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.
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.
One of the things we've heard in a lot of the testimony from previous groups is the atrocities and the human rights abuses and the abuse of media that has been going on in the past in Honduras.
One of the questions I have for you is that when you look at Colombia and the changes and improvements that are going on there—and of course the trade agreement is a piece in the puzzle in bringing about a better quality of life for the people in Colombia.... I look at that example and I ask why couldn't we use that here in Honduras? I look at the example and ask if we're going to make things better, what is the best way to do that? How do we move forward? Looking at it the way it is right now, obviously it's not working, because we still have atrocities. We have to figure out a way to work with the Hondurans on how to step forward.
I look at trade as one of the tools to do that. Now that doesn't make it the only tool. There should be other things we should be considering while we're doing a trade agreement, looking at other aspects that will help improve the quality of life for Hondurans over the longer period of time. That's the goal, I think, behind this trade deal. The goal of the Hondurans is to get a quality of life that will actually be better than what they're experiencing right now.
I look at this and I see a lot of reasons to criticize it. There's no question about it that you can criticize a lot of things and can always say that they should have done this or that better. But the reality is that you can only do so much at a certain point in time and then you build upon that. You draw a line in the sand and say that for now, at this point in time, this is a good agreement that everybody can actually work with. Then you build upon that more and more as you move forward.
If we didn't do this trade agreement, from talking to groups like Gildan and other companies that we've seen there before, where would their employees end up? If they did not work for Gildan or a mining company, making good wages, with a good quality of life, good working conditions, and good health care, what would they do? What is their other option?
The reality for them would otherwise be narco-trafficking, or nothing, or being employed in very poor economic activities with very poor alternatives, with a very poor outlook for the quality of life, not only for themselves, their families, and their communities, but also for the whole infrastructure surrounding them.
I'm looking at this and seeing this as a way to help them up. Now you're saying that we do nothing. You're saying, don't do a trade deal; don't do anything else. Just leave it be. But the status quo in my opinion is not acceptable.
How would you move forward? If you're saying don't do this, how else would you move forward? Right now what you're proposing is the status quo, and that ain't working. Give me something that works.
The FTA reduces the ability of the Honduran state to monitor and regulate foreign investment, which is what is required to address the problem you're mentioning. It needs to be more selective about what kind of investment comes into the country and to be sure that it is actually contributing to the welfare of the people of the country and not to criminalization, securitization, and drug activity.
Actually, Canada's intervention in Honduras already has quite a negative effect in that regard. The mining law that came out in I believe 2012, which was done with advice from Canada, levies a 2% security tax on the royalties of production for security purposes. In other words, the Canadian mining companies are funding the securitization of the country.
And of course, these are sites that create enormous conflict and tension. Although I don't know more details about the topic you're raising, I think the general context points to the fact that the FTA will in no way or form help address that problem and will actually encourage forms of investment that may be quite problematic.
Just to give another example, we are aware of the—
Witnesses, thank you for your views on this issue.
I'm a bit confused. We had witnesses here at the last meeting, I believe, and one of the Canadian companies actually on the ground was also here. They told us that it would be beneficial if this Honduran free trade agreement were ratified. Those companies also appear to have well-developed corporate social responsibility policies. They were able to describe for me some of their activities in Honduras with respect to medical care, poverty, poverty reduction, and other areas they operate in.
Mr. Grinspun, you mentioned security contribution. I'm a little puzzled here because, in my understanding, if security in a country is improved, that is good for the population of the country and that is good for society in the country.
My question is about expanding our presence in Honduras. By the way, this witness also told us that they pay way above the minimum wage in that country and that they have all kinds of facilities to improve the life of Hondurans.
If the culture is changed in a country from narco-trafficking to work culture, is it bad or is it good?
I am not a regular member of this committee, but I am my party's deputy international trade critic.
Regarding the study the and debates held in the House on the free trade agreement, the NDP's position on trade agreements is clear. We have established three conditions. The country we are doing business with should have a good human rights record, and it should be a strategic partner. The third condition has to do with the agreement's content, once it has been disclosed.
I think it's clear from the witnesses' points of view that Honduras is far off the mark with its human rights record. I recognize the arguments that the government side has brought forth, but which, after having been repeated so often, I think we should raise the burden of evidence for. For example, they have been saying that a trade agreement with a country with a poor human rights, record actually improves its human rights or has the potential to do so. Well, I haven't seen any significant evidence of that happening in any deal we've signed before.
There are major problems in Honduras, be they governance or the quality of the judicial process. Those cannot be explained only by narco-traffic. I think it would be a failure to try to explain it that way.
I know my time is limited and I don't want to block the process as we move to clause by clause. For all of these reasons, the NDP side will be voting against each and every clause. Surprise, surprise. You have not made case for CETA or a free trade agreement with South Korea so far.
Shall schedule 2 carry?
(Schedule 2 agreed to on division)
(Clause 1 agreed to on division)
The Chair: Shall the title carry?
Some hon. members: Agreed
An hon. member: On division.
The Chair: Shall the bill carry?
Some hon. members: Agreed
An hon. member: On division.
The Chair: Shall I report the bill to the House?
Some hon. members: Agreed
An hon. member: On division.
The Chair: Very good.
That takes us to the end, and we don't need to reprint the bill.
Thank you very much for being here.
The meeting is adjourned.