Canada, Honduras Say Better Late than Never for Free-Trade Agreement

Erin O’Toole (Canada) and Sofia Cerrato (Honduras) sign a memorandum of understanding towards a free trade agreement.
Erin O’Toole (Canada) and Sofia Cerrato (Honduras) sign a memorandum of understanding towards a free trade agreement. (Flickr)

EspañolAfter a decade of negotiations, Canada and Honduras have finally achieved a bilateral free-trade agreement (FTA), including tariff-free status for 98 percent of goods categories.

The agreement is set to go into force on October 1, given a memorandum of understanding, signed on September 15 by Erin O’Toole of Canada’s Ministry of International Trade and Sofia Cerrato, Honduras’s ambassador to Canada. It addresses labor and environmental cooperation and delineates how Canada and Honduras will interpret, apply, and administer obligations regarding customs procedures.

The Long Road to a Free Trade Agreement

Canada initiated the negotiations with the CA-4 Central American nations (El Salvador, Guatemala, Honduras, and Nicaragua) in 2004, piggybacking on discussions associated with the Central America-Dominican Republic FTA (CAFTA-DR). However, Canada’s presence at those negotiations failed to bear fruit, and only Honduras remained interested in further negotiations with Canada.

In October 2010, the two nations revived their negotiations, and the first round of talks began in Ottawa in December 2010, followed by a meeting in Tegucigalpa in February 2011. The negotiations concluded in August 2011, but the agreement remained unresolved until now.

The snail’s pace continued for three more years. Two of the nation’s economic ministers signed the FTA agreement in Ottawa on November 5, 2013. Then in January, Canada’s parliament approved the FTA with the Canada-Honduras Economic Growth and Prosperity Act, although the final confirmation came eight months later.

On passage of the law, Canada’s International Trade Minister Ed Fast declared that his “government understands that trade and investment are the twin engines of the global economy that lead to more growth, the creation of good jobs and greater prosperity. That’s why we continue to open new markets for our exporters around the world. In Latin America alone, Canada now has six free trade agreements in place.”

Victoria Henderson, managing director of the Institute for Social and Economic Analysis (ISEA) weighed in with the PanAm Post on the various benefits and disadvantages of this kind of agreement: “To the extent that barriers to trade are reduced and competition is increased, the outcome of any FTA is positive sum.”

However, Henderson cautions that there can be a tendency among FTA negotiators to ignore the pains of change: “We need to recognize that FTAs can cause shifts in the employment landscape, and this can make them a difficult sell in the political arena. Too much reshuffling too quickly can be destabilizing. In the long run, however, the process of reshuffling is what allows us to work together to maximize our strengths.”

Labor Rights the Sticking Point of the FTA

Honduran officials see this FTA as both an opportunity for commerce with Canada and to establish themselves as a nation that respects human rights. Canada’s occupational-health and safety regulations are some of the world’s most stringent, and Canadian officials do not sign agreements with nations that fail to meet those standards.

One of the most pressing requirements for Canada to enter this FTA was that Honduras respect basic human labor rights. Specifically, Honduras must meet her obligations as a member of the International Labour Organization (ILO), based in Switzerland, and her commitments to the ILO Declaration on Fundamental Principles and Rights at Work (1998). For example, Honduras must respect freedom of association and the right to collective bargaining, eliminate of all forms of forced or compulsory labor and child labor, and prohibit discrimination with respect to occupation.

Blooming Relationship

For Honduras, a relationship with Canada presents a promising opportunity. The large market offers consumers for goods such as gourmet coffee, fisheries, fruits and vegetables, sugar, and clothing. In addition, foreign manufacturers may also be motivated to relocate to Honduras, since they too will be able to enjoy the more open route to the Canadian market.

Even before going into force, Canada is a key trading partner: 12.5 percent of foreign direct investment in 2012 was Canadian, and trade in goods between the two nations has grown by 46 percent in the past five years.

Henderson is of the opinion that the “FTA negotiators [were] seeking to get the best possible terms for their respective parties. That said, the big concern is to ensure that domestic industry heavyweights are prevented from using their political clout in a way that makes the FTA an extension of entrenched privilege.”

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