Water Incorporated

The commodification of the world's water

Features

We would like to believe that there is an infinite supply of fresh water on the planet, but that assumption is tragically false. Available fresh water amounts to less than half of one percent of all the water on Earth. The rest is seawater or polar ice. Fresh water is renewable only by rainfall.

Global consumption of water is doubling every 20 years - more than twice the rate of human population growth. According to the United Nations, more than one billion people on Earth already lack access to fresh drinking water. If current trends persist, by 2025 the demand for fresh water will rise by 56 percent and as many as two-thirds of the world’s population will be living with serious water shortages or absolute water scarcity.

Around the world, the most common tactic to meet increased water demand has been to divert rivers and to build environmentally destructive dams. The number of large dams worldwide has climbed from just over 5,000 in 1950 to 38,000 today. Only 2 percent of US rivers and wetlands remain free-flowing and undeveloped, while the country has lost more than half of its original wetlands.

In the US, 37 percent of freshwater fish are at risk of extinction, 40 percent of amphibians are imperiled and 67 percent of freshwater mussels are extinct or vulnerable to extinction.

More than 30 countries already face water stress and scarcity. The Earth’s water system can support, at most, only one more doubling of demand, estimated to occur in less than 30 years. The US National Intelligence Council, a group that reports to the CIA, warns that water will become the main resource-scarcity problem by 2015 and that the instability created by water shortages “will increasingly affect the national security of the United States.”

Fortune Magazine notes that “water will be to the 21st century what oil was to the 20th.” Who owns water and how much they are able to charge for it will become the question of the century. The privatization of water is already a $400-billion-a-year business. Multinational corporations hope to increase profits from water commodification even further by using international trade and investment agreements to control its flow and supply. One Canadian water company, Global Water Corp., puts it best: “Water has moved from being an endless commodity that may be taken for granted to a rationed necessity that may be taken by force.”

Over the last few decades, multinational corporations have profited from the provision of water through the Structural Adjustment Programs (SAPs) of the World Bank and International Monetary Fund (IMF), which used these economic restructuring programs to give corporations access to the water systems of developing countries. Today, corporations are using a new generation of trade and investment agreements to gain ownership over the world’s ever-dwindling water supplies so that they will become the suppliers of last resort.

The FTAA: At Your Service
In the past, governments unanimously believed that access to basic human services such as water, healthcare and education should not be included in trade agreements because these were essential components of citizenship. However, the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) began the process of eroding these basic human rights. Today, the Free Trade Area of the Americas (FTAA) is poised to take this process to a whole new level.

The Free Trade Area of the Americas is the formal name given to the massive expansion of NAFTA [“NAFTA for the Americas,” Summer 2001]. The FTAA would impose NAFTA’s failed model of privatization and deregulation on 34 nations in North, Central and South America and the Caribbean, creating the world’s largest free-trade zone with a population of 800 million and a combined GDP of $11 trillion.

The FTAA’s “services agreement” grants private corporations sweeping new authority to overrule government regulations. Under the FTAA, all public services - schools, hospitals, prisons - would be forced to open up for competition from foreign for-profit service corporations. This agreement would forbid any federal government or local government from giving preferential funding to domestic providers of sewer or water services.

The FTAA would increase the number of towns and cities forced into privatizing their water systems and would reduce the ability of governments to ensure that the privatized systems work to protect the environment, consumers and workers.

As the water crisis intensifies, governments worldwide - under pressure from multinational corporations - are advocating the commodification and mass transport of water. Proponents of water privatization say that a market system is the only way to distribute water to the world’s thirsty. But experience shows that selling water on the open market does not address the needs of poor, underserved people.

On the contrary, privatized water is delivered to those who can pay for it, such as wealthy cities and individuals, agriculture and industries. As one resident of New Mexico’s high desert observed after his community’s water was diverted for use by the high-tech industry: “Water flows uphill to money.”

In cities and towns across the Western Hemisphere, results of water privatization have been almost universal: increased prices and a concurrent loss of access to water, failed promises of infrastructure improvement, loss of indigenous peoples’ rights to water, worker layoffs, lack of information on water quality and big profits for the privatizing corporations.

In India, some households pay a staggering 25 percent of their income for water. Poor residents of Lima, Peru, pay private vendors as much as $3 per cubic meter for buckets of often-contaminated water while the affluent pay only 30 cents per cubic meter for treated municipal tap water.

Water-Related Conflicts
The push to commodify water comes at a time when the social, political and economic impacts of water scarcity are rapidly becoming a destabilizing force around the globe. In 1997, Malaysia, which supplies about half of Singapore’s water, threatened to cut off its supply after Singapore criticized Malaysia’s policies. In Africa, relations between Botswana and Namibia have been severely strained by Namibian plans to construct a pipeline to divert water from the shared Okavango River. In the water-starved Middle East, the late King Hussein of Jordan once said that the only thing he would go to war with Israel over was water because Israel controls Jordan’s water supply.

More than 5 million people, most of them children, die every year from illnesses caused by drinking poor-quality water. In the industrial maquiladoras along the Mexico-US border, water is so scarce that Mexican babies and children are compelled to drink Coca-Cola and Pepsi instead.

Eighty percent of China’s major rivers are so degraded they no longer support fish. China is facing the likelihood of severe grain shortages because of water depletion and the shift of water resources from agriculture to industry and cities. The resulting demand for grain in China soon could exceed the entire world’s available exportable supply.

Today, the future of one of Earth’s most vital resources is being determined by those who profit from its overuse. At the annual World Economic Development Congress, corporations and financial institutions met with government representatives from more than 84 countries to attend panels on such subjects as “Overcoming Obstacles to Water Investment.” The agenda was clear: water should be treated like any other commodity, with its use determined by market principles.

The Global Water Power Play
The World Water Forum (WWF) held in The Hague in March 2000 was chaired by World Bank Vice President Ismail Serageldin. The WWF is part of the continuing activities of the World Water Council (WWC), a coalition of governments, international agencies and private-sector interests. The WWC has formed close working partnerships with private corporations, the Global Water Partnership and Business Partners for Development. The websites and reports of these organizations and corporations make clear that some of the world’s largest water privateers are taking the lead in developing global water policies.

With the support of international trade agreements, these companies are setting their sights on the mass transport of water by pipeline and supertanker. Several companies are developing technology to pump fresh water into huge sealed bags to be towed across the oceans for sale.

The US Global Water Corp., a Canadian company, has signed an agreement with Sitka, Alaska, to export 18 billion gallons of glacier water per year to China. It would then be bottled for export in one of China’s “free trade” zones to take advantage of cheap labor. The company brochure entices investors “to harvest the accelerating opportunity… as traditional sources of water around the world become progressively depleted and degraded.”

The National Post called Canada’s water “blue gold” and Post business columnist Terence Corcoran predicts that “The issue will not be whether to export, but how much money the federal government and provinces will be able to extract from massive water shipments…. Using the OPEC model, they will attempt to cartelize the world supply of water to drive the price up.”

Based on negotiating documents that have been released, we can begin to paint a picture of the threats to water that are likely to be included in the FTAA.

Under the agreement, the goods that are subject to the agreement’s obligations include “waters, including natural or artificial waters, and aerated waters.” In 1993, then-US Trade Representative Mickey Kantor said in a letter to a US environmental group, “When water is traded as a good, all provisions of [NAFTA] governing trade in goods apply.”

“National Treatment” is a standard trade provision guaranteeing that countries do not “discriminate” by favoring domestic producers over foreign producers. This means that if a locality provides any portion of its water supply through a private company, it cannot favor a locally owned service provider that may have a greater commitment to the area and may be easier for the local community to oversee. Furthermore, once a permit is granted to a domestic company to export water, the corporations of all the other FTAA countries would have the same access rights to the commercial use of that water. For example, if a Bolivian company were granted the right to export Bolivian water, US multinationals would then have the right to help themselves to as much Bolivian water as they wished.

NAFTA’s “Investor State” provision (which the US, among others, would like to see included in the FTAA) gives investors, usually corporations, the right to sue a foreign government directly.

Under this provision, if any FTAA country, state or province permits only domestic companies to export water, corporations in the other countries would have the right to financial compensation for “discrimination.”

NAFTA’s Chapter 11 allows foreign corporations to sue a country if a government implements legislation that “expropriates” the company’s future profits. For example, if a country privatized its water services, hired a foreign provider and then passed laws requiring improved environmental protections or worker safety, the client corporation could argue that the laws were an expropriation of its profits and therefore illegal under the FTAA.

Suing for the Access to Water
Corporations already have begun suing governments to gain access to domestic water sources. The first such NAFTA Chapter 11 case (Sun Belt Water Inc. vs. Canada) was filed in the fall of 1998. Sun Belt Water Inc. of Santa Barbara, Calif., filed suit after losing a contract to deliver Canadian water to California when British Columbia banned the export of bulk water in 1991. Sun Belt is seeking $220 million in damages. However, Sunbelt appears more interested in access to BC’s water than the $220 million. As Sun Belt’s CEO Jack Lindsay explained, “Because of NAFTA, we are now stakeholders in the national water policy in Canada.”

Chapter 11 was also used successfully by the Virginia-based Ethyl Corp. to force Canada to reverse its ban on MMT, a toxic chemical gasoline additive. In June 1997, Canada banned the cross-border sale of MMT because it is, in the words of Canadian Prime Minister Jean Chretien, an “insidious neurotoxin.” Under NAFTA, Ethyl sued Canada for $250 million in damages for lost future profits and for damaging the company’s “good name.” Rather than allow the case to go to a NAFTA tribunal where it feared losing, the Canadian government reversed its ban in July 1998 and paid Ethyl $13 million in compensation for its “trouble.”

In July 1999, Canadian-owned Methanex Corp. sued the US for $970 million after California Gov. Gray Davis mandated the removal of methyl tertiary butyl ether (MTBE) from gasoline sold in the state by December 31, 2002. The chemical has been associated with human neurotoxicological effects and may cause cancer. Methanex claims that California’s ban violates NAFTA by limiting the corporation’s ability to sell MTBE.

Water as a Human Right
In January 2000, thousands of citizens of Cochabamba, Bolivia took to the streets to oppose the takeover of their water systems by a company jointly owned by the US-based multinational Bechtel and the Italian utility Edison [“Bolivia’s Water War Victory,” Autumn 2000]. The rebellion, which shut the city down for four days, was sparked after the foreign-owned water corporation raised Cochabamba’s water rates 35 percent.

Bolivian President Hugo Banzer was eventually forced to lift martial law and Bechtel was compelled to abandon its Bolivian water-privatization scheme.

An international “civil summit” of farmers, workers, indigenous people, students, professionals, environmentalists, educators and nongovernmental organizations from Bolivia, Canada, India, Brazil and the US subsequently gathered in Cochabamba to combine forces in the defense of the vital right to water. At the conclusion of the summit, they issued “The Cochabamba Declaration” which reads, in part:

• Water belongs to the Earth and all species and is sacred to life. Therefore, the world’s water must be conserved, reclaimed and protected for all future generations and its natural patterns respected.
  
• Water is a fundamental human right and a public trust to be guarded by all levels of governments. Therefore it should not be commodified, privatized or traded for commercial purposes. These rights must be enshrined at all levels of government. An international treaty must ensure these principles are noncontrovertable.

For additional information on the FTAA, contact Antonia Ajuhasz at the International Forum on Globalization [162 Ft. Cronkhite, Sausalito, CA 94965, (415) 561-3490, www.ifg.org].