PRB 99-5E

WATER EXPORTS AND THE NAFTA

TABLE OF CONTENTS

INTRODUCTION

CONSTITUTIONAL FRAMEWORK

FEDERAL WATER POLICY OF 1987

BILL C-156: CANADA WATER PRESERVATION ACT

IS WATER IN ITS NATURAL STATE COVERED BY THE NAFTA?

FEDERAL GOVERNMENT’S POSITION ON
WATER EXPORTS AND THE NAFTA

CANADA-UNITED STATES-MEXICO DECLARATION ON
WATER RESOURCES AND THE NAFTA

MOTIONS, PRIVATE MEMBERS’ BILLS AND QUESTIONS IN THE
HOUSE OF COMMONS ON THE SUBJECT OF WATER EXPORTS

FEDERAL GOVERNMENT STRATEGY TO PROHIBIT THE BULK
REMOVAL OF WATER FROM CANADIAN WATERSHEDS

CRITICS’ RESPONSE TO THE FEDERAL GOVERNMENT STRATEGY

CONCLUSION

WATER EXPORTS AND THE NAFTA

INTRODUCTION

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 since 1987 the federal government has had a policy officially opposing large-scale exports, 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 the obligations of the NAFTA. 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, though the U.S. might not agree to this.

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, both within Canada and for export. The strategy will focus on the protection of water in its natural state as a water management and environmental issue, rather than as a trade issue.

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. The paper does not, however discuss NAFTA investor-state disputes such as that which arose in late 1998 involving alleged unfair treatment of a U.S. bulk water export company (Sun Belt Water, Inc.) that supposedly lost its contract with a British Columbia partner after the B.C. government effectively banned bulk water exports.

CONSTITUTIONAL FRAMEWORK

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 Constitution’s treatment of other issues such as property rights, foreign relations, and international trade. Since 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, including water, 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, the management and sale of public lands (including water), and matters of a local and private nature. A 1982 amendment to the Constitution Act, 1867 specifies that the provinces also have jurisdiction over electricity-generating works.

The provinces’ considerable jurisdiction over water within their boundaries is, however, limited by specific powers assigned exclusively to the federal government. Examples are federal authority over fisheries, navigation, relations with foreign governments, interprovincial and international trade, federal lands, Indians, works for "the general advantage of Canada," and "peace, order and good government."

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.

FEDERAL WATER POLICY OF 1987

The then federal Minister of the Environment, the Hon. Tom McMillan, stated the federal government’s position on water exports when its water policy was announced in November 1987.

The Minister noted that, while 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 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. This federal water policy continues to apply at the current time.

BILL C-156: CANADA WATER PRESERVATION ACT

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.(1) The Minister stated that he was tabling the bill to give legal force to the commitment of the federal government, 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. No government bill on the subject has since been introduced in Parliament.

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, such as: the procedure to be followed in applying for and issuing licences; their duration, renewal, revocation and suspension; fees; 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.

IS WATER IN ITS NATURAL STATE COVERED BY THE NAFTA?

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 Canada’s fresh water supply. Much of the controversy centres on whether water in its natural state is a "good" under the terms of the NAFTA. It appears that there has never been any doubt that the NAFTA applies to bottled water, since in that case the water has clearly been transformed into a "good."

Article 201 (definitions of general application) of the NAFTA defines "goods of a Party" as follows:

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 Canada’s water resources in perpetuity."(2)

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,(3) 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.(4)

In her detailed analysis of the legal impact of the NAFTA’s predecessor, the FTA, on Canadian water exports,(5) Sophie 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."(6)

FEDERAL GOVERNMENT’S POSITION ON WATER EXPORTS
AND THE NAFTA

In August 1992, the federal government 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:

CANADA’S WATER 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.

Large-scale exports of water, either by inter-basin transfer or diversion, are contrary to the 1987 federal water policy.

THE NAFTA WILL NOT AFFECT WATER EXPORTS

Canada’s legislation 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 implementing legislation.

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 you’ve taken out of a well or something like that, then you are indeed trading in water and it’s then a good and is covered by the GATT, by the FTA, or by the NAFTA. But that’s a good you’re trading…

Water is no different from any other resource. Take a forest, for instance. There’s 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 can’t protect your domestic industry, etc. And the same applies with water, you don’t have to trade or anything with it."(7)

A provision similar to that in the Canada-United States Free Trade Agreement Implementation Act(8) was included in the North American Free Trade Agreement Implementation Act.(9) The latter provides in section 7 that:

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 the Canada’s 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 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 Canada’s water resources from American 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 suggested that:

First, Canada negotiate an explicit NAFTA(10) 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 newspaper’s 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 public service.

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 doesn’t 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. Canada’s 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.

. . .

CANADA-UNITED STATES-MEXICO DECLARATION ON WATER
RESOURCES AND THE NAFTA

After the Liberal government came to power 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.
• International rights 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 Minister’s Office, the statement by the three governments made it clear that, contrary to earlier concerns, the NAFTA could not force Canada to export water.(11)

MOTIONS, 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. The following are examples.

In several Parliaments, Mr. Nelson Riis, M.P., has introduced a Private Member’s bill to prohibit the export of water by inter-basin transfers. The most recent of these, Bill C-404, the Canada Water Export Prohibition Act, was introduced in the House of Commons on 13 May 1998. The bill has not gone beyond first reading.(12)

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 Canada’s fresh water, ice and snow will be protected so that at all times and in all circumstances Canada’s sovereignty over water is preserved and protected.

Following debate, the item was dropped from the Order Paper.(13)

On 15 May 1998, the Hon. Charles Caccia, M.P., asked the Minister of 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 water exports.(14)

The Minister, the Hon. Christine Stewart, replied that, as the Minister of the Environment, she was very concerned for the security of our freshwater resources. She stated that her department was reviewing the government’s 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 government’s priorities. She noted that, while no federal legislation currently legislated against the export of freshwater, one of the government’s priorities could be to put such legislation in place.(15)

On 16 November 1998, Mr. Caccia once again posed a question to the Minister of the Environment 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.(16)

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…

Considerable progress 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.(17)

. . .

Subsequently, 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 Canada’s sovereign right to protect, preserve and conserve our freshwater resources for future generations.(18)

FEDERAL 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 referred to above, the Foreign Affairs Minister, the Hon. Lloyd Axworthy, and the 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.(19) They pointed out that the strategy responded to Canadian concerns about the security of Canada’s freshwater resources and was consistent with the motion adopted by the House of Commons the previous day. According to a press release, the strategy reaffirms the government’s long-standing position opposing bulk water removal and is 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 deals 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. That’s 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 Canadian Water:(20)

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 Canada’s 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.

The backgrounder notes that the strategy includes a proposal to develop, in co-operation with the provinces and territories, a Canada-wide accord on bulk water removals in order to protect Canadian watersheds. According to the backgrounder, the Canada-wide accord will represent a commitment by all jurisdictions to act through legislation, regulation or policy. In the case of jurisdictions with measures in place, the accord will re-affirm their commitment. The federal, provincial and territorial governments will jointly develop the accord. As an interim measure, the federal government is urging the provinces and territories to institute a moratorium preventing bulk removals of water from watersheds, including water for the purpose of export, until such time as the accord is in place.

According to the press release, British Columbia and Alberta already have legislation that prohibits the bulk removal of water from provincial watersheds, including water for export, while Ontario is finalizing similar regulations and other provinces are moving towards accomplishing the same goal.

The new strategy also includes proposed amendments to the International Boundary Waters Treaty Act.(21) That statute was enacted to implement the Boundary Waters Treaty (1909), which established the International Joint Commission (IJC) and provides mechanisms to help prevent and resolve disputes, primarily those concerning water quantity and quality, along the Canada-U.S. boundary. The proposed amendments would give the Minister of Foreign Affairs authority over projects potentially affecting levels and flows of boundary waters (specifically in the Great Lakes). Authority would be provided for developing a regulation to prevent the bulk removal of boundary waters on the basis of a single or cumulative impacts.

According to the backgrounder, the proposed amendments would be consistent with the principles of the Harmonization Accord of the Canadian Council of Ministers of the Environment, and would be developed in close consultation with all provinces and territories sharing waters with the United States. The Department of Foreign Affairs and International Trade would lead these consultations.

As well, the strategy includes a reference made jointly with the United States to the International Joint Commission for a study of the effects of water consumption, diversion and removal, including for export from boundary waters. This study will build on a 1985 study of the IJC regarding consumptive uses and diversions within the Great Lakes, and will include an examination of the potential impacts of water export. The IJC will make recommendations to Canada and the United States on the management and protection of our shared waters.

At the February 1999 press conference announcing the strategy, the Minister was asked why, since 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 that’s being proposed by some other people, it’s that they want to turn it into a tradeable commodity. We’re saying there’s a much more effective way of doing it and that is to treat it in its natural state. Therefore it’s not subject to trade rules but you are still able to provide for the kind of management, prohibition and regulations that are required. That’s the whole point, that’s 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 wasn’t 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 to 1947….

CRITICS’ RESPONSE TO THE FEDERAL GOVERNMENT STRATEGY

Immediately after the announcement of the strategy to prohibit the bulk removal of water from Canadian watersheds, the 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 it has to do something," it was not satisfied with the government’s proposed treatment of water exports. Noting that the moratorium 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 also observed that the Government of Quebec had declared that it would not take part. She went on to claim that the strategy was not trade-proof: 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." She also stated that "by not having the guts to deal with water as a trade issue, but only through environmental legislation, … the federal government is leaving us open to further challenges by foreign companies seeking lost profits."

CONCLUSION

As earlier noted, 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., since the water has not at that point "entered into commerce and become a good" for purposes of the NAFTA. The federal government has taken this position all along 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 have not been appeased by the federal government’s recent announcement of a strategy 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 water exports and the NAFTA continues.

(1) Bill C-156, Canada Water Preservation Act, Second Session, Thirty-third Parliament.

(2) For particulars regarding Ms. Holm’s 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 User’s 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).

(3) Jon R. Johnson, The North American Free Trade Agreement: A Comprehensive Guide, Canada Law Book Inc., 1995.

(4) Ibid., p. 109-110.

(5) 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.

(6) Ibid., p. 742.

(7) 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.

(8) S.C. 1988, c. 65.

(9) S.C. 1993, c. 44.

(10) The NAFTA was not yet in force at that time.

(11) Government of Canada, Office of the Prime Minister, Press Release, Prime Minister Announces NAFTA Improvements; Canada to Proceed with Agreement, 2 December 1993.

(12) Bill C-404, the Canada Water Export Prohibition Act, First reading 13 May 1998, First Session, Thirty-sixth Parliament; other similar bills introduced by Mr. Riis in earlier Parliaments include, for example: Bill C-202, the Canada Water Export Prohibition Act, First reading, 25 January 1994, First Session, Thirty-fifth Parliament; Bill C-232, the Canada Water Export Prohibition Act, First reading, 11 March 1996, Second Session, Thirty-fifth Parliament.

(13) For the debate regarding Mr. Gilmour’s motion. See: Canada, House of Commons, Hansard, 8 February 1995, First Session, Thirty-fifth Parliament, p. 9355-9362.

(14) Canada, House of Commons, Hansard, 15 May 1998, First Session, Thirty-sixth Parliament, p. 7062.

(15) Ibid.

(16) Canada, House of Commons, Hansard, 16 November 1998, First Session, Thirty-sixth Parliament, p. 10052.

(17) Ibid., p. 10092-10093.

(18) For the debate on the motion, see: Canada, House of Commons, Hansard, 9 February 1999, First Session, Thirty-sixth Parliament, p. 11607-11637.

(19) 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.

(20) 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.

(21) R.S.C. 1985, c. I-17.