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Citation

J.F. Morin (2004). Water Export: Reconciling International Trade and Sustainable Development. Rev. Sci. Eau 17 (1) : 117-122. [article in French]

Original title: L'exportation de l'eau: comment concilier les exigences du commerce international et du développement durable.

Full text (PDF)

Abstracts

Quebec legislation prohibits bulk water transfers outside of its own political borders. This legislation could be judged contrary to international trade law by an arbitration panel of the North America Free Trade Agreement or the World Trade Organization. Additionally, it is not obvious why international transfers should be considered more environmentally damaging than those effected within provincial borders. A hydrographic basin approach would conform better to international trade norms, environmental objectives and to the spirit of Quebec's new water policy.

The Water Resources Protection Act (1999, c. 73), adopted in November 1999, prohibits bulk transfers of water outside of Quebec . Originally conceived as a temporary moratorium, enacted as a response to a growing public concern with the commercialization of "blue gold", the measure was made permanent in 2001. Quebec civil society, conscious of its water wealth and anticipating increasing international trade demands, almost unanimously accepted this new law.

Nonetheless, views differ regarding the protection this legislation would offer if contested within the framework of the North American Free Trade Accord (NAFTA) or the World Trade Organization (WTO). Additionally, one must question the coherence between an approach based on political borders and the ecosystem management approach put forward in Quebec's new water policy. Ultimately, we believe an approach based on hydrographic borders would assure the best protection, while respecting both international trade law and the need to preserve water resources.

Although this debate first emerged in the Canadian provinces, especially those rich in water resources, the issue concerns the entire international community. In effect, among the instances of bulk water transfers surveyed globally, many cases have occurred in a jurisdictional void (Barlow and Clarke, 2002). With the conclusion of the International Year of Freshwater , an increasing number of individuals and organizations are prepared to protect their water resources against commercial exploitation. Heightened political pressure is thus being applied on legislators, but they will be limited by the same international trade rules to which Quebec is currently subjected .

1- PROHIBITING WATER EXPORT: A RISKY STRATEGY
In the eyes of an international arbitration panel, the Water Resources Protection Act may be considered equivalent to a restriction on exports. Yet, NAFTA article 309 stipulates that "no Party may adopt or maintain any prohibition or restriction on […] the exportation or sale for export of any good destined for the territory of another Party". Article XI.1 of the General Accord on Trade and Tariffs (GATT) of the WTO provides a similar clause.

In the early nineties, when these trade rules were negotiated, the measures taken were designed specifically to assure continued American oil supplies. However, this objective was not explicitly provided for in the text of the treaties, and thus restrictions on exports are banned for all goods. Consequently, if water is considered a good, Quebec could be forced to authorize its export.

It may be difficult to demonstrate before an international trade tribunal that bulk water is not a good. Certainly, Canada assured within article 7(2) of the North American Free Trade Agreement Implementation Act that market obligations would not apply to waters that are not bottled or in tanks. The law, however, does not define tank, thus opening the door to large-scale exports. Furthermore, an international arbitration panel called upon to consider the question would not be obliged to take Canadian laws into consideration.

The arbitration panel would definitely consider the common declaration put forth by Mexico, the United States and Canada resulting from the NAFTA negotiations that affirms, unless water is sold commercially and thus becomes merchandise or a good, that water in all its forms does not fall under the clause of any trade accord including NAFTA. Certain observers, notably the organization Eau Secours, have however suggested that bulk water is already being exported from Canada (COALITION EAU SECOURS, 1999). According to the signed declaration between Canada, the US and Mexico, this commercial precedent would qualify bulk water as a good.

If Quebec's ban on bulk water exports is contested before an arbitration panel, in terms of restrictions to export, neither Canadian laws nor NAFTA can be counted upon to provide a defence. It is probable that judges would retain the argument that water in its natural state is on Canada's tariff schedule (tariff number 2201) and therefore must be considered a good. Bulk water would then become a trade object, in the same manner as bottled water, and thus exports could not be restricted.

2- IDENTIFYING STRATEGIES THAT CONFORM TO INTERNATIONAL TRADE LAW
In the eventuality that an international arbitration panel considers bulk water a good, Quebec has several tools available that would permit the province to avoid, or at least structure, the development of commercial activity in this area. Quebec could call upon the exceptions provided in NAFTA article 2101 and article XX of the GATT, which foresee the conservation of natural resources as a reason to justify export restrictions. The appeal to this exception must adhere, however, to three fundamental conditions:
1) Export restrictions must be applied concurrently with national restrictions. For example, in addition to legislation prohibiting bulk water export, strict measures such as prohibitive taxes must be adopted in order to reduce national consumption.
2) Export restrictions must be applied to all countries without discrimination. Thus, the technical description of water export cannot be to the advantage of the United States, who could receive water transfers by diversion, compared to water exports as cargo to other continents.
3) The restriction on exports for conservation purposes must not be applied in a manner that would constitute a hidden restriction to international trade. The true objective of the restriction must be clearly interpreted as the protection of a natural resource and not, for example, to maintain low prices to internal consumers by ensuring an abundant supply.

It may be difficult for Quebec to satisfy these three conditions (MAYRAND, 1999). In fact, international jurisprudence, notably the well-known WTO case regarding a American restriction placed on shrimp trade, demonstrates that an appeal for an environmental exception is extremely arduous. In order to understand the measures taken by a country, judges are likely to examine their necessity. Why, if on an environmental basis it is not acceptable to transfer water outside of provincial/state borders, would it be acceptable at the national level? Are there not other possible measures that could be taken to achieve the same environmental objectives without affecting international trade so extensively? One cannot exclude the possibility that this logical thought process could drive arbitrators to judge that the prohibition of bulk water export does not adhere to the conditions required to be exempted on the basis of an environmental exception.

If Quebec cannot appeal based on an environmental exception and thus, must lift its ban on bulk water transports, the province can still limit trade. Under certain conditions, the province could levy heavy taxes to discourage large water removals. Quebec could similarly impose quantitative limits to water exports provided that these limits are not lower than previous export limits. These strategies, however, will all be subject to the strict conditions and restrictions of NAFTA articles 309 and 314.

Alternatively, Quebec could simply ban massive water removals, whether they are for local consumption or for export. This is the proposal that the Canadian federal government presented to all its provinces, including Quebec. The Canadian government defines bulk water removal as "large-scale removals of water by man-made diversion, such as canals, tanker ships or trucks, or pipelines. It is not necessarily exported out of the province or country, but is "exported" from its basin of origin. " The application of such a policy would in principle justify the application of similar measures vis-à-vis water exporters.

Quebec, which has the constitutional authority to legislate in this area, preferred to ban bulk water exports outside of its political boundaries, rather than ban water transfers between different hydrographic basins. In Quebec's eyes, the proposed Canadian policy would not prevent the export of water because certain hydrographic basins transcend political borders with the United States. Nevertheless, a measure that would prohibit the bulk removal of water from one basin to another, because it is based on environmental realities, would seem to be one of the only measures that could be covered by the environmental exceptions foreseen under the NAFTA and the GATT.

3 - REMOVAL AND EXPORT: SIMILAR IMPACTS
Whether water removed in bulk is destined for export or the internal market, there can be serious consequences on aquatic and terrestrial ecosystems. Consequences include but are not limited to the following: a reduction in biological productivity, the destruction of both marine and terrestrial habitats, increased soil erosion and sedimentation, an increased level of mercury found in water and the perturbation of natural salinity regimes in estuaries (Quebec Environmental Public Hearing Board, 2000; International Joint Commission, 1999; Linton, 2002).

Projects involving water transfers by canal, diversions or pipelines are those that entail the largest environmental impacts due to the extent of modifications inflicted on the watercourse. Additionally, the repercussions of canal or pipeline construction are not limited to aquatic and shoreline ecosystems. Repercussions can extend broadly, for example, disrupting migratory routes and hunting grounds.

Whereas transfers destined for road transport, ferry transport or shipping are limited, the cumulative impact of numerous transfers can be similar to a single large removal. Water transfers increase the risk of introducing invasive species or exogenous microorganisms. In this context, we must evaluate the cumulative effects of a series of water removals as opposed to evaluating each removal separately.

The negative impacts of bulk water removals are not only environmental but also socioeconomic in nature. Indeed, hydrological cycles and aquatic ecosystems make an important contribution to a multitude of human activities. In certain watercourses, the maintenance of particular flow levels is essential to commercial navigation and to maintain municipal water supply. Similarly, the maintenance of aquatic ecosystems is essential to sport fishing and ecotourism. Ultimately, bulk water removals carry major social and environmental risks, whether they are exported or used internally. The environmental and social contexts do not, therefore, justify special measures that would apply to exports but not to transfers intended for internal use.

4- COMPLETING THE TASK
A ban on bulk water export outside of Quebec borders affirms Quebec's hydrological heritage, thus responding to its political objectives. On the other hand, if the end objective is the preservation of water resources, it would be preferable to ban all bulk water removals, regardless of their end use (export or internal). It would be easier to justify an environmental exception before an international arbitration panel if there were a total ban on bulk water removals. This would also reinforce the protection of ecosystems and Quebec's watercourses.

However, using environmental borders rather than political borders to define the legality of a bulk water transfer raises some concerns. Firstly, one must be assured that intra-basin water transfers do not have the same environmental impacts as inter-basin transfers. Mindful of this objective, particular attention must be paid to the legal definition of hydrographic basins.

We must also avoid a scenario whereby such legislation would be unduly restrictive to essential projects required by Quebec as a society, notably hydroelectric projects and the diversion of rivers for public safety. There are, therefore, certain exceptions that should be authorised by the Environment Minister.

Finally, we must ascertain that this approach does not permit intra-basin bulk water transfers at the American border. The Canadian Government has already amended the International Boundary Waters Treaty Act to ban removals exceeding 50 000 litres of water per day from Canadian border water. The Great Lakes Charter, adopted in 1985 by the Governors and Premiers of states and provinces within the Great Lakes basin, requires a consultation process for all proposed removal and diversion projects affecting more than 5,000,000 gallons per day.

By narrowly defining hydrographic basins, by foreseeing certain exceptions and by aiming for complementarity with federal measures, a ban on bulk removals from hydrographic basins would respond both to the constraints imposed by international trade law and to environmental objectives. Additionally, such an approach conforms to the spirit of Quebec's new water policy, which seeks to promote ecosystem management.

Keywords

NAFTA, WTO, Water export, Bulk water, Hydrographic basin.

Corresponding author

J.F. Morin, Département des Sciences politiques, Université du Québec à Montréal, CANADA

Email : jean-frederic.morin@unisfera.org

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Update: 2006-12-19
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