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Trading Away Our Water Rights?

Speech by Dr Patricia Ranald, AFTINET Convenor, for the Seminar on World Water Day, 22/03/02, Parliament House, Sydney.

"Today, companies like France’s Suez are rushing to privatise water, already a $400 billion global business. They are betting that water will be to the 21st century what oil was to the 20th" (Fortune Magazine, May 15, 2000 p 55).

What if our government signed a legally binding international agreement which meant that water had to be treated purely as a traded commercial good? What if the rules of this agreement meant that regulation to ensure equitable access and affordable pricing of water services could be challenged by transnational corporations as a barrier to free trade? What if the agreement meant that governments had to open up the funding of publicly owned water services to privatisation by transnational corporations?

What if the negotiations for such an agreement took place behind closed doors and it was legally binding on all levels of government without any legislation being passed in the Australian parliament?

Impossible? Unfortunately not.

The Australian government is taking part in negotiations over the next two years in the World Trade Organisation (WTO) which could have these results in Australia, and have even more devastating impacts in developing countries. These negotiations are about changes to the General Agreement on Trade in Services (GATS). They seek to reduce that right of governments to regulate services, to remove all barriers to trade in environmental services and to define all water services as commercially traded goods rather than public goods requiring public regulation . This is a fundamental attack on democracy . Decisions about essential services like water should be made democratically at the local and national level, not secretly signed away in trade agreements.

Why, you might ask, would governments want to sign away their own powers? They are under pressure form transnational corporations which see water as a source of vast profits: the oil of the 21st century. Also many governments like our Federal government support privatisation and deregulation as part of their political ideology, but they know it is highly unpopular. By transferring the decision to an international body they can pass the political responsibility on to the WTO.

What is GATS?

The Australian government and other member governments of the WTO signed the General Agreement on Trade in Services (GATS) in 1994. It potentially applies to all services, from banking to transport and telecommunications, to health, education and prisons, but not up until now to most water services. GATS aims to promote international trade in services, and to remove barriers to such trade.

Although some GATS rules apply to all services, many only apply to those services which each government agrees to list in the agreement. However, GATS commits governments to increase over time the range of services included in the agreement, without any review of its impacts.

Under GATS rules, a government cannot give better treatment to local service companies than to foreign service companies in the services areas it has listed in the agreement. This is known as "national treatment". Governments cannot limit the access of companies by limiting their numbers or requiring them to have local content or train local people.

The GATS Agreement was signed with little public debate in Australia. Signing of trade agreements is a Cabinet decision. WTO agreements are briefly tabled in parliament and examined by a parliamentary committee, which can only make recommendations to Cabinet.

This is in contrast to UN agreements on human rights and the environment, most of which require domestic legislation for their implementation.

Like other WTO Agreements, GATS rules are legally binding on governments, and can be enforced through the WTO dispute system. Governments can complain about the laws of other governments to a panel of trade law experts and the winner can ban or tax the exports of the loser.

What changes are proposed to GATS and who wants them?

Governments are being asked to increase the range of services which they agree to be covered in the GATS, and to make changes to the rules of GATS which could reduce their right to regulate services, and to provide and fund public services.

GATS has some rules which recognise the right of government to regulate services and to provide and fund public services. These rules are there because many governments recognised that many services need to be regulated or provided by government to ensure equitable access to them.

However, the GATS rules on public services are ambiguous. The agreement says that public services are generally not covered by the GATS, except if they are supplied on a commercial basis or in competition with other service providers. Since many public services have been exposed to private competition through privatisation and competitive tendering policies, this means it is not clear whether some GATS rules can apply to some public services. The current agreement only fully covers public services if governments list them in the GATS agreement. Most governments have not listed public services like health, education or water.

Governments are now being pressured by global services corporations to reduce the right of governments to regulate services and to open public services to private investment. They see water services as trillion dollar markets which should be opened up to them. They see government regulation and provision of public services as barriers to trade.

There is a proposal to reduce the right of government to regulate by declaring that regulation in areas like qualifications, licensing requirements, and technical standards. must be "least trade restrictive" .This means that companies could challenge such regulation under the WTO disputes process and the obligation would be on governments to show that their regulation is not a barrier to trade. The disputes are heard by experts in trade law and public interest and environmental considerations are given little weight. Companies can argue that environmental or health regulation which is not found elsewhere is too trade restrictive. For example, the US and Canada successfully argued against an EU ban on beef containing high levels of hormones on the grounds that such regulation did not exist in North America and that was so burdensome for their companies that it was a barrier to trade.

There is also a move to apply "national treatment" rules to government funding. This would define the funding of public services like health and education as unfair "subsidies" to public services. Under the rules of national treatment, transnational corporations could argue for equal access to them through compulsory competitive tendering, leading to privatisation .

Australian Government Policy

The Australian government has supported a stricter WTO test to reduce national rights to regulate services. It has also supported the definition of all water services as traded goods which could be covered by GATS.

In the past, governments have recognised that equitable access to water requires careful public regulation and often government provision of water services.

Up until now, the GATS definitions of services includes sewerage and sanitation services but not drinking water services, and no government has listed water services to be fully covered by the GATS.

But the WTO Doha Ministerial Meeting in November 2001 made a general commitment to remove all barriers to trade in environmental services. The Australian government is supporting an EU proposal to broaden the definition of environmental services to include all water services. This means that water services could be included in GATS negotiations, and governments could face pressure to include water services in their GATS commitments. If the other changes to GATS proceed, (to reduce the right of governments to regulate and to open up the funding of public services to foreign corporations), then GATS could become a means of privatising water services.

Investment Agreements

Another proposal being debated in the WTO is for an investment agreement which would have many of the features of the OECD Multilateral Agreement on Investment which collapsed in 1998. It collapsed after public exposure and debate revealed that it was an attempt to remove the powers of governments to regulate transnational investment, and to give corporations the power to challenge laws and sue governments if regulation restricted investment. rights. Transnational corporations are lobbying for an investment agreement with a complaints mechanism which would enable foreign investors to challenge laws which harm their investments and to sue governments for damages. The model preferred by corporations is the infamous disputes process of the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico. Corporations have used this process to sue governments for millions of dollars on the grounds that environment or health and safety legislation has harmed their investments.

Examples include:

  • The U.S. Metalclad Corporation sued a local municipality in Mexico for US16.7 million, because it was refused permission to build a 650,000-ton/annum hazardous waste facility on land already so contaminated by toxic wastes that local groundwater was compromised;
  • The Canadian-based Methanex Corporation is suing the U.S for US$970 million because of a ban by California and other states on the fuel additive the company manufactures, which has become a major groundwater contaminant. Among other claims, Methanex is arguing that the ban was unnecessary because less trade-restrictive measures were available;
  • The U.S.-based Sun Belt Water Inc. is suing Canada for US$10 billion because a Canadian province interfered with its plans to export water to California. Even though Sun Belt had never actually exported water, it claims that the ban reduced its future profits

Under bilateral investment agreements based on the NAFTA model:

  • Compania de Aquas del Aconquija (a subsidiary of Vivendi) is suing Argentina for US$300 million, arising from a water and wastewater privatisation deal gone sour. The claim alleges that public health orders, mandatory service obligations, and rate regulations all offended its investor rights;
  • Aguas del Tunari, an affiliate of U.S.-based Bechtel has threatened to sue Bolivia for more than US$25 million, for breach of its contract to provide water services to the City of Cochabamba. When public anger erupted over steep price increases, Bolivia cancelled its privatisation deal with the company.

(Source: Steven Shrybman, "Thirst for Control"

What can we do about it?

The Australian Fair Trade and Investment Network is a network of over 50 human rights groups, churches, unions, environment groups, and community organisations which conducts public debate and community education on trade and human rights issues and seeks to make our government accountable for its trade policies.

The decisions about GATS and an investment agreement will be made over the next two years. There is time to campaign to expose these issues to public debate, and to tell our government that we do not want our rights to make decisions about essential water services signed away.

AFTINET is campaigning to put pressure on our government and is linking with movements in other countries to influence the WTO process.

Some Campaign materials are available on our website now and we will be launching new materials in April.

We are making the following demands of our government:

  • a review of the impact of the existing GATS agreement and full public discussion of the proposed changes;
  • no reductions in the ability of governments to regulate services;
  • clear exclusion of public services, cultural services and water services from the GATS agreement;
  • all GATS negotiating requests and responses should be made public and publicly debated before governments make commitments;
  • GATS and other trade agreements to be debated and ratified by parliament, not by Cabinet;
  • No WTO investment agreement which would remove the rights of government to regulate foreign investment or give corporations the right to challenge public interest legislation and sue governments for damages.

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