Free Trade agreement between the EU and Canada threatens water management
Secret negotiations of free trade agreement between the European Union and Canada leaves loopholes that can allow water to be considered a trade-able good, says the European Water Movement.
During the negotiations of the free trade agreement between the European Union and Canada (know as CETA), the European Commission always maintained that water would be excluded from the treaty, and that the choice on how to manage Services of General Economic Interest (SGEI) related to water (production and distribution of drinking water and sanitation, among others) by the public authorities would not be questioned. But a careful reading of the consolidated text of CETA shows that the reality is different.
Rights and Obligations Relating to Water
The article “Rights and Obligations Relating to Water” is written in fuzzy legal terms, sometimes even in contradiction with EU and national legislation. No doubt the vagueness and loopholes in this article will facilitate a corporate capture of water by multinational companies in Europe and Canada, says the European Water Movement. The article states that “water in its natural state is not a good or a product and therefore is not subject to the terms of this agreement.” But almost all water uses involves water extracted from its natural environment. It could, therefore, be considered as a good and a product, and could be treated as a commodity and therefore subject to CETA. The article adds: ” Where a Party permits the commercial use of a specific water source, it shall do so in a manner consistent with the Agreement” without clearly defining what is a “commercial use” for water or a “specific water source.” Currently it is up to Member States in Europe to allocate water abstraction rights and they do so by different criteria, but not with criteria based on trade and investment that can be found in free trade agreements.
Reservations for Future Measures
Annex II on “Reservations for Future Measures” indicates the reservations that the EU or certain Member States may apply for different services. The EU can apply a reserve on “Market Access” and “National Treatment” for “Collection, purification and distribution of water” services. Germany can apply a “Market Access” reservation for the services of “Sewage, refuse disposal, and sanitation.” However, only four reservations together: “Market Access”, “National Treatment”, “Most Favoured Nation” and “Performance Requirements” can guarantee that a service will be excluded from CETA’s mechanisms in all cases. In addition, no other Member State apart from Germany applied for reservations on services “Sewage, refuse disposal, and sanitation” which would imply their inclusion in the CETA framework in contradiction with Article 12 of the Concessions Directive.
The EU is neutral – in theory but not in practice – on the choice between public or private management of their SGEI. England has chosen a purely private model of water management for SGEIs, while most member states have chosen to allow both public and private management. Regulatory cooperation, introduced into CETA and also in the free trade negotiations between the European Union and the United States (TTIP), challenges that freedom of choice. Regulatory cooperation allows private companies to be consulted on legislative procedure of the EU or states which affects trade or investment, and to interfere with this procedure if it seems detrimental to their interests. Suppose a state decides to allow only the public management of water-related SGEI. Under a system of regulatory cooperation, private companies can block the legislative procedure. In addition, an arbitration chapter between states and private investors (ISDS) allows a foreign company to challenge in a private arbitration court a public measure when it affects its expected profits. This provision, as introduced in CETA, will apply to water and water-related services as it is already the case in other free trade agreements: Veolia took the Egyptian government to an arbitration court after Egypt increased the minimum wage; in April 2015, Suez got Argentina to pay more than $ 400 million in damages for having reduced the price of water during the severe economic and social crisis of 2001 through the arbitration court of the World Bank.
Ratchet effect and private management of water
The rights and obligations in the water sector, the reserves applied to water-related services and regulatory cooperation as defined in CETA will make it difficult or impossible to return to a public water management once management has been assigned to a private company. There are examples of this ratchet effect in other free trade agreements such as NAFTA: when the bottled-water company Parmalat, which had a permit to abstract water from the source of the Esker (Quebec), went bankrupt the local authorities were not able to recover this water, and the government of Quebec had to grant a new license to an American-Chinese private company.
Canadian and European companies in the water sector are subsidiaries of the same multinational companies (such as Veolia, Nestlé, Suez or Coca-Cola). CETA and TTIP offer these multinationals a great opportunity to get their hands on water and water-related services, to the detriment of people living on both sides of the Atlantic.