OMYA ruling opens floodgates to exportsFederal adviser fears NAFTA partners could demand equal access to water Dave Rogers The Ottawa Citizen Ontario's decision to allow a Swiss company to triple the amount of water it takes from the Tay River means that U.S. and Mexican firms will be able to demand equal treatment under free trade rules, a federal government trade adviser said yesterday. The decision sets a precedent that will entitle all North American investors to similar treatment in Ontario, according to Howard Mann, a legal adviser to the Canadian government on the NAFTA-related North American Agreement on Environmental Co-operation. Surface water exports would not be permitted under North American trade rules unless water becomes a commodity sold on the open market, said Mr. Mann, who was participating in a panel discussion sponsored by the Environmental Law Students' Association at the University of Ottawa. He said the decision to give OMYA Canada Inc. access to more water could effectively make water a commodity. "Other foreign investors could say the government gave this Swiss investor a certain amount of water and they are entitled to a multiple amount according to the flow of the river," he said. Mr. Mann admitted the situation regarding water is not clear, however. "The big public debate is whether NAFTA covers water, especially the export of water," said Mr. Mann. "Towards the end of the political process leading to ratification of the agreement, the three NAFTA governments said, 'Don't worry, we promise you the export of water, especially bulk exports, is not in NAFTA.' "The statement said that water is not a good or a product and is not covered by NAFTA. Then they said that is the situation unless water is entered into commerce, but they don't define what commerce is." Elizabeth May, executive director of the Sierra Club of Canada, said bulk water export is an environmental issue because there is a growing shortage of water in southern Canada. "The question is not whether NAFTA compels us to sell our water, but what is the trip wire that places water under NAFTA rules," Ms. May said. "At what point do we make a mistake, so that water becomes part of commerce and if we don't sell it, a private investor has the right to sue us? Mr. Mann said nobody knows how water would become part of commerce and subject to NAFTA rules, but a broad reading of the agreement would expand NAFTA coverage over fresh water. "Does a privatized water system make the water part of commerce? I buy my water from the Ottawa River filtered through the City of Ottawa treatment system. Does that make the water in the Ottawa River part of commerce? If it were a privately managed system, would that mean it was in commerce? The problem is, we don't know how low the bar is that would make water part of commerce." Mr. Mann said bottled and canned water is covered as a trade product under NAFTA. He said bulk water transfers across the border in trucks or tank cars would trigger a "trip wire," making water a product subject to NAFTA rules, but OMYA's water-taking does not do that because it is used to make a product. OMYA mixes the water with crushed calcium carbonate to produce a thick slurry that is shipped throughout North America to make products such as paper, paint, wallboard, plastics, food additives, toothpaste, antacids and calcium supplements. "But if a NAFTA-based investor said the government had provided this Swiss investor with certain rights and went to the minister to evade the legal process, it could say it had a right to equal consideration by the minister to avoid the process," Mr. Mann said. "Bizarre as that sounds, that is a realistic scenario under which a company could make a claim." Mr. Mann said that under NAFTA, foreign investors could have more rights than Canadian law allows. He said the most-favoured-nation provisions of the trade agreement require that NAFTA investors be treated at least as well as investors from other countries. Ms. May said: "The Tay River case is an excellent example of how politics can get in the way of sensible ecological planning. To have the minister of the environment step in and decide that OMYA can take 4.5 million litres a day from a shallow river is really appalling. An export ban at the federal level that is clear and unequivocal might protect us."

OMYA ruling opens floodgates to exports
Federal adviser fears NAFTA partners could demand equal access to water

February 27, 2003
Dave Rogers
The Ottawa Citizen

Ontario's decision to allow a Swiss company to triple the amount of water it takes from the Tay River means that U.S. and Mexican firms will be able to demand equal treatment under free trade rules, a federal government trade adviser said yesterday.

The decision sets a precedent that will entitle all North American investors to similar treatment in Ontario, according to Howard Mann, a legal adviser to the Canadian government on the NAFTA-related North American Agreement on Environmental Co-operation.

Surface water exports would not be permitted under North American trade rules unless water becomes a commodity sold on the open market, said Mr. Mann, who was participating in a panel discussion sponsored by the Environmental Law Students' Association at the University of Ottawa.

He said the decision to give OMYA Canada Inc. access to more water could effectively make water a commodity.

"Other foreign investors could say the government gave this Swiss investor a certain amount of water and they are entitled to a multiple amount according to the flow of the river," he said.

Mr. Mann admitted the situation regarding water is not clear, however.

"The big public debate is whether NAFTA covers water, especially the export of water," said Mr. Mann. "Towards the end of the political process leading to ratification of the agreement, the three NAFTA governments said, 'Don't worry, we promise you the export of water, especially bulk exports, is not in NAFTA.'

"The statement said that water is not a good or a product and is not covered by NAFTA. Then they said that is the situation unless water is entered into commerce, but they don't define what commerce is."

Elizabeth May, executive director of the Sierra Club of Canada, said bulk water export is an environmental issue because there is a growing shortage of water in southern Canada.

"The question is not whether NAFTA compels us to sell our water, but what is the trip wire that places water under NAFTA rules," Ms. May said. "At what point do we make a mistake, so that water becomes part of commerce and if we don't sell it, a private investor has the right to sue us?

Mr. Mann said nobody knows how water would become part of commerce and subject to NAFTA rules, but a broad reading of the agreement would expand NAFTA coverage over fresh water.

"Does a privatized water system make the water part of commerce? I buy my water from the Ottawa River filtered through the City of Ottawa treatment system. Does that make the water in the Ottawa River part of commerce? If it were a privately managed system, would that mean it was in commerce? The problem is, we don't know how low the bar is that would make water part of commerce."

Mr. Mann said bottled and canned water is covered as a trade product under NAFTA. He said bulk water transfers across the border in trucks or tank cars would trigger a "trip wire," making water a product subject to NAFTA rules, but OMYA's water-taking does not do that because it is used to make a product.

OMYA mixes the water with crushed calcium carbonate to produce a thick slurry that is shipped throughout North America to make products such as paper, paint, wallboard, plastics, food additives, toothpaste, antacids and calcium supplements.

"But if a NAFTA-based investor said the government had provided this Swiss investor with certain rights and went to the minister to evade the legal process, it could say it had a right to equal consideration by the minister to avoid the process," Mr. Mann said.

"Bizarre as that sounds, that is a realistic scenario under which a company could make a claim."

Mr. Mann said that under NAFTA, foreign investors could have more rights than Canadian law allows. He said the most-favoured-nation provisions of the trade agreement require that NAFTA investors be treated at least as well as investors from other countries.

Ms. May said: "The Tay River case is an excellent example of how politics can get in the way of sensible ecological planning. To have the minister of the environment step in and decide that OMYA can take 4.5 million litres a day from a shallow river is really appalling. An export ban at the federal level that is clear and unequivocal might protect us."