BULK WATER REMOVALS,
WATER EXPORTS AND THE NAFTA
Law and Government Division
20 February 2001
Revised 31 January 2002
FEDERAL WATER POLICY OF 1987
BILL C-156: CANADA
WATER PRESERVATION ACT
INTERNATIONAL TRADE CONSIDERATIONS
in its Natural State; Water as a Good
B. Exports of Water as
C. Bulk Water
Removal and NAFTA Chapter 11
PRIVATE MEMBERS BILLS AND QUESTIONS IN THE
HOUSE OF COMMONS ON THE SUBJECT OF WATER EXPORTS
GOVERNMENT STRATEGY TO PROHIBIT THE
BULK REMOVAL OF WATER FROM CANADIAN WATERSHEDS
Amendments to the International Boundary Waters Treaty Act
Proposed Canada-wide Accord on Bulk Water Removals
to the International Joint Commission
BULK WATER REMOVALS,
WATER EXPORTS AND THE NAFTA
Canada is the largest single
owner of fresh water resources in the world. This vast abundance
of water has prompted some to advocate its export to water-poor regions,
primarily the southwestern region of the United States. The debate
over whether to export water from Canada has continued over the past three
decades. Although the federal governments policy officially
opposing large-scale exports has been in place since 1987, public fears
nevertheless continue. These fears have been heightened by concerns
of critics over the North American Free Trade Agreement (NAFTA) and its
predecessor, the Canada-United States Free Trade Agreement (FTA), which
were not in place when the debate over water exports began.
Clashes continue over whether
surface and ground water in its natural state (for example, in lakes and
rivers) is subject to NAFTA obligations. Some argue that this is
the case. At the same time, however, the governments of Canada,
the United States and Mexico have expressly stated that the NAFTA does
not apply to water in its natural state.
Critics of the status
quo have called on the federal government to take action to deal with
what they perceive to be a serious threat to our water resources.
They contend that, not only should there be federal legislation placing
an outright ban on large-scale water exports, but that there should also
be an explicit amendment to the NAFTA exempting water in its natural state
from the obligations of the treaty, although the U.S. might not agree
On 10 February 1999, in
response to mounting calls from the Council of Canadians and others that
the issue be dealt with, the federal government announced that it would
develop a strategy in consultation with all the provinces and territories
to prohibit the bulk removal of water from Canadian watersheds,
whether for domestic purposes or for export. The announcement stressed
that the strategy would focus on the protection of water in its natural
state as a water management and environmental issue, rather than as a
This paper will trace a
number of major developments that have taken place in Canada in the past
few years with respect to large-scale water exports and, more recently,
with respect to bulk water removals, both within Canada and for export.
The paper will also examine the issue of whether water is subject to international
trade agreements such as the NAFTA.
Under the Canadian Constitution,
jurisdiction over water is divided between the federal and provincial
governments, with some overlapping. The Constitution does not specifically
mention water; however, it does deal with some water uses, such as navigation,
fisheries and, more recently, electrical energy generation. Most
questions of jurisdiction must be inferred from the Constitutions
treatment of other issues such as property rights, foreign relations,
and international trade. Because the use of water resources has
both national and provincial implications, both levels of government may
lay claim to legislative competence within their respective spheres.
The provinces generally
have authority over the natural resources within their boundaries.
Their jurisdiction over water derives from specific clauses in the Constitution
that assign them jurisdiction over such matters as property and civil
rights within the province (section 92(13)); the management and sale of
public lands (section 92(5)); and matters of a local and private nature
(section 92(16)). A 1982 amendment to the Constitution Act, 1867
specifies that the provinces also have some jurisdiction over electricity-generating
works (section 92A(1)(c)).
Although water is a natural
resource, the provinces considerable jurisdiction is limited
by specific powers assigned exclusively to the federal government.
Examples are federal authority over fisheries (section 91(12)); navigation
and shipping (section 91(10)); the regulation of trade and commerce (section
91(2)); federal lands (section 91(1A)); Indians and lands reserved for
Indians (section 91(24)); interprovincial works and undertakings (s. 92(10)(a));
works for the general Advantage of Canada (section 92(10)(c));
and Peace, Order and good Government (section 91 opening paragraph).
The federal government also has responsibilities for boundary and transboundary
As a result of the constitutional
division of powers, a water export scheme would succeed only with the
support and cooperation of both levels of government. Except with
respect to federally owned or administered lands, the provinces possess
a proprietary interest in the water resources within their boundaries
and thus have both legislative and proprietary rights to deal with them.
These rights are subject to federal authority in certain specified areas,
however. For example, an emergency or national interest would justify
federal intervention on the basis of the residual power granted by the
Peace, Order and good Government clause of the federal declaratory
power. Where water is exported from a province, the federal government
necessarily becomes involved.
WATER POLICY OF 1987
The then federal Minister
of the Environment, the Hon. Tom McMillan, stated the federal governments
position on water exports when its water policy was announced in November
The Minister noted that,
although Canadians have an abundance of water, most of it is not in the
populated areas of the country, where it is needed and, in those populated
areas where it is plentiful, water is fast becoming polluted and unusable.
The overall problem is compounded by drought in certain regions
of Canada. This is why the Minister stressed that the Government
of Canada was emphatically opposed to large-scale exports of our water.
Moreover, he pointed out that the inter-basin transfers necessary for
such exports would inflict enormous harm on both the environment and society,
especially in the North, where the ecology is delicate and where the effects
on native cultures would be devastating.
The federal water policy
states that, insofar as water exports are concerned, the federal government
will take all possible measures within the limits of its constitutional
authority to prohibit the export of water by inter-basin diversions, and
strengthen federal legislation to the extent necessary to implement this
policy fully.(2) This federal
water policy continues to apply at the current time.
BILL C-156: CANADA WATER
On 25 August 1988, the then
Minister of the Environment, the Hon. Tom McMillan, tabled in the House
of Commons Bill C-156, the Canada Water Preservation Act.(3)
The Minister stated that he was tabling the bill to give legal force to
the federal governments commitment, expressed in its water policy
announced in November 1987, that it would oppose large-scale water exports
from Canada. Within weeks of its introduction and before it could
be considered by a parliamentary committee, the bill died on the Order
Paper when Parliament was dissolved on 1 October 1988 on the call
for an election.
Had it been enacted into
law, Bill C-156 would have prohibited the export from Canada of outright
large-scale freshwater exports, such as those involving inter-basin transfers
between river systems, and strictly regulated small-scale exports, such
as those involving shipments by tanker or pipeline. Very small-scale
exports, such as water used in manufactured goods and bottled or packaged
water, would not have been affected by the legislation.
The bill, which would have
been binding on not only the private sector but all levels of government,
would have provided for the creation of federal-provincial agreements
for licensing small-scale exports. The Governor in Council would
have been granted broad regulation-making powers respecting licences,
the procedure to be
followed in applying for and issuing licences;
their duration, renewal,
revocation and suspension;
the criteria to be used
in deciding whether to issue or renew licences; and
public hearings and
disclosure of information in connection with the issuance, renewal,
revocation or suspension of licences.
The Governor in Council
would also have been granted the power to exempt from the licensing requirement,
by order, the exportation or diversion of water in the circumstances
set out in the order. The above provision would have allowed
very small exports to be exempt from regulation, but would in no way have
sidestepped the prohibition on large-scale exports.
No export licence would
have been granted under the bill without a thorough environmental assessment.
The bill also contained
detailed enforcement proposals and would have provided for penalties of
up to $1 million and three months in jail for violators.
The issue of whether water
is subject to international trade agreements such as the North American
Free Trade Agreement (NAFTA) and the World Trade Organizations (WTO)
Agreements, for example, the General Agreement on Tariffs and Trade (GATT),
has been raised on a number of occasions. The Department of Foreign
Affairs and International Trade, in a paper entitled Bulk Water Removal
and International Trade Considerations,(4)
has identified three separate but related issues that arise from that
question. They are as follows: whether these trade agreements
apply to water; whether allowing the removal and export of some
water creates a precedent, compelling Canada or a province to allow the
removal and export of all water; and the relationship between bulk
water removal and chapter 11 (investment) of the NAFTA. Each of
these issues will be examined in turn.
A. Water in its
Natural State; Water as a Good
A contentious issue that
continues to be debated is whether the United States is entitled under
the NAFTA (and was previously under the FTA, which contained similar provisions)
to a share of Canadas fresh water supply. The NAFTA generally
prohibits restrictions on the exportation of goods. Much of the
controversy therefore centres on whether water in its natural state is
a good under the terms of the agreement. It appears
that there has never been any doubt that the NAFTA applies to water in
containers such as bottles or water used in manufacturing a product such
as a soft drink, because in those cases the water has clearly been transformed
into a good.
Article 201 (definitions
of general application) of the NAFTA defines goods of a Party
goods of a party
means domestic products as these are understood in the General
Agreement on Tariffs and Trade or such goods as the Parties may
agree, and includes originating goods of that Party.
The FTA similarly defined
goods of a Party as meaning domestic products as these
are understood in the General Agreement on Tariffs and Trade
(GATT), which categorizes its products in its Harmonized Commodity Description
and Coding System. The system contains a tariff item for water,
which reads as follows:
22.01 waters, including
natural or artificial waters and aerated waters, not containing added
sugar or other sweetening matter nor flavouring; ice and snow.
An explanatory note states
that the heading item covers ordinary natural water of all kinds
(other than sea water). Such water remains in this heading whether
or not it is clarified or purified.
On the above basis, critics
such as Wendy Holm (an agricultural economist who has written numerous
articles on water and free trade) and the Council of Canadians (a citizens
watchdog organization founded in 1985 which came to prominence in its
fight against free trade) argue that all natural water other than sea
water is treated as a good under the NAFTA. Ms. Holm
contends that, based on the above definition, the United States (and possibly
Mexico) has unprecedented and irrevocable access rights to Canadas
water resources in perpetuity.(5)
The above position is, however,
contrary to that taken by the federal government and a number of others.
For example, Jon Johnson, the author of The North American Free Trade
Agreement: A Comprehensive Guide,(6)
in referring to the NAFTA article setting out relevant definitions and
certain other articles respecting national treatment, import and export
restrictions, and export taxes, states:
The key to determining
the scope of these provisions is the use of the word product.
As the GATT does not define product, the meaning of this
word is its ordinary meaning, which is something that is produced.
For a thing to be produced, something must be done to it. It
must be extracted, harvested, collected, stored, graded, transported,
refined, processed, assembled, packaged, or somehow transformed into
an article of commerce. Unexploited resources such as oil or
gas in the ground or water in lakes, rivers or aquifers are not products
and therefore are not subject to these or any other NAFTA provisions.
There is nothing in NAFTA by which a NAFTA country can be compelled
to exploit and sell a resource. The governments of the NAFTA
countries expressly confirmed this point with respect to water in
a joint declaration issued in December 1993. Once a resource
is exploited by being extracted or collected, it becomes a product
and is subject to these and other NAFTA provisions.(7)
In a 1993 article, Sophie
Dufour presented a detailed analysis of the legal impact of the NAFTAs
predecessor, the FTA, on Canadian water exports.(8)
Ms. Dufour maintained that under the FTA, which contained a similar definition
of a good for purposes of that agreement, natural water could
become a product within the meaning of that definition only
by being collected, stored, bottled, or otherwise packaged and so
on. Conversely, she maintained that water in a natural river,
lake or in the ground, has not been produced within the literal
meaning of that word and therefore, does not constitute a product
under the GATT nor a good for the purpose of the definition
section in the FTA. Ms. Dufour noted that this interpretation
was clearly confirmed when considered in the context of the GATT as a
whole. She pointed out that, in this regard, while water as a beverage
has long been covered by international trading rules (including those
stipulated in the GATT and to which Canada itself subscribes), water in
its free-flowing state has never been contemplated and there is
no indication at the present time that it ever will.(9)
The federal government has
consistently taken the position that the NAFTA does not apply to water
in its natural state. In August 1992, it released The NAFTA Manual
to provide an overview of the then proposed NAFTA. The document
contained the following statement on the subject of water resources:
RESOURCES A SUMMARY
Like the Canada-U.S.
Free Trade Agreement (FTA), the NAFTA does not apply to large-scale
exports of water.
As in the FTA, only
water packaged as a beverage or in tanks is covered in the NAFTA.
Water was not discussed
during the NAFTA negotiations with the United States and Mexico.
of water, either by inter-basin transfer or diversion, are contrary
to the 1987 federal water policy.
THE NAFTA WILL NOT AFFECT
to implement the FTA already states clearly that the FTA does not
apply to water, except in the case of water packaged as a beverage
or in tanks. Similar provisions will be included in the NAFTA
There never has been,
nor will there be, any negotiation or provision for large-scale exports
of water to another country.
In his appearance in 1993
before the House of Commons Legislative Committee on Bill C-115 (NAFTA
implementation), Mr. Konrad von Finkenstein, then the Assistant Deputy
Attorney General, Department of Justice, stated in part:
if you trade
water in its natural state you put in tanks, or bottles, or something
and sell me fresh water that youve taken out of a well or something
like that, then you are indeed trading in water and its then
a good and is covered by the GATT, by the FTA, or by the NAFTA.
But thats a good youre trading
Water is no different
from any other resource. Take a forest, for instance.
Theres nothing in the NAFTA, the FTA, or the GATT that forces
us to cut our trees down, etc. you have to play by the rules.
You cant protect your domestic industry, etc. And the
same applies with water, you dont have to trade or anything
A provision similar to that
in the Canada-United States Free Trade Agreement Implementation Act(11)
was included in the North American Free Trade Agreement Implementation
Act.(12) The latter provides in section
7. (1) For greater certainty,
nothing in this Act or the Agreement, except Article 302 of the Agreement,
applies to water.
(2) In this section,
water means natural surface and ground water in liquid,
gaseous or solid state, but does not include water packaged as a beverage
or in tanks.
In other words, according
to Canadas domestic legislation implementing the NAFTA in Canada,
none of the NAFTA provisions, other than Article 302 (tariff elimination),
applies to natural surface or ground water.
Critics such as Wendy Holm
and the Council of Canadians contend that section 7 of the implementing
legislation is insufficient protection without an amendment to the NAFTA
itself and that only such an explicit exemption can protect Canadas
water resources from U.S. interests. These critics claim that the
domestic legislation is not binding on NAFTA panels and that currently
the Agreement itself would be given precedence over domestic legislation.
On 3 and 4 April 1993, the
Victoria Times-Colonist devoted its lead weekend editorials to
the NAFTA and water resources. It stated that the testimony of Ms.
Holm in her appearances before the House of Commons Subcommittee on International
Trade and the British Columbia Select Standing Committee on Economic Development,
Science, Labour, Training and Technology, shows clearly that under
NAFTA, water will be treated as a good, subject to the same
rules as the other goods and services under the FTA and the
NAFTA. The newspaper quoted Ms. Holm as stating that an earlier
statement by then Trade Minister Michael Wilson had been untrue
and misleading in claiming that water had been specifically removed
from the NAFTA. With respect to how Canada could retain sovereignty
over its water resources, the newspaper noted that Ms. Holm had
First, Canada negotiate
an explicit NAFTA(13) exemption for water in other
than bottled form.
Second, Canada enter
into a Memo of Understanding with the U.S. that specifically limits
the terms of the FTA to only bottled water.
Third, the Canadian
Water Preservation Act [Bill C-156] shelved by the Conservatives in
1987 must be reintroduced and passed to, as Holm puts it, establish
a framework for a sound and sovereign water policy.
The newspaper urged Canadians
to let their M.P.s know, emphatically, that Canada must retain control
over this precious resource.
In a column in the same
newspaper on 2 May 1993, the Trade Minister responded as follows to the
newspapers editorials on the NAFTA and water resources:
Your April 3 editorial,
NAFTA and Water (1): basic resource at risk, lends
credence to fundamental misinterpretations of the NAFTA and the GATT
that your newspaper should clear up for its readers as a much needed
The argumentation of
Wendy Holm and others turns on a false premise: that natural
water of all kinds is a good and hence subject to the
national treatment obligations of the NAFTA. This is a fundamental
misreading of the agreement. No matter how many detailed provisions
from the NAFTA and the GATT are quoted out of their treaty context,
it doesnt change the facts. (To take one example:
because something is indexed in the GATT Harmonized Commodity Coding
System itself imposes no obligations whatsoever respecting purchase
or sale, import or export.)
Water in its natural
state is not covered by the NAFTA, the FTA, the GATT, or any other
trade agreement. Lakes, rivers, or aquifers are simply not goods
or products, any more than are the fish swimming in them or the oil
and gas trapped under them.
Trade agreements only
cover water as a good, that is, only when water has entered
into commerce as a product. Canadas growing exports of
water products benefits from such coverage.
And there is absolutely
nothing in the NAFTA or any other trade agreement that forces Canada
to either exploit its water for commercial use, or to export its water.
. . .
Why did we not dispel
any lingering doubt by simply exempting water from the agreement?
The answer is plain. There is no exemption for water in the
NAFTA because it is not necessary to insert an exemption from obligations
that do not exist. To do so would throw into doubt whether obligations
exist for other natural resources in their natural state, such as
trees in the ground, where clearly no such obligations exist either.
The bottom line is that
Canadian governments, both now and under the NAFTA, have the freedom
of action required to regulate the exploitation of our water resources.
And until it is exploited and entered into commerce as a good, water
is not covered by the NAFTA or any other trade agreement.
Following the federal election
and the coming into power of the new Liberal government in October 1993,
Prime Minister Chrétien announced on 2 December 1993 that the government
had secured significant improvements in various areas with respect to
the NAFTA and was now prepared to proceed with implementing the agreement
on 1 January 1994. In response to concerns that the NAFTA could
force Canada to export water, the Prime Minister then announced the following
Canada-United States-Mexico declaration on water:
STATEMENT BY THE
GOVERNMENTS OF CANADA, MEXICO AND THE UNITED STATES
The governments of Canada,
Mexico and the United States, in order to correct false interpretations,
have agreed to state the following jointly and publicly as Parties
to the North American Free Trade Agreement (NAFTA):
The NAFTA creates
no rights to the natural water resources of any Party to the Agreement.
Unless water, in
any form, has entered into commerce and become a good or product,
it is not covered by the provisions of any trade agreement, including
the NAFTA. And nothing in the NAFTA would oblige any NAFTA
Party to either exploit its water for commercial use, or to begin
exporting water in any form. Water in its natural state
in lakes, rivers, reservoirs, aquifers, waterbasins and the like
is not a good or product, is not traded, and therefore is not
and has never been subject to the terms of any trade agreement.
and obligations respecting water in its natural state are contained
in separate treaties and agreements negotiated for that purpose.
Examples are the United States-Canada Boundary Waters Treaty
of 1909 and the 1944 Boundary Waters Treaty between Mexico and
the United States.
According to the press release
from the Prime Ministers Office, the statement by the three governments
made it clear that, contrary to earlier concerns, the NAFTA could not
force Canada to export water.(14)
More recently, in November
1999, the Department of Foreign Affairs and International Trade addressed
this issue in its paper on bulk water removal and international trade
considerations to which reference was earlier made:
Some observers have
suggested that, because Canadas .
tariff schedule includes
natural waters as a tariff heading, this means that all
water must be considered to be a good. This is a mistaken view
of the tariff schedule. The tariff schedule does not define
what is a good; it merely provides an organizational structure for
the purposes of tariff negotiations and customs administration.
In other words, it does not tell us if and when water is a good; it
only tells us that when water is classified as a good, it falls under
a particular tariff heading.
Water in its natural
state can be equated with other natural resources, such as trees in
the forest, fish in the sea, or minerals in the ground. While
all of these things can be transformed into saleable commodities through
harvesting or extraction, until that crucial step is taken they remain
natural resources and outside the scope of trade agreements.
The department pointed out
that the NAFTA countries had reinforced this viewpoint in their December
1993 joint statement noted above and that furthermore, the International
Joint Commission (IJC) stated in its report on the protection of the waters
of the Great Lakes that, it would appear unlikely that water in
its natural state (e.g., in a lake, river, or aquifer) is included within
the scope of these trade agreements since it is not a product or a good
In short, there continues
to be a great deal of controversy about whether water in its natural state
is considered a good for purposes of the NAFTA and is therefore
covered under the agreement. According to the government and a number
of other observers, water does not become a good under the NAFTA and other
international trade agreements until it is removed from its natural state
and transformed into a saleable commodity, such as bottled water or water
that has been used as an ingredient in manufacturing a product.
However, as seen above, a number of critics disagree.
B. Exports of Water as a Precedent
The Department of Foreign
Affairs and International Trade (in its paper on bulk water removal and
trade considerations) identified a second issue as arising from the question
of whether water is subject to international trade agreements, such as
the NAFTA and the GATT. This second issue is whether allowing some
water to be extracted from lakes, rivers, etc., and to be put into commerce
as a good, including for export, would create a precedent requiring that
all other requests to extract water and transform it into a good for commercial
purposes, including for export, be granted anywhere in Canada. In
other words, if one project for the bulk export of water were allowed,
would this open the floodgates of water generally? Could we turn
off the tap?
According to the department,(15) nothing in Canadas international
trade obligations would require that future projects for the removal of
water for bulk exports be given approval, just because other projects
had been approved. The department points out that Canadian governments,
federal and provincial, retain full sovereignty over the management of
Canadian water in its natural state. The department notes that any
possible precedent from a water export project would be limited to the
jurisdiction involved and would arise from the particular legislation
that permitted removal for export, and not from trade agreements.
The department maintains
that the NAFTA does not require all provinces to adopt the same regulatory
regime. It merely requires that each province, within its regulatory
regime, not treat foreign goods or investors less favourably than it treats
its own goods or investors. Hence, according to the department,
if one provinces legislation permitted removal of water and a project
were to be approved, other provinces could still have legislation that
prohibited removal of water without running afoul of national treatment
The department further notes
that within a province that did permit removal of water, future applications
for approval to remove water would still have to be considered in light
of the legislation (including environmental assessment requirements in
the particular province), and in accordance with principles of administrative
law, such as fairness and reasonableness, and without discriminating between
applicants on the basis of nationality.
In short, because it contends
that water in its natural state is not a good for the purposes
of the NAFTA or other international trade agreements, the Department of
Foreign Affairs and International Trade maintains that, from the standpoint
of trade obligations, the fact that a government in Canada has allowed
the extraction and transformation of some water into a good, including
for export, does not mean it (or another government within Canada)
must allow the extraction and transformation of other water into a good
in the future.
The above view is reinforced
by legal opinions of trade experts received by the International Joint
Commission during its study on the protection of the waters of the Great
Lakes. In its final report,(17) the Commission summarized the thrust
of those opinions in part as follows:
The provisions of the
NAFTA and the WTO agreements do not prevent Canada and the United
States from taking measures to protect their water resources and preserve
the integrity of the Great Lakes Basin ecosystem where there is no
discrimination by decision-makers against individuals from other countries
in the application of those measures.
NAFTA and the WTO agreements
do not constrain or affect the right of a government to decide whether
or not it will allow natural resources within its jurisdiction to
be exploited and, if a natural resource is allowed to be exploited,
the pace and manner of such exploitation.
Moreover, even if there
were sales or diversions of water from the Great Lakes Basin in the
past, governments could still decide not to allow new and additional
sales or diversions in the future.(18)
Nevertheless, certain observers
who contend that the NAFTA applies to water in its natural state in lakes,
rivers, etc., argue otherwise. For example, the Council of Canadians,
in its Fact Sheet # 1: Trade, states in part:
How the Rules of NAFTA
Apply to Water:
National Treatment means
that American and Mexican companies must be treated like Canadian
companies in access to goods and markets. Trading water cannot
be limited to Canadian companies nor can we place limits on how it
is traded, how much is traded or with whom it is traded.
that as long as there is a drop of water left we can never end water
exports regardless of the environmental effects in Canada or the needs
allow investors from outside Canada to sue the Canadian government
should we pass a law that interferes with its ability to make profits
now or in the future. The process is secret and companies could
even sue if they were considering investing in an enterprise affected
by new legislation.
and once the tap
is turned on, we wont be able to turn it off no matter
what other environmental consequences we discover down the road.
The federal government
has asked the provinces to declare a temporary ban on exporting water.
If even one province gives in to corporate promises, all of Canada
is committed to trade water.
In the same Fact Sheet,
the Council of Canadians argues, among other things, that the government
must enact legislation prohibiting large-scale water exports
as well as open negotiations to exempt water from NAFTA or, preferably,
sink the deal.
C. Bulk Water Removal
and NAFTA Chapter 11
A third issue identified
by the Department of Foreign Affairs and International Trade as arising
from the question of whether water is subject to the NAFTA is the relationship
between bulk water removal and chapter 11 of the Agreement. Chapter
11 applies to measures adopted or maintained by a NAFTA country relating
to investors, and investments of investors, of another NAFTA country in
its territory. As well, chapter 11 provides a mechanism for dealing
with investor-state disputes relating to a NAFTA countrys alleged
breach of obligations under chapter 11. The department has identified
two principal obligations of chapter 11 most often cited as being relevant
to bulk water removals: providing national treatment; and paying compensation
in cases of expropriation.
The national treatment obligation
of the NAFTA (Article 1102) requires that any measure adopted by Canada,
relating to an investor of another NAFTA country, must accord treatment
no less favourable than it accords, in like circumstances, to its own
domestic investors. The same applies to investments of an
investor of another NAFTA country. It is the departments view
that a regulatory measure relating to an investor of another NAFTA country
(or an investment of an investor of such a country) would be consistent
with the national treatment obligation if it prohibited the bulk removal
of water from water basins in a manner that did not discriminate between
investors, in like circumstances, on the basis of nationality. The
department therefore contends that Canadas proposed strategy to
prohibit the bulk removal of water from Canadian watersheds, whether
for domestic purposes or export, is in keeping with the above obligation.
The strategy is discussed subsequently in this paper.
The NAFTA also provides,
in section 1110, that no Party to the agreement may directly or indirectly
nationalize or expropriate an investment of an investor of another Party,
or take measures tantamount to expropriation, unless it meets certain
criteria, including the payment of compensation. A claim for compensation
could, however, only arise where there was an investment that had been
expropriated. The department maintains that a regulatory measure
designed to conserve and manage water resources, such as outlined in the
governments strategy to prohibit the bulk removal of water from
Canadian watersheds, should not constitute an expropriation. According
to the department, Any claim for compensation would have to be examined
in light of the details of the individual case.
It is in the context of
chapter 11 of the NAFTA that a U.S. firm Sun Belt Corporation
has launched an action against the Canadian government. The background
of the case has been described elsewhere(19) as follows. In 1986, the
British Columbia government decided to allow entrepreneurs to export fresh
water from its coastal streams by marine tanker, but not diversion from
its interior rivers. Several applicants received licences (mostly
for small water volumes) and proceeded to seek foreign markets. When
the first of these, Snowcap, joined forces with the Sun Belt Corporation
to supply water to the tiny California town of Goleta, the province found
itself embroiled in controversy. Environmentalists were concerned
because a flood of new export applications resulted from the apparent
success of Snowcap/Sun Belt, many wanting to extract water from the same
coastal inlet. The possible precedent and cumulative effect led
to the province in 1991 placing a moratorium on all new or expanded licensing
for export. This resulted in Snowcap/Sun Belt being unable to sign
its contract with the town of Goleta. Four years later, the new
B.C. government enacted legislation in the form of the B.C. Water Protection
Act making the prohibition permanent, both for bulk removal from the
province and for diversion between the provinces major watersheds.
Subsequently, Sun Belt lodged a complaint under the NAFTA that Canada
violated its rights, on the basis that the province had settled on compensation
with its Canadian partner (Snowcap) but not with itself.
The case has been pending
since 1999 and arbitration has not yet started. The Canadian government
which takes the position that the Sun Belt Corporation has not
satisfied the prerequisites for triggering the arbitral process
says that it cannot speculate on Sun Belts next steps.(20)
PRIVATE MEMBERS BILLS AND QUESTIONS IN THE
HOUSE OF COMMONS ON THE SUBJECT OF WATER EXPORTS
Issues concerning water
exports have been raised on numerous occasions in the House of Commons.
A number of examples are presented below.
In several Parliaments,
Mr. Nelson Riis, M.P., introduced a Private Members bill to prohibit
the export of water by inter-basin transfers. The most recent of
these, Bill C-249, the Canada Water Export Prohibition Act, was introduced
in the House of Commons on 19 October 1999. The bill died on the
Order Paper with the dissolution of Parliament.(21)
Had the bill been enacted
into law, no person would have been permitted to export water from Canada
by inter-basin transfers. The Minister of the Environment would
have been required to take such measures as would have been necessary
to prevent the export of water by inter-basin transfers. For the purpose
of facilitating the formulation of policies and programs with respect
to inter-basin transfers within Canada, the Minister could
with the approval of the Governor in Council have entered into
an arrangement with one or more provincial or territorial governments:
(a) to conduct
research on the effects of inter-basin transfers;
(b) to maintain
continuing consultation on inter-basin transfers; and
(c) to formulate
and coordinate the implementation of inter-basin transfer policies
As well, any person could
have applied for judicial review of the Ministers exercise or non-exercise
of any power or fulfilment or non-fulfilment of any duty conferred or
imposed on the Minister by the bill, whether or not the person applying
for it was affected or had suffered damages.
A similar bill, Bill C-205,
the Canada Water Export Prohibition Act, was introduced in the House of
Commons on 2 February 2001 by Mr. Pat Martin, M.P.(22)
In both sessions of the
Thirty-sixth Parliament, Mr. Clifford Lincoln, M.P., introduced a Private
Members bill in the House of Commons on the subject of water exports.
The most recent of these was Bill C-410, the Canada Water Export Prohibition
Act, which received first reading on 16 December 1999; the bill subsequently
died on the Order Paper with the dissolution of Parliament.(23) For purposes of the bill,
water meant surface and ground water, but did not include
water packaged as a beverage. Had the bill been enacted into law,
it would have provided that, despite any other Act of Parliament, no person
would have been permitted to export water from Canada by pipeline, railway
tank car, tank truck, tanker or inter-basin transfers. Every person
who contravened the bill would have been guilty of an offence and liable:
(a) on summary conviction, to a fine not exceeding $75,000; or (b) on
conviction on indictment, to a fine not exceeding $250,000.
On 8 February 1995, Mr.
Bill Gilmour, M.P., introduced the following motion which was debated
in the House of Commons:
That, in the opinion
of this House, the government should support a policy that Canadas
fresh water, ice and snow will be protected so that at all times and
in all circumstances Canadas sovereignty over water is preserved
Following debate, the item
was dropped from the Order Paper.(24)
On 9 February 1999, after
debate, the House of Commons adopted the following motion of Mr. Bill
Blaikie, M.P., as amended:
That, in the opinion
of this House, the government should, in co-operation with the provinces,
place an immediate moratorium on the export of bulk freshwater shipments
and inter-basin transfers and should introduce legislation to prohibit
bulk freshwater exports and inter-basin transfers, and should not
be a party to any international agreement that compels us to export
freshwater against our will, in order to assert Canadas sovereign
right to protect, preserve and conserve our freshwater resources for
On 15 May 1998, the Hon.
Charles Caccia, M.P., asked the Minister of the Environment the following
question in the House of Commons:
In view of the latest
proposal in Newfoundland to export water and considering the important
non-commercial role water plays within its natural watershed in the
maintenance of a healthy ecosystem, could the Minister of the Environment
indicate whether she plans to introduce legislation this fall banning
The then Minister of the
Environment, the Hon. Christine Stewart, replied that she was very concerned
for the security of Canadas freshwater resources. She stated
that her department was reviewing the governments freshwater policy,
which had been in place since 1987, and that, as part of the review, she
would be meeting with the provinces in the summer of 1998 to set the federal
governments priorities. She noted that, although no federal
legislation currently legislated against the export of freshwater, one
of the governments priorities could be to put such legislation in
On 16 November 1998, Mr.
Caccia once again posed a question to the Environment Minister in the
House of Commons. He noted that he had asked the Minister in May
1998 whether she planned to introduce legislation to ban water exports
and pointed out that it was now close to the end of 1998 and that there
was broad support for the gap to be filled. Stating
that We know we can expect proposals in future for water exports,
he asked the Minister when legislation to ban water exports would be introduced.(28)
Mr. Julian Reed, the Parliamentary
Secretary to the Minister of Foreign Affairs, responded in part as follows:
I want to go on
record as saying the federal government is opposed to bulk water exports
has been made regarding consultation with provinces on options to
deal with this matter. Both federal and provincial governments
have a role to play in deciding the outcome. The government
will lay out its strategy for a comprehensive approach to water exports
later this year. I can assure my hon. friend we will proceed
with the utmost caution.(29)
As noted subsequently in
this paper, Mr. Caccia continued to raise the issue of water exports in
the House of Commons, calling for a federal legislative ban on bulk water
GOVERNMENT STRATEGY TO PROHIBIT THE
BULK REMOVAL OF WATER FROM CANADIAN WATERSHEDS
On 10 February 1999, the
day after the House of Commons had adopted the motion of Mr. Bill Blaikie,
M.P., referred to above, the then Foreign Affairs Minister, the Hon. Lloyd
Axworthy, and the then Environment Minister, the Hon. Christine Stewart,
announced a strategy to prohibit the bulk removal of water from Canadian
watersheds, both within Canada and for export.(31) They pointed out that the strategy responded to
Canadian concerns about the security of Canadas freshwater resources
and was consistent with the motion adopted by the House of Commons the
previous day. According to a press release, the strategy reaffirmed
the governments long-standing position opposing bulk water removal
and was consistent with the 1993 statement by the three NAFTA countries
that, unless water in any form has entered into commerce and become
a good or product, it is not covered by the provisions of any trade agreement
including the NAFTA. The strategy dealt with the protection
of water in its natural state as a water management and environmental
issue rather than as a trade issue.
Ms. Stewart stated:
Canadians value their
freshwater resources and want their governments to take action to
protect them. Thats why I have invited the provinces and
territories to work with the federal government for the Canada-wide
accord to prevent bulk water removal from our watersheds.
According to a government
backgrounder released on the same date and entitled A Strategy to Protect
The strategy recognizes
that provinces have the primary responsibility for water management
and that the Government of Canada has responsibilities under the Boundary
Waters Treaty. Actions by territorial governments will also
be important as they assume greater responsibility over water resource
management. Joint participation is essential to develop and
implement a permanent Canada-wide solution to bulk water removal.
The strategy respects
Canadas trade obligations because it focuses on water in its
natural state (e.g., in rivers or lakes). Water in its natural
state is not a good or product, and is not subject to international
trade agreements. Nothing in the North American Free Trade Agreement
or in the World Trade Organization agreements obliges Canada to exploit
its water for commercial use or to begin exporting water in any form.
At the press conference
announcing the strategy, the Foreign Affairs Minister was asked why, because
international trade is clearly a federal responsibility, the federal government,
could not, if it so wished, enact legislation banning the export of water
from Canada. Mr. Axworthy responded in part as follows:
But once you do that,
once you start doing that then you make water into a tradeable commodity
and it gets subject to all the trade rules going back to GATT of 1947.
That to me is the anachronism of the approach thats being
proposed by some other people, its that they want to turn it
into a tradeable commodity. Were saying theres a
much more effective way of doing it and that is to treat it in its
natural state. Therefore its not subject to trade rules
but you are still able to provide for the kind of management, prohibition
and regulations that are required. Thats the whole point,
thats why I said I mean I think people are confusing it.
The debate that took place over NAFTA was really a debate about whether
we were obliged to export water
It wasnt in terms of a
broad management system, it was were we obliged. The statement
that was made in 1993 by the three NAFTA partners said there is no
obligation for one country to export its water to another country
under this agreement but the GATT rules still apply and they go back
The federal strategy comprised
three key elements:
to the International Boundary Waters Treaty Act;
a proposed Canada-wide
accord on bulk water removals; and
a joint Canada-United
States reference to the International Joint Commission (IJC) to study
the effects of water consumption, diversion and removal, including
for export, from the Great Lakes.
Because the strategy specifically
refers to bulk water removal as opposed to water export,
the obvious question is what is the difference between the two and why
did the federal government adopt this particular approach? Environment
Canada provided the following explanation.(33)
The term bulk water removal broadly refers to large-scale
removals of water by man-made diversions (such as canals), tanker ships
or trucks, or pipelines. The water is not necessarily exported
out of the country. According to the department, such removals
have the potential, directly or cumulatively, to harm the health of a
drainage basin. Small-scale removal, such as water in small portable
containers, is not considered bulk. Water export, on the other
hand, refers to taking water and shipping it to other countries for profit
whether in bottles, by tanker or pipeline, or by man-made diversions,
for example, diverting rivers and building canals. Environment Canada
points out that the government uses the phrase bulk water removal
(as opposed to water export) in its strategy because:
we are taking
a comprehensive approach to guarantee the security of our freshwater
resources. Since the removal and transfer of water in bulk from
its natural drainage basin or watershed can result in similar ecological,
social and economic impacts whether the water is destined for foreign
markets, or for other destinations within Canada, this includes measures
to prevent the bulk removal of water from major watersheds for any
reason whether for domestic purposes or for export.
Each of the components of
the federal strategy to prohibit bulk water removal from Canadian watersheds
will now be examined.
to the International Boundary Waters Treaty Act
On 22 November 1999, Bill
C-15, an Act to amend the International Boundary Waters Treaty Act (Second
Session, Thirty-sixth Parliament),(34)
was introduced in the House of Commons by the then Minister of Foreign
Affairs, the Hon. Lloyd Axworthy. The bill was debated at second
reading on 20 October 2000 but subsequently died on the Order Paper
with the election call and dissolution of the Thirty-sixth Parliament
on 22 October 2000. A similar bill, Bill C-6, was introduced in
the new Parliament (First Session, Thirty-seventh Parliament) on 5 February
2001. Bill C-6 was debated in the House and Senate and enacted into
law, having received Royal Assent on 18 December 2001.(35)
It is expected that the Act will be proclaimed into force in the Spring
of 2002, once the necessary regulations to implement the legislation have
The International Boundary
Waters Treaty Act(36) was
originally enacted to implement in Canada the Boundary Waters Treaty (1909)(37)
which established the International Joint Commission (IJC) and provides
mechanisms to resolve disputes, primarily those concerning water quantity
and quality, along the Canada-U.S boundary. Through the Treaty,
Canada and the United States are mutually obliged to protect natural levels
and flows of waters shared by the two countries. Bill C-6
amended the above Act to provide for a clearer Act and more effective
implementation of the Treaty. The principal effect of the amendments
are to generally prohibit the bulk removal of water out of the Canadian
portion of boundary water basins between Canada and the United States.
The amending Act does this by deeming that the cumulative effect of such
removals alter the natural flow of water on the U.S. side of the border.
The prohibition on boundary water removals applies principally
to the Great Lakes but also affects other boundary waters, such as part
of the St. Lawrence River, the St. Croix and Upper St. John Rivers,
and the Lake of the Woods.
Although the provinces have
primary responsibility for the management of water resources, the Boundary
Waters Treaty gives the federal government clear jurisdiction over boundary
waters to the extent stipulated in the Treaty. Only the federal
government has the authority to fulfil the Treatys obligations with
respect to boundary waters.
On 23 November 1999, the
day after Bill C-6s predecessor, Bill C-15, had been introduced
in the House of Commons, Mr. Bill Blaikie, M.P., in the House, drew the
attention of the government to his motion that had been adopted on 9 February
1999 (referred to earlier) calling on the federal government to introduce
legislation to place a ban on bulk water exports. Noting that the
government bill did not accurately reflect this motion, Mr. Blaikie asked
the government why it was now abandoning its commitment to a national
ban on bulk water exports
which it supported only
short months ago
Why are the Liberals in full denial about the fact
that they cannot act the way they said they would act because of NAFTA?
The then Minister of Foreign
Affairs, the Hon. Lloyd Axworthy, responded in part:
does provide for a prohibition of bulk water removal.
What it does not do is follow the recommendation of the hon. Member
and some of his party on the west coast, which is to turn this into
a trade issue which would result in a series of trade actions that
would totally impede the capacity of Canada to protect its waters.
The Department of Foreign
Affairs and International Trade specifically addressed this issue in its
background documentation on Bill C-6, and, previously, on Bill C-15.
The government publicly stated its agreement that measures needed to be
taken to protect the integrity of Canadas water resources but believed
that this would be best achieved by its strategy of prohibiting bulk
water removal from all major drainage basins in Canada. In
the departments view, such a prohibition would be better than a
ban on bulk water exports because it is more comprehensive,
environmentally sound, respects constitutional responsibilities and is
consistent with Canadas international trade obligations
this way water is protected before the issue of exporting arises.
Water would be regulated in its natural state, before it has become a
commercial good or saleable commodity. The department views this
as an environmental protection measure of general application, aimed at
preserving the integrity of ecosystems. It would protect water at
its source from bulk removal outside the water basin by any party,
Canadian or foreign.
In response to the argument
that the government should place an export ban on bulk water exports
from Canada, the department claims that this apparently quick and simple
solution does not focus on the environmental dimension, has possible
constitutional limitations and may be vulnerable to a trade challenge.
The department maintains that an export ban would focus on water
once it has become a good and therefore subject to international trade
agreements. Because these agreements limit the ability of governments
to control the export of goods, a ban on exports is likely to be contrary
to Canadas international trade obligations. This contrasts
sharply with the federal governments approach.(40)
During second reading debate
on Bill C-15 (Bill C-6s predecessor) in the House of Commons, Mr.
Blaikie, M.P., once again referred to his motion adopted by the House
on 9 February 1999 calling on the federal government to place a ban
on bulk water exports. Mr. Blaikie stated in part:
This is a bill which
aims to prohibit bulk water removals from boundary water basins
only. This is a retreat from banning bulk water exports
and this retreat is clearly, although the government will not say
so, because of the North American Free Trade Agreement. The
very language of removal tells the story. The Liberals refuse
to use the word export because if they talked about water exports
as opposed to water removal, then they would have a test case with
respect to NAFTA because NAFTA deals with exports. (emphasis added)(41)
As noted elsewhere in this
paper, the Hon. Charles Caccia, M.P., also continued to press the government
in the House of Commons for a federal legislative ban on bulk water exports.
Mr. Deepak Obhrai, M.P.,
speaking on behalf of the Canadian Alliance during the second reading
debate of Bill C-15, stated his partys position on the bill as follows:
The Canadian Alliance
believes that Canadians should retain control over our water resources
and supports exempting water from our international agreements, including
NAFTA. An outright ban would run contrary to our NAFTA commitment
because water was not exempt from that agreement.
A side agreement would
have to be negotiated that would exempt water from NAFTA before a
ban on water exports could even be considered. Until an exemption
is achieved, we encourage the provinces to place a moratorium on commercial
water licensing so that water in bulk form never becomes a good governed
by NAFTA rules.
In the absence of exempting
water from NAFTA, the Canadian Alliance will support the proposed
bill as it represents the only viable approach that the federal government
can take and the only constitutionally valid NAFTA compatible ban
on bulk water export. However, I would like to see the government
propose real answers on this issue and show some leadership in exempting
water from our trade agreements.(42)
Mr. Obhrai reiterated those
comments during the second reading debate of Bill C-6.(43)
Canada-wide Accord on Bulk Water Removals
As part of its strategy
on bulk water removals from Canadian watersheds, the federal government
proposed a Canada-wide accord between the federal and provincial-territorial
levels of government to prohibit bulk water removal, whether for
domestic purposes or for export, from Canadian water basins. As
an interim measure, the government urged the provinces and territories
to institute a moratorium preventing bulk water removal from watersheds
until such time as the accord was in place.
Environment Canada explained
the need for a joint approach because of shared jurisdiction over water:
Water is a shared responsibility
between the federal and provincial, and territorial governments, and
each have an important role to play in protecting Canadas freshwater
resources. The strategy recognizes that provinces have the primary
responsibility for water management and that the Government of Canada
has certain legislative authorities in the areas of navigation, fisheries,
federal land, and shared water resources with the U.S. Actions
by territorial governments are also becoming increasingly important
as they assume greater responsibility over water resource management.
All governments have an important role to play in achieving a permanent,
Canada-wide solution for the prohibition of bulk water removal,
including removal for export purposes. (emphasis added)(44)
The proposed accord would
represent a commitment by the federal government, provinces and territories
to prohibit bulk water removal from bodies of water over which
they have jurisdiction through legislation or regulations. The proposed
accord was discussed at meetings of the Canadian Council of Ministers
of the Environment in November 1999 and again in May 2000. Although
Quebec and the western provinces refused to endorse the accord as presented,
nevertheless, federal government officials point out that as a result
of the above initiative, all provinces either currently have in place
or are in the process of developing legislation or regulations to effectively
prohibit bulk water removal (whether for domestic purposes or export)
from water basins over which they have jurisdiction. According to
Environment Canada officials, this provides solid assurance that bulk
water removals and exports will not proceed in the near future.(45)
Because the federal government
is of the view that water in its natural state is not a good, and
is therefore outside the scope of the trade agreements, including the
NAFTA, it maintains that any federal or provincial measure regulating
the extraction of water in its natural state would not be subject
to international obligations concerning trade in goods. As noted
earlier, this point was also reinforced by the legal opinions the International
Joint Commission received from trade experts during the preparation of
its report on the protection of the waters of the Great Lakes.
The Hon. Charles Caccia,
M.P., among others was critical of the above approach, and continued to
press in the House of Commons for a federal legislative ban on bulk water
exports. On 22 November 1999, the day Bill C-15 (Bill C-6s
predecessor) was introduced in the House, Mr. Caccia, noting that the
bill was restricted in its application in that it would place a ban on
bulk water removals in boundary waters only, expressed his concerns
about both the bill and the proposed accord. He stated in part:
First, the proposed
voluntary accord would be just that, voluntary. It would not
legally bind any province to protect our water resources.
Second, the proposed
accord would do nothing to prohibit export initiatives undertaken
by municipalities, crown agencies, corporations or even private parties.
Even if the provinces wanted to ban water removals and exports, it
is the federal government that has the constitutional authority to
federal government hopes that a province by province voluntary ban
would treat water protection strictly as an environmental issue and
that trade lawyers will not see the disguise.
The proposed accord
will lead to a patchwork of provincial initiatives, thus making Canada
more vulnerable to trade challenges. The legislation tabled
today is, it seems to me, too limited in scope to provide protection
to most of our water bodies.
It seems quite clear,
that a meaningful protection of our water resources requires the federal
government to face the reality of international trade agreements,
in search of the most effective strategy to protect our water resources
from exports. I would recommend: first, to enact federal
legislation designed specifically for the purpose of banning bulk
transboundary water removals from Canada; and second, to renegotiate
international trade agreements to seek an exclusion or waiver of water
from such agreements.(46)
On 3 April 2000, Mr. Caccia
once again reiterated his views on this issue in the House:
Now the federal government
plans to make reliance on provincial goodwill as a formal policy through
a voluntary accord. It is time the federal government acts where
it has jurisdiction because in light of our international trade agreements,
a patchwork of provincial initiatives is inadequate. What we
need now is a watertight federal ban on water exports.(47)
As noted earlier, a number
of observers, such as the Council of Canadians, are also critical of the
federal governments approach. Immediately following the announcement
of the federal strategy to prohibit bulk water removal from Canadian watersheds
(February 1999), the National Chairperson of the Council of Canadians,
Maude Barlow, and its Executive Director, Peter Bleyer, held a press conference
to respond to it. Ms. Barlow stated that although the Council of
Canadians was pleased that the government knows that it has to do
something, it was not satisfied with the governments proposed
treatment of water exports. Noting that the moratorium
on bulk water removals would not be binding on the provinces, she suggested
that if one province decided not to adhere to it, the whole plan would
be placed in jeopardy. She went on to claim that the strategy was
not trade-proof. In her view, if one province were to allow the
export of water for commercial purposes, all of the provincial bans across
the country would be put at risk because only federal legislation
exempting us from NAFTA can pertain to this issue. According
to her, This has been very clearly spelled out by many, many trade
lawyers and by Mr. Axworthy himself when he was in Opposition.
She also stated that by not having the guts to deal with water as
a trade issue, but only through environmental legislation,
federal government is leaving us open to further challenges by foreign
companies seeking lost profits.(48)
Subsequently, in an essay
entitled Ottawas Leaky Water Policy, published in The
Globe and Mail on 18 November 1999, days before the Canadian Council
of Ministers of the Environment was to meet to discuss the proposed accord,
Ms. Barlow urged the provinces not [to] sign this document if they
care about protecting Canadas water from commercial export.
She stated in part:
The federal government
is trying to pass the buck on its responsibility. A voluntary
accord would be just that voluntary and would not bind
any province in a meaningful way to protect its water resources
now or in the future.
As noted earlier in this
paper, the Council of Canadians has published a Fact Sheet # 1: Trade
in which it argues, among other things, that the federal government needs
to enact legislation prohibiting large-scale water exports, as well as
open negotiations to exempt water from the NAFTA or, preferably,
sink the deal.
to the International Joint Commission
The federal strategy to
prohibit the bulk removal of water from Canadian watersheds (10 February
1999) also provided for a reference made jointly by Canada and the United
States to the International Joint Commission (IJC) to study the effects
of water consumption, diversion and removal, including for export, from
the Great Lakes. On 15 March 2000, the IJC released its final report
entitled Protection of the Waters of the Great Lakes.(49)
The IJCs conclusions and recommendations were generally consistent
with and supportive of the broad environmental approach adopted by Canada.
The IJC recommended that the governments should not permit
any new proposal for the removal of water from the Great Lakes Basin to
proceed unless the proponent can demonstrate that the removal would not
endanger the integrity of the ecosystem of the Great Lakes Basin.
The Commission recommended that strict criteria should be applied, including
giving full consideration to the potential cumulative impacts of
the proposed removal, taking into account the possibility of similar proposals
in the foreseeable future; and that there be no net
loss to the area from which the water was taken and that the water
be returned in a condition that protects the quality of and prevents the
introduction of alien invasive species into the waters of the Great Lakes.
According to federal government sources, application of these criteria
would effectively prevent any large-scale or long-distance removal of
water from the Great Lakes.(50)
As noted earlier in this
paper, the IJC, in conducting its study, also looked at the issue of whether
international trade agreements such as the NAFTA and the GATT might affect
water management in the Great Lakes. The Commission noted that after
issuing its interim report it had received a letter dated 24 November
1999 from the Deputy United States Trade Representative on the subject.
The letter stated in part as follows:
. in the report
the IJC issued an interim recommendation that federal, state and provincial
governments not authorize or permit any new bulk sales or removals
of surface water or groundwater from the Great Lakes Basin.
In our view, the implementation of this recommendation would not run
afoul of the obligations imposed by international trade agreements
to which the United States and Canada are parties.
the WTO has nothing
to say regarding the basic decision by governments on whether to permit
the extraction of water from lakes and rivers in their territory.(51)
The Commission also referred
to the document entitled Bulk Water Removal and International Trade
Considerations from the Department of Foreign Affairs and International
Trade (and referred to earlier in this paper). The IJC noted that
these submissions were generally consistent with the Commissions
views regarding the effects of international trade law on the two countries
ability to protect the water resources of the Great Lakes Basin.
As well, the Commission noted that it had received legal opinions from
several trade experts that were similar to the views expressed by the
Canadian and U.S. governments on the issue.(52)
On 15 March 2000, the same
day the IJCs final report on the protection of the waters of the
Great Lakes was released to the public, the Council of Canadians issued
a press release in which it criticized the report. It expressed
deep disappointment that in its final report
Joint Commission squandered an historic opportunity to speak for the citizens
of Canada and the United States. Jamie Dunn, Water Campaigner
for the Council, stated in part:
The IJC has joined the
company of Brian Mulroney, John Crosbie and federal Environment Minister
David Anderson in trying to convince Canadians that trade agreements
dont threaten Canadas water sovereignty. Since 1988,
Canadians have heard an ever-changing story about water and trade
deals. Not only has the IJC now joined the federal government
in clouding the issue, it has proposed that exporting water can be
okay despite clear statements from the public rejecting bulk water
exports for profit. What we predicted would happen to water
under free trade in 1988 is slowly happening.(53)
As noted earlier, the three
NAFTA countries clearly stated in their joint declaration of December
1993 that the NAFTA does not apply to water in its natural state in lakes,
rivers, etc., because the water has not at that point entered into
commerce and become a good for purposes of the NAFTA. The
federal government has consistently taken this position with respect to
the NAFTA and its predecessor, the FTA. Nevertheless, critics of
the government position remain adamant that water in its natural state
is covered by the NAFTA and that nothing short of an amendment
to the agreement, accompanied by federal legislation banning large-scale
water exports, will protect our water resources adequately. Hence,
the concerns of critics were not appeased by the federal governments
announcement of a strategy in February 1999 for seeking a commitment from
all jurisdictions across Canada to prohibit the bulk removal of water,
including water for export, from Canadian watersheds. Thus, the
debate concerning bulk water removals, water exports and the NAFTA continues.
Canada, Environment Canada, Federal Water Policy, 1987.
Ibid., p. 24.
Bill C-156, the Canada Water Preservation Act (Second Session, Thirty-third
Canada, Department of Foreign Affairs and International Trade, Bulk
Water Removal and International Trade Considerations, 16 November
For particulars regarding Ms. Holms arguments contending that Canadian
control of water resources is compromised by the terms of the NAFTA, see:
Wendy Holm, Water and Free Trade, Chapter 1 (p. 1-27)
in NAFTA and Water Exports, Canadian Environmental Law Association,
October 1993. See also, Barry Appleton, Chapter 25, Frequently-Raised
Concerns on the NAFTA, Navigating NAFTA: A Concise Users
Guide to the North American Free Trade Agreement, Carswell, 1994;
Mr. Appleton also is of the view that the NAFTA applies to ground and
surface fresh water in its natural state. In a specific heading
entitled Water, Mr. Appleton discusses what he considers to
be the effects of the NAFTA on our water resources (p. 201-205).
As well, see West Coast Environmental Law, Legal Opinion commissioned
by the Council of Canadians re: Water Export Controls and Canadian International
Trade Obligations, 17 August 1999.
Jon R. Johnson, The North American Free Trade Agreement: A Comprehensive
Guide, Canada Law Book Inc., 1995.
Ibid., p. 109-110.
Sophie Dufour, The Legal Impact of the Canada-United States Free
Trade Agreement on Canadian Water Exports, (1993), 34 Les
Cahiers de Droit 705. After analyzing at length the legal effects
of the FTA on Canadian water resources, Ms. Dufour concluded that there
was nothing in the deal to suggest that Canada had in any way conceded
future access to its water resources to the United States.
Ibid., p. 742.
Canada, House of Commons, Legislative Committee on Bill C-115 (Third Session,
Thirty-fourth Parliament), Minutes of Proceedings and Evidence,
5 May 1993, Issue No. 6, p. 15-16.
S.C. 1988, c. 65.
S.C. 1993, c. 44.
The NAFTA was not yet in force at that time.
Government of Canada, Office of the Prime Minister, Prime Minister
Announces NAFTA Improvements; Canada to Proceed with Agreement,
Press Release, 2 December 1993.
The following information concerning the federal governments position
on the issue is taken from: Canada, Department of Foreign Affairs
and International Trade, Questions and Answers (Trade). These
questions and answers were prepared as part of a package of materials
on Bill C-6, an Act to amend the International Boundary Waters Treaty
Act (First Session, Thirty-seventh Parliament), 2001.
On the issue of national treatment under the NAFTA, see the subsequent
discussion in this paper under the heading entitled Bulk Water Removal
and NAFTA Chapter 11.
International Joint Commission, Protection of the Waters of the Great
Lakes: Final Report to the Governments of Canada and the United
States, 22 February 2000. Pages 32-34 of the report deal with
Ibid., p. 33.
As described in: Frank Quinn and Jeff Edstrom, Great Lakes Diversions
and Other Removals, Canadian Water Resources Journal, Volume
25, p. 125-151 at 140 (June 2000).
Canada, Department of Foreign Affairs and International Trade, Questions
and Answers (Trade), Materials prepared in relation to Bill C-6, An
Act to amend the International Boundary Waters Treaty Act (First Session,
Thirty-seventh Parliament), 2001.
Bill C-249, the Canada Water Export Prohibition Act, First Reading 19
October 1999 (Second Session, Thirty-sixth Parliament). Other similar
bills introduced by Mr. Riis in earlier Parliaments include Bill C-202
(First Session, Thirty-fifth Parliament); Bill C-232 (Second Session,
Thirty-fifth Parliament); Bill C-404 (First Session, Thirty-sixth Parliament).
Bill C-205, the Canada Water Export Prohibition Act, First Reading 2 February
2001 (First Session, Thirty-seventh Parliament).
Bill C-410, the Canada Water Export Prohibition Act, First Reading 16
December 1999 (Second Session, Thirty-sixth Parliament). Mr. Lincolns
other similar bill on the subject was Bill C-485 (First Session, Thirty-sixth
For the debate regarding Mr. Gilmours motion, see: Canada, House
of Commons, Hansard, 8 February 1995 (First Session, Thirty-fifth
Parliament), p. 9355-9362.
For the debate regarding Mr. Blaikies motion, see: Canada,
House of Commons, Hansard, 9 February 1999 (First Session,
Thirty-sixth Parliament), p. 11607-11637, 11652-11675.
Canada, House of Commons, Hansard, 15 May 1998 (First Session,
Thirty-sixth Parliament), p. 7062.
Canada, House of Commons, Hansard, 16 November 1998 (First Session,
Thirty-sixth Parliament), p. 10052.
Ibid., p. 10052-10053.
For example, see: Canada, House of Commons, Hansard, 3 November
1999 (Second Session, Thirty-sixth Parliament), p. 1049; see also Hansard,
22 November 1999, p. 1591-1592; 1 March 2000, p. 4210; 3 April 2000,
Canada, Department of Foreign Affairs and International Trade, Strategy
Launched to Prohibit the Bulk Removal of Canadian Water, including Water
for Export, Press Release, 10 February 1999.
Canada, Department of Foreign Affairs and International Trade, A Strategy
to Protect Canadian Water, backgrounder, 10 February 1999.
Another backgrounder, entitled Water Facts, was released by the
department on the same date.
Canada, Environment Canada, Background Information on Bulk Water Removal
and Water Export, and Bulk Water Removals and Water Export
Frequently Asked Questions, 2001.
For background information on, and an analysis of, Bill C-15, see Canada,
Library of Parliament, Parliamentary Research Branch, LS-353E.
For background information on and an analysis of Bill C-6,
see Canada, Library of Parliament, Parliamentary Research Branch, LS-383E.
Bill C-6, an Act to amend the International Boundary Waters
Treaty Act appears as S.C. 2001, c. 40.
R.S.C. 1985, c. I-17 as amended.
The Treaty appears as a schedule to the International Boundary Waters
Treaty Act, R.S.C. 1985, c. I-17 as amended.
Canada, House of Commons, Hansard, 23 November 1999 (Second Session,
Thirty-sixth Parliament), p. 1635.
Canada, Department of Foreign Affairs and International Trade, Backgrounder:
Amendments to the International Boundary Waters Treaty Act (IBWTA).
Canada, House of Commons, Hansard, 20 October 2000 (Second Session,
Thirty-sixth Parliament), p. 9329.
Ibid., p. 9329.
Canada, House of Commons, Hansard, 26 April 2001 (First Session,
Thirty-seventh Parliament), p. 3223.
Canada, Environment Canada, Background Information on Bulk Water Removal
and Water Export, 2001.
Canada, House of Commons, Hansard, 22 November 1999 (Second Session,
Thirty-sixth Parliament), p. 1591.
Ibid., 3 April 2000, p. 5620.
Council of Canadians, Press Conference, A Plan Full of Holes, 10
February 1999. See also West Coast Environmental Law, Legal Opinion
commissioned by the Council of Canadians re: Water Export Controls
and Canadian Environmental Trade Obligations, 17 August 1999.
International Joint Commission, Protection of the Waters of the Great
Lakes: Final Report to the Governments of Canada and the United
States, 22 February 2000. The report was released to the public
on 15 March 2000. An interim report had earlier been released in
Canada, Environment Canada, Bulk Water Removals and Water Export
Frequently Asked Questions, Question 3, 2001.
International Joint Commission, Protection of the Waters of the Great
Lakes: Final Report to the Governments of Canada and the United
States (22 February 2000), Appendix 8.
Ibid., p. 33.
Council of Canadians, International Joint Commission Fails Canadians
and Opens Door to Bulk Water Exports, Press Release, 15 March