The Great Lakes Region And Bulk Water Exports - Issues
of International Trade in Water
The article provides an overview of the latest developments
in the debate concerning the bulk water export of Great
Lakes water. It examines the policy and legal dimensions
of this new debate. The policy dimension focuses on the
public attention and concern, in Canada, regarding bulk
water removals of water from the Great Lakes basin. This
concern has triggered the new Canadian federal legislation
banning water exports from the region (Bill C-15). Is
this a sign that the Canadian government now embraces
a water conservation ethic? Is its position in line with
the recent recommendations on the topic of the International
Joint Commission (IJC), the joint body created by the
United States and Canada to manage their shared waters?
The attempt by investors to export water from the Great
Lakes basin raises issues regarding Canada's obligations
under international and regional trade agreements, most
notably the General Agreement on Tariffs and Trade (GATT)
and the North American Free Trade Agreement (NAFTA). The
article examines the provisions of those two trade agreements
in the context of the water export debate in Canada and
concludes that increased clarity on Canada / US shared
water issues is required. KEYWORDS: The Great Lakes -
Canada - United States - Bulk Water Exports - International
Trade Agreements, GATT, NAFTA, water law, International
Joint Commission, NGOs, trade, investment, water markets.
INTRODUCTION The purpose of this article is to establish
how the Canadian and U.S. federal governments could avoid
the potentially restrictive effects of the application
of the General Agreement on the prohibition of withdrawals
from the Great Lakes basin. The United States and Canada
have a history of successful co-operation in the Great
Lakes region. They discovered early on that the shared
natural resources of this region had to be managed adequately
so as to prevent lasting damage to the watershed. To this
end, they signed the 1909 Boundary Waters Treaty, thus
regulating the quantity levels of the water in the lakes.
The Boundary Waters Treaty only regulates the waters that
are running along the boundary between the United States
and Canada, and do not regulate the flow of transboundary
waters. The Treaty is an example of an early "conservation
ethic" on a regional level.
In order to provide institutional support to this co-operation,
the United States and Canada created the International
Joint Commission (hereinafter the "IJC"). The International
Joint Commission issued two reports recently, an interim
and a final report, in which it encourages the environmental
conservation ethic as a means to preserve the Great Lakes
water levels. At the same time, the Canadian public, mainly
voiced by a Non-Governmental Organisation called the 100,000-member
"Council of Canadians", chaired by Maude Barlow, made
clear its concerns concerning bulk export of water from
the Great Lakes. It also expressed concerns as to the
possibility that the NAFTA and the GATT would prevent
Canada from prohibiting the contentious bulk exports.
As a result, the issue of bulk water exports had acquired
a notorious policy dimension, which could not be ignored
by the Canadian federal government. Consequently, the
Canadian federal government enacted an amendment to the
International Boundary Waters Treaty Act. Bill C-15, which
is the name of this amendment, establishes a system of
licenses for water diversions, and prohibits any removal
of water from the basins. Bill C-15's raison d'Ítre is
to diminish the possible negative effect of bulk water
removals from the Great Lakes on the U.S. side. This legislation
uses a specific terminology, namely "prohibition of removal".
It does establish a "ban on exports". The former would
be allowed under the GATT and NAFTA. The latter would
not. Thus, terminology is of paramount importance in this
context. This is the issue at stake when discussing the
impact of GATT and NAFTA on Canada's freedom to regulate
the waters in the Great Lakes basin. It will become clear
that the only way Canada can retain that freedom under
the GATT and NAFTA is only through the adoption of a conservation
ethic, together with the United States, whose co-operation
is much needed.
INTERNATIONAL COOPERATION (U.S. - CANADA): TOWARDS AN
ECOSYSTEM MANAGEMENT OF THE GREAT LAKES BASIN The United
States and Canada have an impressively good history of
joint management of the Great Lakes basin. Both countries
are signatories to a treaty regulating the water uses.
Recently, the Canadian federal government enacted a law
to prohibit the removal of water from the basin. This
law came about subsequently to much protest from the public
in Canada calling the federal government to take appropriate
action to ban bulk removal of water from the Great Lakes.
Questions arise now as to the adequacy of the federal
government's strategy. This strategy is in line, though,
with the repeated recommendations of the IJC, and there
is little doubt that this strategy is consequent with
the past history of the Great Lakes cooperation between
the United States and Canada. The 1909 Boundary Waters
Treaty (hereinafter "BWT") is the main legal instrument
regulating the use of the Great Lakes waters. It establishes
both legal principles regarding the boundary and transboundary
waters of the Lakes and an institutional arm, the IJC,
having the task to ensure the implementation of the legal
principles underpinning the Treaty. The primary focus
of the Treaty is on water quantity, although the BWT is
limited in this respect.
A first limitation of the BWT is that it does not treat
the waters of the basin as a coherent whole. This means
that boundary waters entail different rights and duties
than waters tributary to boundary waters or waters of
rivers flowing across the boundary. Concerning boundary
waters, the United States and Canada have "equal and similar
rights in the use of the waters" (BWT, Article VIII).
Concerning waters tributary to boundary waters or waters
of rivers flowing across the boundary, on the other hand,
each nation reserves "the exclusive jurisdiction and control
over [their] use and diversion" (BWT Article II).
The BWT has a second limitation, which is the limited
jurisdiction of IJC with respect to water uses, proscribed
by the Treaty. The IJC is obliged to give precedence to
certain uses over others in the following hierarchy of
uses: domestic and sanitary uses, navigation uses and
uses for power and irrigation. A use "which tends materially
to conflict with or restrain" any higher use is forbidden
(BWT Article VIII). It is clear from this list of criteria
that this reflects the interests in the Great Lakes in
1909, and there is no provision for in-stream uses related
to fish and wildlife, for example, as we would expect
to find today.
Despite these limitations, the BWT establishes a very
strong and flexible regime that is able to meet the environmental
challenges that arose during the past century. When the
United States and Canada made a joint reference to the
IJC concerning the future of the Great Lakes, it issued
two reports, an interim and a final one, which advocate
a joint strategy of water conservation. In February 1999,
the United States and Canada gave a reference to the IJC
to study the effects of water consumption, diversion and
removal, including for export, from boundary waters, with
an initial emphasis on the Great Lakes. The Treaty defines
boundary waters as "the waters from main shore to main
shore of the lakes and rivers and connecting waterways,
or the portions thereof, along which the international
boundary between the United States and Canada passes,
including all bays, arms, and inlets thereof..." The Great
Lakes constitutes a good example of boundary waters. In
August the IJC released an Interim Report on the Protection
of the Waters of the Great Lakes.The IJC commenced its
work on this reference on February 10th, 1999.
In spring of that year, public hearings were held in
4 Canadian and 4 U.S. cities, and concerned citizens from
both the United States and Canada, as well as interested
organisations, participated in the consultation process.
In addition, the IJC consulted with interested provinces
and territories. On August 18th, 1999, the IJC submitted
an interim report to the Canadian and U.S. governments.
The key recommendation consisted of the implementation
of an immediate moratorium on bulk removal of water from
the Great Lakes .
The main conclusions of the Interim Report are threefold.
First, the IJC concluded that water is a non-renewable
Second, the IJC made clear that there never is a surplus
of water, as every drop of water has several potential
Thirdly, the IJC concluded that provisions of the NAFTA
and WTO agreements, including the GATT do not prevent
Canada and the U.S. from taking measures to protect their
water resources and preserve the integrity of the Great
Lakes basin ecosystem so long as there is no discrimination
by decision makers against individuals from other countries
in the application of those measures. It added that Canada
and the U.S. cannot be compelled by trade laws to endanger
the waters of the Great Lakes. In addition to those three
conclusions, and importantly, the IJC also recommended
that governments should exercise caution and called for
a moratorium on any bulk removals pending its final report.
In conclusion, it is fair to say that the Government of
Canada's strategy is fully in line with the conclusions
and recommendation of the IJC, which was generally supportive
of the environmental approach by the federal government
Indeed, on February 10, 1999, the Canadian Government
announced a strategy to prohibit the bulk removal of water,
including for the purposes of export, from Canadian water
basins. The federal strategy was - and still is - based
on an environmental approach. The water basin approach
treats water as a resource and not as a good, and is considered
by the federal government of Canada to be the most comprehensive
and environmentally sound way to protect our water basins
from environmental damage that can be caused by bulk removals.
Following six months of broad consultations on the Interim
Report, the IJC submitted its final report to the U.S.
and Canadian governments in March 2000. The Final Report,
entitled Protection of the Waters of the Great Lakes,
recommended that the governments should not permit any
new proposal for removal of water from the Great Lakes
Basin to proceed unless the proponent could demonstrate
that the removal would not represent a danger for the
integrity of the ecosystem of the Great Lakes Basin. The
Commission recommended strict criteria should be applied,
including giving full consideration to the potential cumulative
impacts of single and future such removals, that there
should be "no net loss" of water to the area from which
it is taken, and that the water is returned in a condition
that protects the quality of and prevents the introduction
of alien invasive species into the waters of the Great
Lakes. Application of these criteria would effectively
prevent any large-scale or long distance removal of water
from the Great Lakes Basin.
It is important to understand the policy dimension before
moving on to the legal dimension. There is dissatisfaction
among Canada's public with the IJC's reports mentioned
above and with the Federal government's watershed approach.
Since 1998, a major Canadian non-governmental organisation,
the Council of Canadians, has been asking the federal
government to prohibit the export of water. They feared
that corporations would turn Canada's water resources
into an export commodity. They urged the government to
enact a moratorium on the export of water immediately,
in December 1998 (Council of Canadians, Our Water is Not
for Sale). At the same time, the Canadian Environmental
Law Association (hereinafter "CELA") expressed the same
fears. In December 1998, Sarah Miller, spokesperson for
CELA, said "There is no forum examining the many environmental
impacts of taking water from its natural setting.
The Great Lakes are experiencing the lowest water levels
in 34 years thanks to the growing impact of climate change.
Big business is banking on water becoming the oil of the
next century and Canadians need to say no" (Council of
Canadians, Our Water is Not for Sale). In February 1999,
she added: "Allowing water to be traded away is certain
to harm the environment since it will inevitably place
growing numbers of lakes and rivers beyond the reach of
governments and the rule of law. Canada must act now"
(Council of Canadians, National Organisations Urge Chretien
to Ban Bulk Water Exports Before it's too Late).
The Canadian Government took action by launching a three-fold
strategy. On February 10, 1999, the federal Government
of Canada announced a strategy to prohibit the bulk removal
of water, including for the purposes of export, from Canadian
The federal strategy is threefold.
Part I of the strategy is to amend the International
Boundary Waters Treaty Act, which is intended to give
the Minister of Foreign Affairs the power to prohibit
bulk removals from boundary waters, principally the Great
Lakes. The federal government is demonstrating commitment
by taking action within its jurisdiction, and on November
22, 1999, the Minister of Foreign Affairs Lloyd Axworthy
introduced in the House of Commons an Act to Amend the
International Boundary Waters Treaty Act (hereinafter
"IBWTA"). The principal effect of the proposed amendments
is to prohibit removal of water out of boundary water
basins between Canada and the U.S., especially the Great
Lakes. The Great Lakes and other boundary waters now have
protection from bulk removals under federal Canadian law.
This is important as the Great Lakes could attract developers,
including for the purposes of export or diversions schemes
(DFAIT, Letter from Minister Lloyd Axworthy).
Part II of the federal government's strategy is to make
a joint Canada-U.S. reference to the International Joint
Commission to examine the effects of water consumption,
diversion and removal, including for export, from boundary
waters, with an initial focus on the Great Lakes. As mentioned
above, the IJC released its final report in March 2000
(DFAIT, Q & A - General Issues on the Legislation).
Part III of the federal government's strategy is a proposal
to develop, together with the provinces and territories,
a Canada-wide accord to prohibit bulk water removals which
would apply to all waters. The federal strategy to prohibit
the bulk removal of water out of major drainage basins
acknowledges the primary responsibility of provinces and
territories for water management and proposes the development
of a Canada-wide accord on bulk water removal. Under the
accord each jurisdiction would promise to adopt this approach,
if they have not already done so. The federal government
does not have jurisdiction over all waters in Canadian
territory, as mentioned earlier. The Boundary Waters Treatygives
the federal government clear jurisdiction over boundary
waters to the extent stipulated in the Treaty. That is
why the Government chose the option of amending the International
Boundary Waters Treaty Act as the most adequate way to
achieve their objectives, while respecting provincial
However, in March 1999, the Council of Canadians issued
a press release stating "one month after federal announcement,
state of Canada's water as precarious as ever". The reason
for this being, according to the Council of Canadians,
that while the federal government invited the provinces
to join in the moratorium as a temporary measure before
negotiating a national accord, few provinces seemed willing
to jump on board and Quebec had refused (Council of Canadians.
One month after federal announcement, state of Canada's
water as precarious as ever). Maude Barlow qualified the
Government's plan for a voluntary moratorium as a plan
full of holes, and her reasons were that "This deal can't
protect water because it's simply not NAFTA-proof. Corporations
are turning up the pressure to export water and a voluntary
accord between the provinces means that, if one province
gives in, the floodgates to sell water are open everywhere"
(Council of Canadians, Council of Canadians supports BC
call for federal action on water export ban). Jamie Dunn,
the Council of Canadians' water campaigner added, "...
the government will have to deal with NAFTA" (Council
of Canadians, Council of Canadians supports BC call for
federal action on water export ban). The Council of Canadians
did congratulate the IJC's on its report released in August
1999, calling for a ban on bulk export of water (Council
of Canadians, Council of Canadians releases legal opinion
on water exports; congratulates IJC). The Council subsequently
released a legal opinion that echoed the need for the
federal government to act immediately to ban bulk water
exports. The Council wants the government to ban exports
of water.While the federal government agrees that measures
need to be taken to protect the integrity of Canada's
water resources, the federal government believes in the
adequacy of its strategy of prohibiting the bulk removal
of water from all major drainage basins in Canada.
According to the Government of Canada, prohibiting bulk
water removal from water basins is better than an export
ban because a prohibition is more comprehensive, environmentally
sound, in line with constitutional responsibilities and
consistent with Canada's international trade obligations.
The federal government believes that an export ban may
appear as a fast and easy solution, but that it does not
focus on the environmental dimension, has possible constitutional
limitations and that it may be subject to trade challenges.
The reasons why the Government chose the option of prohibiting
bulk removal of water are the following.
A first reason is that in that way, water is protected
in its water basin, before the issue of exporting arises.
A second reason is that, under the Canada-wide accord,
each level of government has a responsibility and each
level must take action. Thus, sovereign control over water
as a natural resource would rest with Canadian and not
A last reason is that water is regulated in its natural
state, beforeit has become a commercial good or a tradable
commodity. This is in line with Canada's international
trade obligations (DFAIT, Q & A - General Issues on the
Legislation). In March 2000, the Council of Canadians
expressed deep disappointment with the IJC's final report
on water exports, in which the IJC supports the federal
government's strategy to prohibit water removals (Council
of Canadians, International Joint Commission Fails Canadians
and Opens Door To Bulkwater Exports).
In June 2000, the Council criticised the federal government
for trying to get the provinces to agree to its voluntary
water accord, instead of negotiating with trading partners
to protect water from the NAFTA (Council of Canadians,
Sixteen months later, Government still pushing futile
water accord). And finally, in June 2000, the Council
urged the federal government to adopt a comprehensive
national water policy that explicitly bans bulk water
exports (Council of Canadians, Federal Government Must
Adopt a Comprehensive, National Water Policy to Respond
to Looming Water Crisis).
The policy dimension is obviously closely tied to the
legal issues at stake. Therefore, the article will now
examine the legal options that are available to Canada
under the NAFTA and the GATT 'to ban bulk water exports'
or 'to prohibit bulk water removals'. The discussion below
focuses on the implications of both the GATT and NAFTA
for water withdrawals in the Great Lakes basin.
EXPORTING CANADA'S FRESHWATER: THE LEGAL DIMENSION
The NAFTA being rooted in the GATT, the major rights
and obligations of the former are found in the latter.
There are, however three major differences. Firstly, the
NAFTA trade obligations contain limitations on the use
of the GATT exceptions. Secondly, NAFTA has so-called
"proportional sharing provisions" not found in the GATT.
And thirdly, NAFTA contains investment obligations, not
found in the GATT either. When examining whether water
export control measures such as put in place by the Canadian
federal legislation prohibiting bulk removal of water
from the Great Lakes basin are in line with Canada's obligations
under the GATT and NAFTA, it is of considerable importance
to know whether these agreements include water in its
coverage. This preliminary question must be addressed
before digging into the substantive obligations of the
agreements in question. One major argument in favour of
a positive answer to this preliminary question is that,
in the GATT, both Canada (Schedule V) and the U.S. (Schedule
XX) include water as a tariff item (item 220): "Waters,
including natural ... waters". However, the fact that
water is included in the tariff heading does not necessarily
mean that water in all its forms is included. The reason
for this is that the GATT obligations only extend to "products".
There is no definition of a "product" under the GATT,
but the ordinary meaning of the word is that it is a "creation,
commodity, produce or an end result", according to many
a dictionary. So, it would appear that water in a lake
is not a product, and that it would thus not be subject
to the GATT obligations. On the other hand, when water
has been transferred into bottles, tankers or pipelines,
it has been "captured" and would then attract GATT obligations.
The same tariff headings apply under the NAFTA, which
means that the same reasoning would apply. This is also
the reasoning of the federal government of Canada, and
the reason why Bill C-15 "prohibits removal of water"
before it has become a good or commodity. There are, unfortunately,
several reasons to doubt the Canadian federal government's
analysis, as the Council of Canadians warn. Firstly, the
tariff schedules do not include a limitation to water
that has been taken out of its natural state. Secondly,
water in its natural state is considered a commercial
good under U.S. law (Sporhase v. Nebraska ex rel. Douglas).
In Sporhase v. Nebraska ex rel. Douglasthe Supreme Court
of the US concluded that water was an article of commerce
in part because of the nature of, and trade in, the commodities
that were produced with its use. Thirdly, water is a good
under international law, as the European Court of Justice
has interpreted the term "good" to include anything capable
of monetary valuation and of being an object of a commercial
transaction (Commission v Italy, Case 7/68). Fourthly,
a very large part of Canada's water resources can already
be considered as subject to commercial use. In British
Columbia, as of 1993, approximately 40,000 licenses for
the withdrawal of surface water were in existence in the
province (Shrybman, 1999). Under NAFTA, however, there
is a Joint Statement, made in 1993 by the U.S. and Canada,
providing: Unless water, in any form, has entered into
commerce and becomes 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,
water basins and the like is not a good or product, is
not traded, and therefore is not and never has been subject
to the terms of any trade agreement. This joint statement
confirms the argument advanced by the Canadian federal
government according to which the watershed approach it
follows is consistent with Canada's trade obligations.
It is unfortunate, though, that a recent study by the
U.S. State Department describes the use of joint statements
as follows (Shrybman, 1999): It has long been recognised
in international practice that governments may agree on
joint statements of policy or intention that do not establish
legal obligations. In recent decades, this has become
a common means of announcing the results of diplomatic
exchanges, stating common positions on policy issues,
recording their intended course of action on matters of
mutual concern, or making political commitments to one
another. These documents are sometimes referred to as
non-binding agreements, gentlemen's agreements, joint
statements or declarations. Because of these uncertainties,
it has to be assumed that water in some form is indeed
subject to GATT and NAFTA disciplines. The key provision
in the GATT is Article XI. This is a common element between
GATT and NAFTA. GATT Article XI.1 reads as follows: No
prohibition or other restrictions other than duties, taxes
or other charges, whether made effective through quotas,
import or export licenses or other measures, shall be
instituted or maintained by any contracting party on the
importation of any product of any other contracting party
or on the exportation or sale for export of any product
destined for the territory of any other contracting party.
Article XI of the GATT is the provision that is most likely
to cause problems if Canada wants to put in place water
export control measures, as the article prohibits restrictions
on the exportation of any product. NAFTA Article 309 is
similar to Article XI of the GATT, and it prevents contracting
parties from restricting or prohibiting the export of
goods. The real debate is to be found in the exceptions
to article XI, Article XX of the GATT. Under the GATT
obligations, contracting parties have recourse to the
exceptions under Article XX. Article XX (g) permits measures
"relating to the conservation of exhaustible natural resources
if such measures are made effective in conjunction with
restrictions on domestic production and consumption".
Article XX: General Exceptions, provides in part: Subject
to the requirement that such measures are not applied
in a manner which would constitute a means of arbitrary
or unjustifiable discrimination between countries where
the same conditions prevail, or a disguised restriction
on international trade, nothing in this Agreement shall
be construed to prevent the adoption or enforcement by
any Member of measures: .... (g) relating to the conservation
of exhaustible natural resources if such measures are
made effective in conjunction with restrictions on domestic
production and consumption;It is clear that Article XX
(g) of the GATT could provide for a justification for
a violation of Article XI of the GATT. However, there
is a fair amount of controversy as to whether or not water
in its natural state falls under Article XX (g) of the
GATT. More exactly, the question is whether or not surface
water qualifies as an 'exhaustible' resource and whether
the latter term was intended to be restricted to non-living
finite resources such as oil, gas or coal. According to
the 1996 Reformulated Gasolinecase, the renewability of
a resource does not prevent the resource being exhaustible.
In that case, the U.S. said that this could apply to lakes.
In the 1998 Shrimp-Turtlecase, the term 'exhaustible'
has been interpreted broadly, and this leads to the conclusion
that the Great Lakes could be considered an 'exhaustible
natural resource' within the scope of Article XX (g).
As far as the NAFTA is concerned, there are some limitations
to the exceptions of Article XX. The NAFTA provides that,
in relying on the exceptions in GATT Article XX (g), parties
are obliged to ensure that any such measures meet additional
criteria set out to limit the disruptive effects of any
cutbacks in exports. This is to be found in Article 315(1)
of NAFTA. However, as this limitation is based on the
existence of some significant trade in the resource in
question, it is highly unlikely to have much consequence,
unless, of course, such trade was to really develop between
Canada and the United States. This is a unique feature
of NAFTA, that has no equivalent in the GATT, and it is
called the 'proportional sharing' provisions of the NAFTA.
Article 315 provides: 1. Except as set out in Annex 3.15,
a Party may adopt or maintain a restriction otherwise
justified under Articles XI:2(a) or XX(g),(i) or (j) of
the GATT with respect to the export of a good of the Party
to the territory of another Party, only if: a. the restriction
does not reduce the proportion of the total export shipments
of the specific good made available to that other Party
relative to the total supply of that good of the Party
maintaining the restriction as compared to the proportion
prevailing in the most recent 36-month period for which
data are available prior to the imposition of the measure,
or in such other representative period on which the Parties
may agree; b. the Party does not impose a higher price
for exports of a good to that other Party than the price
charged for such good when consumed domestically, by means
of any measure, such as licenses, fees, taxation and minimum
price requirements. The foregoing provision does not apply
to a higher price that may result from a measure taken
pursuant to subparagraph (a) that only restricts the volume
of exports; and c. the restriction does not require the
disruption of normal channels of supply to that other
Party or normal proportions among specific goods or categories
of goods supplied to that other party.[emphasis added]
This means that the U.S. is entitled to a proportional
share of Canada's water resources forever, once exports
have started. This has specific implications for 'turning
off the tap' on water exports from the Great Lakes. Once
exports get underway, Canada will be unable to place a
ban on exports, due to these proportional-sharing obligations
under NAFTA. Once Canada's obligations under the trade
provisions of the GATT and NAFTA have been spelled out,
it is now time to investigate the investment provisions
of the NAFTA. Chapter 11 of the NAFTA, its investment
chapter, has caused a great deal of concern among environmental
groups, such as the Council of Canadians mentioned earlier.
The disciplines of Chapter 11 of the NAFTA apply to Canadian
water resources, including access rights to Canadian water
in its natural state. Once governments allow water to
be withdrawn from its natural state - as they have done
on numerous occasions for purposes that include large-scale
industrial uses to personal consumption - the same rights
will then have to be accorded to foreign investors. This
is a consequence of the National Treatment obligation
to be found in Article 1102 of NAFTA: Each Party shall
accord to investors of another Party treatment no less
favourable than it accords, in like circumstances, to
its own investors with respect to the establishment, acquisition,
expansion, management, conduct, operation, and sale or
other disposition of investments. The requirement of national
treatment at the stage of the establishment of investment
is clearly an obligation that goes beyond that recognised
by customary international law. However, it only assures
treatment as favourable as that extended to nationals.
So, if Canada decides to close certain areas of potential
enterprise to investment generally- such as resource development
in national parks - this would not offend the National
Treatment provision of the NAFTA, as long as foreign and
national investors are treated equally.
Another novelty in the NAFTA investment chapter is the
investor-state arbitration procedure that allows an investor
to settle disputes between itself and a NAFTA party (Section
B of Chapter 11). Sun Belt Water, Inc. a U.S. company
that sought to export Canadian water to California, tried
- unsuccessfully - to submit a valid Notice of Arbitration
to the NAFTA secretariat so as to start a NAFTA chapter
11 investor-state arbitration. The government of Canada's
position is that their submissions of a Notice of Arbitration
do not meet NAFTA's requirements, and no arbitration has
started yet. In this dispute, British Columbia denied
an export permit to Sun Belt Water and the latter sued
the former before the domestic courts on the grounds that
Sun Belt Water was prevented to export water to the U.S.
and Mexico. Sun Belt Water's attempted notices under NAFTA
do not claim damages on the allegation that British Columbia
water export controls breach the NAFTA. Sun Belt Water's
attempts to claim damages under NAFTA Chapter 11 are due
to assertions relating to its treatment by the British
Columbia Governments and courts in a domestic lawsuit.
As a concluding note to this trade and environment section,
it is important to keep in mind the three main lines of
thought underpinning the discussion: First, under both
GATT and NAFTA, restrictions on exports of any good are
forbidden (Article XI GATT & 309 NAFTA). Pertaining to
this, it is not certain whether or not water in its natural
state could be qualified as a good or product. Second,
exceptions are valid if for the protection of an 'exhaustible
natural resource' (Article XX (g) GATT; also valid under
NAFTA, although care has to be taken not to 'open the
tap' under NAFTA). Third, under NAFTA, the National Treatment
obligation of Article 1102 requires foreign investors
to be given the same treatment as national investors.
CONCLUSION - TOWARDS A COHERENT AND PRINCIPLED APPROACH
IN ORDER TO SAVE THE GREAT LAKES? The key to unlock the
door to bulk water export control measures resides in
the necessary co-operation between the United States and
Canada, as advocated by Saunders (Saunders, 2000). Although
it seems that the federal government of Canada needs to
take drastic measures to ban the bulk water export, as
pressed by Canada's environmental NGO's, this would not
be a good strategy considering Canada's obligations under
the NAFTA. This is conversely true for the United States
as well. What is needed is joint action. In the Great
Lakes basin, there is a history of bilateral and regional
co-operation, and this factor could weigh heavily on a
GATT or NAFTA panel's decision whether or not to allow
export control measures for the Great Lakes' water. In
the United States-Restrictions on Imports of Tunait was
the unilateral dimension of some of the U.S. actions that
led to the conclusion that the U.S. measures were not
in conformity with WTO obligations, as noted by Saunders
(Saunders, 2000). Were the U.S. and Canada to develop
a coherent and principled approach in order to save the
Great Lakes, they would stand more chances to win a WTO
or NAFTA dispute settlement procedure. This approach should
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Isabel Dendauw is currently doing her PhD in International
Trade and Water Law at the University of Dundee. She also
completed her LL.M. in International Energy Law and Policy
at the Centre for Energy, Petroleum and Mineral Law and
Policy, University of Dundee. She presented a paper on
the topic of this article at the Dundee Water 2000 International
Conference. EMAIL ADDRESS IDendauw@hotmail.com