Proceedings of the Standing Senate Committee on
Human Rights

Issue 17 - Evidence - May 14, 2015


OTTAWA, Thursday, May 14, 2015

The Standing Senate Committee on Human Rights met this day at 8:31 a.m. to monitor issues relating to human rights and, inter alia, to review the machinery of government dealing with Canada's international and national human rights obligations (topic: Corporate Social Responsibility (CSR) and garment workers).

Senator Salma Ataullahjan (Deputy Chair) in the chair.

[English]

The Deputy Chair: Good morning, senators. Welcome to the thirty-first meeting of the Second Session of the Forty- first Parliament of the Standing Senate Committee on Human Rights.

The Senate has tasked our committee with examining issues related to human rights, both in Canada and internationally.

The chair of this committee, Senator Mobina Jaffer, could not be here at this time. My name is Salma Atuallajhan. I'm deputy chair of the human rights committee, and it is my honour to welcome all of you to this meeting.

Before I continue, I would like my colleagues to introduce themselves, starting to my left.

Senator Eaton: Nicole Eaton, Toronto, Ontario.

[Translation]

Senator Rivard: Good morning. My name is Michel Rivard, and I am a senator from Quebec.

[English]

Senator Hubley: Senator Elizabeth Hubley, Prince Edward Island.

Senator Nancy Ruth: Nancy Ruth, Toronto, Ontario.

Senator Eggleton: Art Eggleton, Toronto. Toronto is dominating here today.

The Deputy Chair: Thank you. Garment manufacturing is an important source of jobs in the developing world. The great flexibility and decentralization of that industry, together with its generalized recourse to subcontracting, complicates the implementation of adequate health and safety standards. In many countries that export clothing, like Bangladesh, India and Vietnam, thousands of salaried workers are exposed to dangerous working conditions and other risks to their health and safety.

We heard this morning about the fire in the Philippines, where the workers could not get out because the windows had bars on them, and they still don't know how many people died.

On April 24, the Rana Plaza building in Dhaka, Bangladesh, collapsed, and approximately 1,130 workers were killed, and more than 2,500 people injured. This was the worst of a series of fatal accidents that took place in the garment manufacturing industry in Bangladesh. Among those were also the November 2012 fire, where over 100 people were killed, and the fire in October 2013, where 7 died and 50 were injured. Human rights obligations exist in the private sphere, including in situations of employment. Safe and healthy working conditions, a living wage and reasonable hours of work are protections that have been won by employees advocating in many communities across the globe for their human rights in the workplace.

When workers' health and safety are not protected, when wages do not allow for a reasonable standard of living and when workers are intimidated for trying to unionize, a number of rights recognized in international human rights conventions, to which Bangladesh is a party, are engaged.

Unfortunately, although Bangladesh has ratified a number of international human rights conventions, such as the ILO's Labour Inspection Convention, in 1972, the Rana Plaza collapse and other similar events demonstrate that there is significant room for improvement in implementation and that effective enforcement is still required.

To begin our hearing, I would like to welcome, from Foreign Affairs, Trade and Development Canada, Duane McMullen, Director General, Trade Commissioner Service Operations and Trade Strategy; and Jeff Nankivell, Director General, Programming, Asia Pacific.

Gentlemen, I will ask you to make your presentation, to be followed by questions from the senators.

[Translation]

Duane McMullen, Director General, Trade Commissioner Service Operations and Trade Strategy, Foreign Affairs, Trade and Development Canada: Thank you very much for the opportunity to speak here today.

I am pleased to tell you about the Government of Canada's overall effort to support responsible business practice among Canadian firms operating and sourcing abroad, including lessons learned from our experiences with the extractive sector.

[English]

Our department works with colleagues across government to promote responsible business principles and practices to Canadian businesses operating abroad. They contribute to business success in challenging environments and bring benefits to local economies and communities in which they are active. Our approach to corporate social responsibility, or CSR, supports and aligns with other efforts of my department and those of the Government of Canada as a whole.

Our overarching position is that the Government of Canada expects Canadian companies operating internationally to respect all applicable laws, to operate transparently and in consultation with host governments and local communities, and to conduct their activities in a socially and environmentally responsible manner. Companies are also expected to respect human rights and to meet widely-recognized international standards for responsible business conduct by integrating CSR principles throughout their business practices. This includes undertaking due diligence and sourcing responsibly.

This position is clearly articulated within Canada's CSR strategy for the Canadian extractive sector abroad, which was originally launched in 2009 and recently enhanced in November 2014. The lessons learned from the CSR strategy, along with Canada's experience and leadership in responsible resource development, guide our broader efforts for CSR in other sectors. They inform how my department advises and supports all Canadian companies abroad, including our efforts in responsible sourcing.

When doing business internationally, Canadian companies can find themselves operating in countries that lack the capacity to help business operate responsibly. The Government of Canada helps to fill this gap through a variety of initiatives that assist Canadian companies in the various challenges they face in operating responsibly abroad.

The activities undertaken by the Government of Canada to promote and advance CSR can be grouped in four areas: promoting and advancing CSR guidance, fostering networks and partnerships, facilitating dialogue towards dispute resolution and strengthening the environment affecting responsible business practice.

To help companies understand good CSR practices, the Government of Canada promotes the use of several CSR guidelines that are relevant to any sector and size of company.

Canada's missions abroad, including the Trade Commissioner Service, are a key channel for engaging on responsible business practices. Through various events, Canada's missions have a tangible impact by bringing a variety of stakeholders together to discuss CSR, share best practices and build networks and relationships. We have over 950 trade officers with more than 400 of them working in 60 developing countries. They provide advice to Canadian companies active abroad on how to operate both successfully and responsibly.

Providing guidance and facilitating partnerships can help companies work well with local communities, yet problems can arise. To help resolve disputes, the Government of Canada has two dialogue facilitation mechanisms — one focused on the extractive sector and one for all sectors. The CSR counsellor provides targeted services for the extractive sector, while Canada's national contact point for OECD guidelines is aimed at helping consenting parties dialogue on the full range of CSR issues and sectors.

Finally, in order to foster an enabling environment, when looking at responsible sourcing, my department and the broader Government of Canada engages with a variety of stakeholders at home and abroad. We collaborate interdepartmentally on a variety of issues related to ready-made garments and their supply chains and engage multilaterally on these challenges, such as through the OECD national contact points and the OECD advisory group on responsible supply chains in the textile and garment sector, as well as working with G7 partners.

We also engage with industry, civil society and labour partners to explore how to encourage good practices in responsible sourcing. An example of coordinated efforts on this front has been collaboration to improve working conditions in the ready-made garment sector in Bangladesh, where a wide variety of stakeholders are undertaking efforts to collectively improve working conditions in the sector, including the private sector.

The Government of Canada will continue to assist Canadian companies with responsible business practice wherever they are active and in whatever sector, providing them with the necessary tools and advice for successful and responsible operations.

Thank you again for the opportunity to present to you today. I look forward to your questions.

Senator Eaton: It is interesting, when you go into another sovereign country and a Canadian company is perhaps only one of the many companies that will use that factory to make garments or shoes, what kind of authority do you have? Is it mostly moral authority? You arrive in country X, you are a big customer, but you are only one customer. You see that their labour practices are not what we would consider to be good labour practices. Is there anything you can do?

Mr. McMullen: Certainly. One thing we have learned through this process is that each country faces different challenges and the environment is different. For example, in Bangladesh it became obvious — too late — but the main challenge there was building safety and fire safety. In other countries, say, for example in Jordan, initially the key challenge turned out to be migrants' labour and working hours. Each country has a different environment.

As we speak to Canadian business, the job of our offices abroad is to recognize what the unique challenges in that country are and to make sure that the companies themselves are aware of those challenges. We give advice to those companies about how they can mitigate those challenges.

For example, in a country where there might be some kind of labour issue within a factory, the Canadian company is but one of many other customers of that factory. That kind of problem is solvable, but not necessarily overnight. One of the roles of our missions abroad is to build coalitions in countries, so if there are Canadian customers then there must be American and European customers. We would work with our colleagues in other embassies or high commissions in that market to make the companies aware of those issues, so that it is not just Canada that is trying to influence the situation in that factory.

For Canadian brands, as well as for European and American brands, they value their brand reputation. They don't want to take a risk that there is a fire in the factory, for example, that kills a lot of people, like in the news that we saw this morning from the Philippines. But if they are not aware of the risk, then they can't take measures against it.

In the case of Bangladesh, as an example, where we have done a lot of work since the fire and the building collapse, with building safety as a problem, the efforts are to work with the local government, the supply chain and companies to do a number of things. For example, to certify factories, so that suppliers know that if I use that factory then it has been validated by external trustworthy sources that that is an acceptable factory to use.

Senator Eaton: Are the standards you try to get Canadian manufacturers and other countries that are using that factory almost to the Canadian or European standard? Surely companies go looking to countries like the Philippines, Bangladesh and Vietnam because they make a much cheaper product than if they were manufacturing it here.

Mr. McMullen: Standards are different. We try to respect the sovereignty of each country to set its own standards. We expect Canadian companies will at least meet those standards, but there are also international guidelines that we expect Canadian companies to meet that can be above the standards within a specific country.

Companies will go abroad to other markets not necessarily because the labour cost is low or because standards are different. It may well be labour availability is a factor or we in Canada have a quota system on imports. So you will go to a country not necessarily because it is the country you want to go to, but it has quota available. Then you try to figure out how you can produce within that country, in a way that meets international standards because you need access to that quota.

Senator Eggleton: You appeared here a year ago and much of the discussion at that point in time was with the RANA Plaza in Bangladesh and the catastrophe of over 1,100 people being killed and many more injured. Of course, that occurred two years ago.

What improvements have actually happened in the area? A year ago we talked about the need for safe and healthy working conditions, living wages, reasonable hours and the right to organized unions without intimidation. What has actually happened in Bangladesh with respect to these issues?

Jeff Nankivell, Director General, Programming, Asia Pacific: Thank you, senator. I will speak to this issue.

My responsibilities are as the director general responsible for Canada's development assistance programming in Asia-Pacific. In that capacity, the government and the Department of Foreign Affairs and Trade and Development has been engaged in the efforts in Bangladesh to improve the situation for the workers in the ready-made garment sector.

It has been two years. A lot of work has been done by a lot of partners. Through our development assistance programs, for a year and a half now, we have been engaged in a major effort through the International Labour Organization where Canada, the Netherlands and the U.K. have each put in $8 million, working with the ILO in a project, which is providing technical support in the fire and safety regime; rehabilitation and skills training for workers affected by the RANA plaza tragedy; fire education and training, and occupational health and safety information; and other areas related to improving the factory inspection systems. These efforts are alongside efforts that have been undertaken by major players in the industry, the Alliance and the Accord, two international coalitions of buyers and manufacturers.

Of those targeted, there are 3,500 sport-oriented factories that are the baseline in terms of improving the inspection regime. Up to now, about three quarters of those factories have been inspected. Some of those inspections have been done under the auspices of the Accord, some under the Alliance, and about 750 throughout the ILO project supported by Canada. Forty-eight factories were recommended for closure. Of those, 14 were closed fully, 13 were partially closed and 21 underwent remedial measures and are now operational.

A major area of engagement for us and our international partners has been to get the government to hire more inspectors. In the last two years, 180 new labour inspectors have been recruited. Twenty per cent of them are women. Technical support has been provided for their training. There are other results related to the re-employment of Rana Plaza survivors and training and rehabilitation for those injured.

That said, there is still more that needs to be done, particularly in the area of ensuring that systems are in place to guarantee the rights of workers and that unions are able to organize. The payments to the Rana Plaza tragedy survivors have not been fully dispersed, and there is still a need to expand and make more coherent the database of all of the factories that are doing work for final export, which will require inspection. There is a continuing job of remediation to be done.

Senator Eggleton: I take it the inspections are relevant to the safety and health aspects of the workplace?

Mr. Nankivell: Yes. The focus has been on fire safety and the structural integrity of buildings.

Senator Eggleton: What about wages? There was a lot of controversy about how poor the wages were. Has anything been done about that?

Mr. Nankivell: Yes. The government has increased wages and the industry has accepted the minimum wage increase, which has gone from $40 to $73 a month.

Senator Eggleton: That is in effect?

Mr. Nankivell: Yes.

Senator Eggleton: Okay. As to this question of unionization, has there been any progress on that?

Mr. Nankivell: Yes. There has been progress. There have been more unions formed and more workers are joining unions. I mentioned the role that the International Labour Organization has been playing in Bangladesh. As you know, it is a tripartite organization that is equally representative of international labour organizations, international employers and governments. The ILO has been engaging with international labour organizations to work on the labour organization side of this equation.

That said, everyone acknowledges there is more work to be done there. Not all organizations that represent themselves as unions would be recognized in Canada as unions. There are issues in a country like Bangladesh, which does experience, on a fairly broad scale, corruption in various walks of life. In government, in industry and also in civil society organizations, there are a number of challenges to overcome.

Senator Eggleton: Yes. Presumably, it is still not easy to organize a union. There is probably still intimidation. If there is corruption, there is probably that, too.

What about this Accord and Alliance? These are two organizations — one more European-based and one more North American-based as I recall — of the business community. What are they accomplishing and what are Canadian businesses, particularly, accomplishing?

Mr. Nankivell: In the measures that I have mentioned, the progress that I have mentioned that has been made, they have played a large role in this. I gave a percentage on factory inspections. Of the 3,500 factories that were targeted, 1,291 were inspected with support from the Accord, which is the European-based coalition of companies. Loblaw is one Canadian company that is a member of the Accord. Six hundred and sixteen factories were inspected under the auspices of the Alliance and, as I mentioned, through the ILO project, 757 factories.

These three initiatives — and ILO is working with a Government of Bangladesh initiative — are working in coordination on common standards and kind of a division of labour in terms of facilitating these factory inspections and reporting and going into a common database.

In terms of the Canadian company engagement, I can't speak for the Canadian companies. I would encourage the committee to speak with them. As I mentioned, Loblaw has been prominent in the Accord. If you give me a minute, I can get the names of some of the Canadian companies that are members of the Alliance, which, as you mentioned, is a North American-dominated initiative, where the Accord is led primarily, but not exclusively, from Europe.

Senator Eggleton: The last time you were here, we were told that the Government of Bangladesh had not ratified a couple of conventions of the ILO. You mentioned, Madam Chair, the one in 1972, but there is one in 1981 and another protocol in 2002, which I take it would be helpful in overcoming some of the loopholes in their system. Have they ratified either one of these now, a year later than the last time we reviewed this?

Mr. McMullen: We would have to get back to you on that.

Since the Rana Plaza collapse, we have been working closely with the Government of Bangladesh. They passed a national tripartite act on fire and building safety, so they have given some legislative framework to the hiring and training of inspectors, as my colleague Mr. Nankivell has mentioned. They have adopted a national occupational health and safety policy that requires labour management and occupational health and safety committees in all enterprises and are providing training on occupational health and safety. We have provided that to 114 master trainers who are currently training 7,500 factory supervisors for 500 factories, and that is impacting 500,000 workers.

Senator Eggleton: This is all to implement this new policy?

Mr. McMullen: Yes. The fourth pillar of our CSR policy, as I mentioned, is working to build the capacity of the host government to be able to improve its own infrastructure and institutions for managing these kinds of issues.

Senator Eggleton: That is what part of the $8 million is going for, I assume?

Mr. McMullen: Yes.

Senator Eggleton: Okay. Thank you.

[Translation]

Senator Rivard: Thank you kindly, Madam Chair. This is the first time I've had the honour of sitting on this committee, so, unfortunately, my questions may have already been asked.

In your presentation, you said you had over 900 trade officers, with 400 of them working in 60 developing countries. Are we to understand that those 400 officers working on the ground aren't necessarily Canadians stationed in Asia but, instead, local officers of those countries, be it Bangladesh or somewhere else, trained by Canada? They aren't actually 400 Canadians.

[English]

Mr. McMullen: Yes, that is correct. Approximately half of our trade commissioners abroad are officers hired locally, but they are particular experts in the local business community, business practices and the local environment. The Canadians will tend to stay for two to four years in country and have a really good understanding of the Canadian context, but we rely heavily on our local staff who are permanently in the country to give us advice about local conditions. They are an invaluable part of our network abroad.

[Translation]

Senator Rivard: Am I correct to assume that you are active in places where Canadians have business interests, not just as owners or shareholders of manufacturing companies there, but also as owners of businesses here who import products from factories in those countries? Is that your area of activity?

[English]

Mr. McMullen: We focus on helping Canadian companies to be aware of the risks that they run in other countries. We'll see a lot of Canadian companies when they're new to international trade. They'll make the assumption that things work abroad like they work in Canada. So in Canada you don't think twice about buying from a factory in Manitoba or about whether the labour conditions good or if the factory is safe. You just assume those things.

But these can be very dangerous assumptions to make for a Canadian company operating in a challenging environment. One of the roles of our trade officers abroad is to make the Canadian companies aware of those risks. What could happen if those risks materialize? The Rana Plaza disaster is a very good tragic example of that. What they can do to avoid running into those risks?

For example, in the case of Bangladesh, there are now two very good private-sector driven sets of standards, the Alliance and the Accord, that can allow a company to share in the work that other companies have done in terms of validating safety practices, validating work practices, and to know that if they hire a company that has a factory in one of the certified enterprises then they can feel confident that they aren't running those kinds of risks with their purchases.

[Translation]

Senator Rivard: Do inspectors notify factory owners before the site visit? Do they check fire safety systems? Do they serve as external inspectors for private firms whose shareholders have decided to carry out surprise inspections? I would think there is a requirement to notify and to conduct surprise inspections to check that rights and regulations are being respected.

[English]

Mr. McMullen: I'm not aware of the specific practices that either the Alliance or the Accord undertakes. I know it is frequent and that major issues frequently are identified when they visit a factory. The goal is not necessarily to immediately shut down the factory. Hundreds of workers could lose their jobs. The goal then becomes remediation. How do we work with that factory to resolve the issues in a timely manner so that a factory can continue to operate?

The first line of approach for both the Alliance and the Accord is to be a partner with the factory, to try to improve conditions. Our experience generally, not just in Bangladesh, but in other markets, is that you achieve much greater results when you're seen as somebody who is an ally, who can help you through issues rather than somebody who is trying to catch you and put you out of business.

[Translation]

Senator Rivard: When you identify a major issue that can jeopardize safety, you, of course, alert the company in question. If, however, that company does business with a Canadian company, do you bring the issue to the attention of both parties?

If the Canadian customer is aware of a potentially dangerous situation, they can put pressure on the supplier. Do you work solely at the local level to remedy the problem?

[English]

Mr. McMullen: Certainly, if we discover or learn of a major issue, then we would bring that to the attention of the Canadian company that was working with the local supplier and to the standard setting bodies or inspectors that also try to remediate those problems.

Senator Hubley: When you appeared before this committee last May, your colleague, Peter MacArthur, outlined some meetings that would be happening on this topic in the weeks after this meeting. There was one in mid-May with the Canadian High Commissioner who was meeting with the British, the EU, the Netherlands and three different ministers of the Bangladesh government, pressing them on the issue. He also said there was an OECD meeting in Paris at the end of June and the European Union's Sustainability Compact review of Bangladesh in mid-July.

Do you know what has come out of those meetings? We've talked about the Accord and the Alliance: Is that something that has come out of those meetings or is that different?

Mr. McMullen: First, those meetings did happen. The Accord and the Alliance pre-existed those meetings. Those are private-sector associations, voluntarily driven, in effect meant for many companies to come together to be able to assure themselves that they were working with subcontractors that were providing acceptable conditions.

As I mentioned, our work is aimed at helping the Alliance and the Accord further articulate those standards to make them more practical and to allow remediation efforts because we want to minimize the harm. We don't want to put people out of work. The ready-made garment sector in Bangladesh and in many countries is a critical part of their economy and provides a significant employment. We want to be able to protect that. How will I describe it? It's a delicate dance between the various stakeholders to look at the problem and think about ways to resolve those problems.

As I mentioned earlier, in our work with the Government of Bangladesh — not just Canada's work, but it's a multilateral effort — they have passed legislation on fire and health and safety policy. They have now mandated occupation and health and safety committees made up of management and labour in all enterprises and they are training master trainers who are training individual factory supervisors on how to implement those new laws.

As my colleague mentioned, much work remains to be done, but we have made significant progress.

Mr. Nankivell: If I can add just a few words on this. The process that's going on in the country, our high commissioner in Bangladesh is engaged in what they call the three-plus-five process. This is the deputy ministers of the Departments of Commerce and Labour and Foreign Affairs of the Government of Bangladesh meeting with five heads of mission of buyer countries, which are currently Canada, the U.S., the Netherlands, the EU as an organization, and there is a rotating seat for any new member. They have been meeting about every two months as a group and the agenda kind of moves along. The most recent meeting was in February.

To give you a flavour of it, the issues that are on the agenda at the moment in that group include: pursuing the remaining 1,300 factory inspections that have not been done of the original targetted 3,500; finalizing the implementing rules of the amended Labour Act of Bangladesh that Mr. McMullen mentioned; establishing an early dispute resolution mechanism when there are disputes involving workers, trade unions and employers; and finally the factory remediation issues, particularly how to improve access for financing for the smaller players in the industry to be able to get the working capital to upgrade their premises to meet the standards that are now increasingly being imposed.

Senator Hubley: I have another question on consequences. In several instances, you expect Canadian companies to apply. You have an expectation that the work that you will do, that the people will follow through.

If they don't, are there any further consequences that we can bring to bear on companies that would perhaps go around some of the work that's taking place, say in Bangladesh, to use in another factory that perhaps doesn't have the standards that it should?

Mr. McMullen: There are in effect two consequences for Canadian companies that don't meet our expectations. The first consequence is that they will receive no public support from us. We will tell them why and we will explain why. This can be a fairly significant consequence abroad because many of these markets are very difficult. If our embassy or high commission is not able to work with local government officials on the various problems that these companies face, they can't successfully do business in that market.

There are the red-tape challenges. The dealing-with-government challenges can be pretty significant in these markets. And if they don't get an intervention from an embassy or high commission they can often be impossible to overcome.

A second challenge is that for companies that need international financing, if they can't show that they are operating to these standards they cannot get financing. The International Finance Corporation has standards. Export Development Canada adheres to those standards, the Ecuador Principles. If you are not able to show that you are in compliance with those principles that are broadly aligned to the kinds of guidelines and standards that we mentioned, you cannot get financing. That can also be a significant deterrent.

Beyond the deterrent of what if there is a disaster, what if there is a fire or a building collapse or a major strike and the government intervenes in a heavy-handed way and your brand is implicated in that, that can be devastating for a business. We explain to companies the kinds of things that can happen to their brand and their businesses if they are tied up in that kind of a tragic situation and they're usually very interested in taking the measures to avoid the risk of that happening. So it's not just a moral issue but also a good business practice issue.

Senator Nancy Ruth: I have a series of questions that are a bit all over the map, so perhaps you would just jot them down.

I'm curious, the Montreal company of Gildan has a large T-shirt manufacturing and dye and export business in Bangladesh. The factory is quite modern, relative to Rana Plaza for sure. What kind of influence, if any, does Gildan have on other Canadian people in similar business? That's one question.

In the health and safety section of the building, does the building inspection really deal with health and safety? Part of my question is the amount of lighting, the seating that workers have to work at, what responsibility is there for early blindness, other issues like that.

I remember well in Indonesia when the first computer chips were made, all the women had their fingers eaten by acid and the Canadian corporations involved took no responsibility whatsoever for long-term benefits.

Another issue I had is when you talk about dispute mechanisms, does Bangladesh have a court system that, should disputes not be resolved, would help in this manner?

Another question had to do with when you talk about Canadian public support, and you articulated very well the number of fingers that the government has to push Canadian companies. I wondered about the issue of quotas. I don't think I quite understood in your opening comments what you meant by quotas. And is this part of this pressure?

Mr. McMullen: I'm not aware of Gildan specifically having investments in Bangladesh. I don't doubt that is the case. Many Canadian ready-made garment manufacturers are finding it increasingly challenging to source labour in Canada and are also finding that they don't like the risks of subcontracting in other markets abroad and feel much safer, I'll say, if they have their own capacity abroad. They feel then they control the standards, the labour issues, the health and safety issues and so on, directly under their supervision. Many Canadian companies are increasingly doing that.

For both the Accord and the Alliance Canadian companies, French, Italian, German, American companies, are working together to come up with shared standards and guidelines in these areas where the local government is deficient. I think Canadian companies have a strong influence in what I'll call multinational, largely private-sector driven entities but also including participants outside the private sector. But Canadian companies do have a disproportionate influence in those bodies.

In terms of building inspections, does it include matters such as lighting and seating arrangements? I'm not sure. That's information we can find, so we can look that up and provide that to you.

Senator Nancy Ruth: I'm talking about health and safety, so that's part of that.

Mr. McMullen: Health and safety within the building inspections. The main issue in Bangladesh was the actual safety of the building and fire protection, fire escape procedures. As my colleague Mr. Nankivell has mentioned, it's a huge challenge to properly inspect over 3,500 factories, and there is a big division of labour, but there are still over 1,000 factories that haven't been inspected, although that work is ongoing.

In terms of dispute resolution, we respect the sovereignty of countries' court systems, so I'll say punitive measures tend to be up to the country itself to impose. We try to work on dispute resolution, on remediation, when guidelines are not met, how you bring things into compliance rather than how to punish for non-compliance. We leave the local countries to deal with the punishment aspect. In many cases Canadian companies will decline to use a subcontractor if standards are not being met.

The quota system is a complicated topic, but many countries, including Canada, have quotas on the amount of ready-made garments that can come from various countries and the quotas are below what the Canadian market would demand.

What that causes in the ready-made garment sector, including in the footwear sector, is they tend to look at countries that have un-utilized quota. If they can establish production in that country, then they can produce more T- shirts or more shoes or whatever it is, but these countries often have, I'll say, a very challenging institutional environment. They don't have a government that's capable of enforcing building safety or hours of work or various labour codes. In those cases you need stakeholders to come together and define those standards and make sure those standards are enforced. Otherwise you get into problems like we've had in Bangladesh and other countries.

Senator Nancy Ruth: I'm wondering if Mr. Nankivell could answer my question about Gildan in Bangladesh. I went through the factory once, they provide one meal a day and they have nursing staff for the employees and their families. They have labour standards way beyond anything else I saw in Bangladesh. I'm curious to know what impact their standards have on other Canadian companies working there.

Mr. Nankivell: I can confirm, as you have, senator, that Gildan is active in Bangladesh. On visits to Bangladesh I've met with representatives of Gildan in a setting where there were representatives from other companies and organizations. They are a voice for quality.

I think our observation is that the higher-standard producers, some of which are foreign invested and some of which are locally invested factories, and as you would expect there is a whole range. With 3,500 factories for export, there is a great range. But the ones that are implementing higher standards, the more they can demonstrate that they can do this and be profitable in exporting to markets like Canada, Europe and the U.S., the faster the improvements will come right across the board.

It's probably the single-most important factor in quickly raising the industry standard. I should roll that back a bit. It may not be the single most important factor; I think implementation and enforcement of actual laws about building safety, fire safety, health standards at work, are the important factors. But close behind that would be the incentives that business owners would feel that it's better for their business to operate in a safer way that's better for workers. They can retain workers.

Anyone operating a factory in a labour-intensive industry anywhere in the world will tell you that a significant challenge that they face is worker turnover. Every time you bring in new workers, you have to train them and you want to retain them for as long as you can. The higher quality factories have much higher retention rates and they reap the benefits from that. It is a very important element in the overall picture and it's one working through the development assistance programs. An important factor for us and our partners working on strengthening capacity for the industry in a holistic way is to work with the leading employers to ensure that they are able to communicate the benefits of the example that they set.

Senator Ngo: As you know, the garment factories are known to employ underage workers. As per your presentation, you say that we have 900 trade officers around 60 countries, and 400 of them, more than half, rely on the local officers. How do you ensure that these inspectors, the local officers will guarantee that these companies respect the UN Convention on the Rights of the Child?

Mr. McMullen: First it's a practical impossibility for our offices abroad to be able to go to — we'll take the case of Bangladesh. Our trade program in Bangladesh has a couple of people. Our aid program is larger, but with 3,500 factories, we can't verify that any individual factory is a good factory or whether or not it's hiring underage workers. We have to rely on the local government, but also the companies and the Alliance and the Accord to be able to tell us which factories are good or not. What we will do with Canadian companies is give them recommendations on — I'll say the consultants or the sources of information that can allow them to determine if a factory is good or not. Either they will be able to find out that a factory has been certified by the Bangladesh government, by the Alliance or the Accord, or know what they can do to undertake their own due diligence — if it's a factory that has not been certified to undertake their own due diligence and to see if that factory would meet standards.

Senator Ngo: Two years ago when the building collapsed we saw a lot of children there. We cannot say that we have to rely on the government, the company or the Alliance to report all this. I think we should know that. How do you do this?

Mr. McMullen: It becomes obvious, I'll say after a disaster happens, what the problems were. The challenge is to avoid the disaster in the first place.

You do that through standard setting, inspections and remediation. It's a much more difficult challenge when looking at a space of say 3,500 factories to figure out which ones are at risk. You can always find out after a disaster, but nobody wants the after-the-disaster signaling mechanism. You want to put measures in place, so the disasters don't happen in the first place.

In the case of Bangladesh, that requires hundreds of inspectors as well as the private sector, the Alliance and the Accord, working on factories and lots of training. That is well beyond the capacity of our missions abroad to do directly, but we try to facilitate the enabling environment to allow the local government, industry and labour to work together to have the standards and inspections in place, so that you don't get those kinds of disasters happening.

Mr. Nankivell: There is also a key role in practical terms of what our missions abroad can do, and that is to do the analysis on the state of the country, the state of labour in the country and what are the risk factors. There are some countries where we can clearly identify that use of child labour is an issue. There may be some others where it's really not an issue. We undertake that kind of general analysis so that when Canadian companies enter into the market then the trade commissioners can advise them that this is something you're going to have to look out for if you're looking to meet with potential suppliers in this country and that use of child labour is a significant issue here.

In some other countries it might be — it's an earthquake zone — that building structure is something you should be paying attention to because there is a potential for a disaster. In other places it could be other aspects of human rights. The rights of children, women and minorities are things on which we do general analysis in the countries where there is a Canadian presence. It's the kind of advice that we give to companies and other organizations when they come into a country, especially for the first time.

Senator Ngo: I would like to pick up the question from Senator Eggleton. He mentioned that the labour organization or the unions in some countries are not allowed. He said that Pakistan has ratified — something like that. But how about in other countries? Let's say Vietnam, for example. Union and labour organizations are not allowed. We know that there are a lot of abuses of workers, wage discrepancies, differences between men, women and children. What do you do about that, if you don't have the labour and union organizations in that country?

Mr. McMullen: We would encourage Canadian companies operating abroad, and it's one of the pillars of our CSR approach, as I mentioned in the opening statement, that multi-stakeholder dialogue is an absolute necessity. When that dialogue doesn't exist, we encourage the companies to create it.

For example, if there is a factory that they were operating in and a union was not allowed — let's say the government wouldn't allow a union, or the union was created and controlled by the government and really didn't function as we would think a union would — then we would encourage that company to create some sort of dialogue mechanism with the workers so they could get early detection of issues, be able to work to resolve those issues early and understand where their workers were coming from.

In our experience operating abroad that can be a very effective strategy for Canadian companies. Canadians are actually pretty good at doing that. Sometimes you need to remind them that they're good at doing that. It works well and that's enough to get them to get to work being Canadian and putting dialogue mechanisms in place.

Senator Ngo: Could you give us one example in Vietnam of a Canadian company doing that? As far as I know right now, labour organizations and unions are not allowed by the Vietnamese government. How do you do that?

Mr. McMullen: Are you aware of any cases from Vietnam?

Mr. Nankivell: I'm not.

Mr. McMullen: We will have to get back to you about the situation specifically in Vietnam and consult with our colleagues at our missions in Vietnam.

Senator Ngo: Thank you.

The Deputy Chair: I have a few questions before we go to a second round.

The Alliance and Accord are focused on Bangladesh, but presumably other countries have similar problems. Why were these initiatives limited to one country? And what is being done elsewhere?

That also brings me to the point that every country has unique challenges. Would it be possible to have a broad CSR strategy for the garment industry?

Mr. McMullen: Each country does have unique challenges. Bangladesh has been in the news; it has been specific to tragedies in Bangladesh that sparked the industry efforts on Alliance and Accord. There tends to be similar types of industry-driven organizations in many other countries. Because of the companies' need to manage the risks of having problems in their supply chains, it is a lot easier for the companies. They all want to certify the same things. Otherwise, you have individual companies doing their own inspections to verify. When the companies work together and share that effort, it becomes significantly more effective and significantly cheaper. It will either happen naturally where the companies will do that, or it is fairly easy to catalyze the creation of that kind of effort simply by talking to companies and putting them together in the same room.

My colleague mentioned the three-plus-five process in Bangladesh. It is very normal for us abroad to work with our like-minded colleagues in other embassies — European embassies, the U.S. embassy — and we will frequently use those contacts to bring companies together so that they can share the work of managing the risks in their supply chains.

Our CSR strategy applies to all companies and all sectors outside of Canada. It is an obligation that Canada has as a member of the OECD. The OECD guidelines on multinational enterprises apply to all Canadian companies operating abroad. We work vigorously on the development of those guidelines with our OECD colleagues and the implementation those guidelines in the work of all of our missions abroad with Canadian companies.

We find that Canada, within the OECD, has played a leadership role in the extractive sector, simply because we have a lot more experience than anybody else in dealing with Canadian extractive companies in challenging jurisdictions abroad. In a sector like ready-made garments, other members of the OECD, for example, Italy and France, have significantly more experience than Canada operating in different jurisdictions abroad. They are playing a leadership role in developing standards, guidelines, building industry coalitions and creating practical user guides. We are also contributing to that process, but we are benefiting greatly from the work of our like-minded countries in the OECD on that as well. But Canada's CSR strategy applies to all countries and all sectors outside of Canada.

The Deputy Chair: So the Alliance and the Accord are limited to specific safety concerns. That is my understanding; is that correct?

Mr. McMullen: The Alliance is a voluntary industry organization. It started with the basis of fire safety and building safety. But once you get the entities talking together, once the dialogue is created and once the habit of discussions and regular meetings happen as new issues crop up, those are also incorporated. What we see with both the Alliance and the Accord is that the guidelines for both of them are becoming broader and deeper within Bangladesh as they develop more experience.

Again, it goes back to one of the pillars of our CSR approach, which is the value and importance of creating multi- stakeholder dialogue. Once you get those people together and talking, things start to work, and you create something that is better than you had before. You can slowly build on that to make things even better. Our role as the government is to try to bring those parties together to be a catalyst to get them working and to keep them working and being effective.

The Deputy Chair: In relation to other issues such as pay, hours of work and unionization, companies may be less interested in advocating for change. How can we address those issues?

Mr. McMullen: That gets to the other aspect of our policy, which is building the capacity of the local government to be able to effectively regulate and legislate in areas of its sovereign jurisdiction.

The Deputy Chair: With the improved working conditions, there is an increase in costs. Is there a risk that business will go elsewhere as conditions improve? Is there anything that can be done about that?

Mr. McMullen: Yes, of course there is a risk that a given country can, in effect, price itself out of an industry. That is something always to be aware of. What is the right balance? That really depends on each individual country. Clearly, a Canadian level of standard in some areas could effectively make everyone unemployed in that sector in another country, and the workers themselves would think that a great injustice had been done to them. Having multi- stakeholder dialogue that includes the workers and the local government to be able to find exactly that balance, to be able to improve standards and to protect human rights and health and safety but also to protect the employment and the economic benefits is an ongoing process. We find having an effective multi-stakeholder dialogue is the best way to find that sweet spot in every situation and to continually evolve that sweet spot.

Senator Eaton: To follow up on Senator Ngo, in this brief, called Investor Brief, they were talking about the Bangladesh government's failure to finalize relevant implementation regulations about health and safety committees. If they don't implement things like health and safety committees, if they allow child labour — I do not know Vietnam but obviously Senator Ngo does — in countries like Vietnam or the Philippines, would Canada ever counsel the Accord or the Alliance to boycott those countries?

Mr. McMullen: I think counselling a boycott would be an extreme measure. Problem identification and remediation is always the preferred approach, working with the companies.

Senator Eaton: But there are cultural differences and different economic needs, as you said yourself. There might be countries where a 10-year-old kid goes off to work every day. I am sure there are. You know there are. Is remediation and chat always effective?

Mr. Nankivell: Maybe I can help. It is a very difficult question, obviously. Great injustices do happen all around the world. Injustices also happen in Canada in industrial settings. As my colleague mentioned, counseling a boycott of the production of an entire country is a severe measure.

Senator Eaton: All right, if not the country, do you boycott certain factories?

Mr. Nankivell: That is precisely the idea behind the Alliance and the Accord and these other initiatives, to create a system where factories can be certified. We focused on the Alliance and the Accord. I am not an expert in this matter globally, but there are also many voluntary codes that different retailers and manufacturers and distributors adhere to. Big companies like Apple, Nike and so on, have their own standards and inspection regimes and so on globally that consumers and shareholders can take action on through boards of directors and consumer measures, including boycotts of products. There is a whole range of initiatives at the corporate level to create this regime of certification so that you can eliminate, as quickly as possible, the participation of factories where these illegal practices are taking place. You can get them out of the supply chain, but it is a big challenge. We are focused on the products coming into Canada in this discussion, but even in Bangladesh there are unbranded products that are going to other parts of other markets such as China, Africa, India and so on.

Senator Eaton: When you talk about other countries — and I do not think this should be focused only on Bangladesh; obviously they had a huge, terrible accident — like Vietnam, India, and it might move to Africa, can you foresee where it will move next as labour costs go up? Are you ahead of the curve or do you march with companies as they slowly move into another country?

Mr. McMullen: Typically we will get a bit of advance notice when the market is shifting that way because the companies will show up and they will be looking for suppliers if they decide to move into a market. They are always looking to see if there are places where they can put production in the ready-made garment sector. So you get a bit of advance notice about that. When that happens, our missions abroad can give useful advice to those companies, working with our like-minded missions.

I would like to come back, if I may, to the question about child labour and standards or country boycotts. For example, I think we heard from Senator Nancy Ruth that Gildan is active in Bangladesh and seems to run an excellent factory. To boycott Bangladesh would punish Gildan and the workers in that factory. If they are following all codes and guidelines, that would be an excessive measure.

Also, child labour itself is a tricky issue. I grew up on a farm in Canada. I was child labour, arguably.

Senator Eaton: You were probably given three meals a day, you probably slept in a good bed and your mother probably sent you to school. Yes, you worked on a farm — after hours and before you went to school.

Mr. McMullen: Yes, exactly.

Senator Eaton: I don't think that is comparable to a child in Vietnam getting up and perhaps having something to eat, working a 10- to 12-hour day and perhaps sleeping on a mat on the floor.

Mr. McMullen: But in terms of a guideline, it gets to what guideline would you have in child labour? Would it be child labour is completely unacceptable in all circumstances, or a child can work if they are educated, properly fed and housed? These are things that we try to have multi-stakeholder dialogues work on and develop standards because in some markets, the child's income can be a critical part of the family income.

Senator Eaton: I agree, so you're culturally sensitive to the environment.

Mr. Nankivell: To add one thing, this is a global issue. It is worth noting that Canada is active globally on these issues. For example, we provide core support and are an active member in the International Labour Organization which is working right around the globe on raising labour standards. There is a record of progress globally on these issues over the last few decades. There is still a long way to go, but these are global problems. They do go right to the heart of culture, economics and politics in countries and communities around the world. We are active in the ILO and we provide core support for the capacity building and standard-setting work of the ILO. We also engage, through the Human Rights Council of the United Nations, on reviews of countries' human rights records which absolutely include labour rights and rights of children and other vulnerable groups in economic settings. There are a number of ways. We are focusing today on corporate responsibility, but it is a multi-front war and we are active in other channels, in global channels, on these issues as global issues.

Senator Eaton: Thank you.

Senator Eggleton: I read the media report this morning about the fire in the Philippines. It may be rather early for you to know the answer to this but do you know if any Canadian companies are involved with this company? It is a company on the outskirts of Manila that makes rubber slippers. Do you know if any Canadian firms are involved?

Mr. McMullen: We saw the media reports also this morning and don't have any information yet as to whether any Canadian firms are involved.

Senator Eggleton: Okay. If you do get that information, could you provide it to us?

Let me deal with the issue here in a more generalized way, though. The death toll currently stands at 72. The remarks in the media are to the effect that there were iron bars on the windows that prevented people from getting out.

If a Canadian company is going into a developing country abroad to arrange for such contracts for purchasing and importing garments, or in this case rubber slippers, I would imagine they would go to the factory. They would want to see the factory and see where their contract is going to be carried out. Do you provide advice or guidelines to them about what they should be looking for when they go to that factory? I can't imagine a firm — whether or not it is a Canadian firm — going to this particular factory and seeing iron bars that would prevent anybody from escaping in the case of a fire and thinking it is okay to do business there.

What kind of guidance do you provide to companies who are about to enter into contracts in these places where health and safety are definitely an issue?

Mr. McMullen: We would advise companies of the risks in that particular market and we would give them referrals to, let us say, a local industry initiative such as the Alliance or Accord and recommend that they perhaps join that Alliance to be able to benefit from the work that organization has done in inspecting and validating factories and undertaking remediation efforts. As an alternate, we would also recommend to them professional and capable inspection organizations that could go into a prospective supplier and give a support on conditions in that factory. It can be really hard. If you are, say, an international business traveller and you spend an hour in a factory, there will be all kinds of things that you will not see and that you will miss.

Senator Eggleton: If they come in contact with you before they go and see the place, before they make a contract you would advise them to check on the health and safety issues, including putting bars up to prevent people from getting out in case of a fire?

Mr. McMullen: Yes. According to the media article this morning, everywhere in the Philippines has barred windows as an antitheft device. If you think about how an organization would set standards, then it becomes everyone would fail if barred windows were a fail standard because then there is a theft problem. It then becomes what is the alternate way to ensure, for example, that there are enough fire escapes and ways out and for people to get training? You have fire drills so people can escape the building and have those actually happen. Or, in the case of this fire, according to the media reports, welding was going on close to where the rubber raw material was stored and that is how the fire started. How do you manage industrial processes so that that kind of high-risk activity doesn't happen?

Senator Eggleton: I don't think there is any excuse for that kind of thing happening that leads to the kind of catastrophe that happened there. We need to make sure that any Canadian company going there has proper checking done on these facilities.

The Deputy Chair: I have a quick question, but I don't know if you'll be able to answer this. Which countries do we import the most garments from? For the benefit of the study, what are the countries we should be looking at besides Bangladesh? Would you have an answer for that?

Mr. McMullen: I don't have that with me, but we can provide that to the committee, madam chair.

Senator Eaton: If a company like Loblaw or Gildan does business with the factories that have been inspected, looked after and brought up to the standard of the country, is there a brand, is there something in the T-shirt? What was the New York diamond company that is owned by Canadians now that said "these are not blood diamonds''? Do we have something commensurate for textile workers, "this T-shirt was made in a certified factory''? Is there a brand or a label?

Mr. McMullen: There are. It's like you can buy fair-trade coffee and things like that. Those marks exist; they're not widely recognized. The clothing manufacturers tend to want their particular brand, whether it's Gildan or Lululemon or Zara. They want that brand to —

Senator Eaton: I understand that, but they don't have an additional thing saying "manufactured in a certified factory''?

Mr. McMullen: Not that I'm aware of.

The Deputy Chair: Thank you very much for being here. As you can see, there was a lot of interest and I'm sure you'll hear from us again.

Senators, we will suspend for a few minutes so that we can go in camera to discuss our future business.

(The committee continued in camera.)