales.
Our entry into the Canadian retail market will also benefit Canadian consumers, by providing them with a more competitive pricing option for apparel, hosiery, and underwear products. More importantly, the presence of our product in the Canadian retail marketplace will provide Canadian consumers with the option for a competitively priced, high-quality product that will be manufactured based on leading recognized standards in the area of corporate social responsibility and Canadian values.
In closing, we look forward to the ratification of this agreement and its subsequent implementation. We have been waiting for free trade between these two countries for over a decade, and accordingly, we do hope to see a rapid implementation.
I would like to once again thank the committee for this invitation, and I look forward to your questions.
Thank you. Merci.
We would like to state something categorically. First, poverty is something that we don't understand, insofar as it is so severe in our country. When we hear Peter talking about all that is good, there are a number of serious violations of labour rights. We are working on that, because we are not getting a reaction or a response from the internal legislation. We have presented our concerns to the Inter-American Court of Human Rights. That's with regard to the Gildan enterprise. For us, it is a basic fact that young women make up the bulk of the workforce. There is never a clear vision of the health impact on these women in terms of the work they do. We wish to deal with that issue legally and with due process.
With regard to your question, I will answer it this way. We cannot deny that in Honduras there is drug trafficking and generalized violence; that is why the country has been called the most violent country. But what we are talking about, in the area in which we work, 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. So we want to be very clear here.
It is difficult to work in the area of human rights right now in Honduras, because the level of crime has gone beyond what can be done. But we know that the number of deaths and arrests, with the political persecution and the accusations that have been generated within the legal system, are factors that discourage the population from making demands.
We are talking about deaths that follow a pattern. It is clearly established that the pattern is there, because there is a squad leading those murders. There is a state agent that either by omission or agency allows it. Our reiterated denunciations are that there are clandestine places, like in the old days, when COFADEH was born, where people are taken and where they are tortured. If they're lucky, they are then set free. In most cases, however, they are killed.
So yes, we cannot deny what has been said here. There is drug trafficking, and there is activity linked to drug trafficking. But we cannot allow serious human rights violations to take place with the excuse that in fact the drug trafficking problem is creating such a problem for us. In the community of Ahuas, we saw what happened there. Four people were murdered: two pregnant women, one minor, and one man of about 40 years old. The attack was important not only because there were four people killed; four people were also injured, two of whom were minors. They cannot now have a full life because of the damage caused by the attack.
So there are human rights violations, serious human rights violations, being committed under cover of drug trafficking. These attacks are against political dissidents.
We are here to ask you to consider ratifying this treaty. Think about it, look into it, go to the areas, go to Honduras, and meet with the different social groups that make up Honduras, not only with the groups that agree with this project. Don't only speak to them.
There must be an exercise to include and to create democratic stability in Honduras. It's not something that can be done in four years because what we see are fierce violations of human rights.
I have a question for Ms. Oliva.
Thank you for being here as well, and thank you for continuing on in your caring, compassionate way. I've read some of your background, and it's just such a horrific situation. Your husband disappeared, and I know that none of us around the table can understand or empathize from that perspective. We want to help those people who are in Honduras.
My question to you today would be a follow-up to Mr. O'Toole's comment about whether we turn our backs and isolate or we engage the Honduran people in social development, social justice, human rights initiatives, and economic development. Do you think that's the correct direction in which we should proceed?
Supplementary to that, within the agreement itself.... We talked about rights of workers. Canada and Honduras have negotiated both a labour chapter, within the free trade agreement, and a parallel agreement on labour cooperation, including extensive enforcement obligations and associated penalties.
Under the agreement on labour cooperation, Canada is dedicated to working with Honduras to promote labour standards and better protect workers. Canada is providing labour-related technical assistance to help Honduras meet its obligations under this agreement. Do you think that is a positive initiative in addition to lowering the prices of beef and pork? Or should we just turn our backs, leave Honduras, and not engage?