On January 28th, 2014, the Canadian government introduced to Parliament the Canada-Honduras Economic Growth and Prosperity Act (the "Act") to bring into Canadian law the Canada-Honduras Free Trade Agreement (the "Agreement"). The Agreement, the product of 13 years of negotiations, was signed on November 5th, 2013 along with parallel agreements on labour and environmental cooperation.
In 2012, Canada exported CND$38.6-million worth of goods to Honduras and Honduras exported CND$218.5-million in goods to Canada.
The major immediate Canadian beneficiaries of the Agreement are pork and beef producers who will get full market access to the Honduran market. That is expected to lead to a CND$5 to CND$7 million annual increase in Canadian pork and beef exports. Additional commodities that are immediate beneficiaries are potato products, vegetable oils and grain products, as well as a range of processed food products. The major Honduran beneficiaries currently are the textile and agricultural sectors.
Some key areas covered by the agreement include:
- Increased market access: Once the Agreement enters into force, 98 percent of goods will be duty free.
- National treatment: The Agreement adopts the GATT 1994 national treatment provisions which prohibit discrimination against foreign products.
- Customs procedures and trade facilitation: The Agreement addresses issues of trade facilitation, customs procedures and technical barriers to trade in an effort to eliminate non-tariff barriers to trade. Along with specific measures such as the simplification of customs processes and procedure for low-risk goods, it encourages technical cooperation among authorities and creates a Technical Cooperation Program to deal with trade facilitation issues.
- Government Procurement: The Agreement contains a suite of rules governing the non-discriminatory bid tendering for covered Honduran and Canadian government procurement, subject to certain enumerated exceptions. The Procurement rules will apply to covered Honduran goods and services procurements greater than CDN$76,600 and construction services contracts greater than CDN$8,500,000. Covered Canadian procurement contracts roughly in the same amount are also subject to the Agreement.
- Investment: The Agreement provides for Most-Favoured-Nation (MFN) and national treatment standards to be applied to investors from each country. The Agreement also sets up a process for investors to settle disputes against either states for certain alleged breaches through arbitration under ICSID or UNCITRAL.
- Financial and cross-border services: Financial services are liberalized as are specific provisions for the temporary entry of business persons. Further, the Agreement addresses provide national treatment and MFN treatment to the cross-border trade in other services as well as setting out provisions generally to liberalize services market access.
- E-commerce: The Agreement recognizes the importance of electronic commerce and sets out guidance on consumer protection, while encouraging private sector self-regulation. The parties also confirm that no duty, fee or charge may be made in respect of a product imported electronically.
To implement the Agreement, the Act amends the Crown Liability and Proceedings Act, the Export and Import Permits Act, the Financial Administration Act, the Importation of Intoxicating Liquors Act, the Customs Act, Commercial Arbitration Act, the Canadian International Trade Tribunal Act, Customs Tariff, and the Department of Human Resources and Skills Development Act.
The Act will follow the typical legislative process, with a second and third reading in the House of Commons as well as three readings in the Senate before receiving Royal Assent, which will determine when the Act and the consequential amendments to the above-listed laws enters into force.
Given the legal changes arising from the Agreement, Canadian businesses with an interest in trading with Honduras or seeking an investment platform in Honduras for greater trade and investment in the region may want to (i) familiarize themselves with the proposed amendments to existing legislation; (ii) assess whether the proposed amendments properly capture the benefits of the Agreement; and(iii) understand what has been negotiated in the Agreement to capitalize on the opportunities to invest in and trade with Honduras.
The authors recognize the research and drafting assistance of Sean Stephenson in the writing of this Bulletin.