The CETA Deception: Water services and regulation

What the Harper government says:

Canada’s FTAs do not prevent governments from setting standards to ensure that Canadians have access to safe drinking water. Canada’s FTAs do not force governments to privatize, contract out or deregulate water-related services. All companies operating in Canada, whether domestic or foreign, must respect Canadian laws and regulations. Free trade agreements could not force Canada to export its water.

What we say:

First, what we DON’T say: The Council of Canadians has not claimed that CETA will lead to bulk water exports to the EU. The concept of pipes across the Atlantic is ludicrous (though it must be said some investors have proposed shipping water to dry or drought-prone countries via tankers). This strategy of conflation, which has since been adopted by big business lobby groups, is clearly designed to ridicule critics of CETA by ignoring their legitimate questions about why Canada is not prepared to exclude water services from the deal.

The Council of Canadians and the Canadian Union of Public Employees have written two reports on the threat that CETA poses to water services. In the report Full of Holes: Newly leaked documents show Canada is opening the door widely to private water companies in trade negotiations with European Union, we compared a leaked copy of Canada’s initial services and investment offers to what the EU was proposing. As of January 2012, EU negotiators wanted to reserve the right “to adopt or maintain any measure at any level of government with respect to services relating to the collection, purification and distribution of water, including the provision of drinking water, water management, and waste water management.”* Since then, the EU has revised this language so that only drinking water is carved out of CETA. But Canada’s provinces have made no similar request, which is a signal to the EU and large private water companies such as Suez and Veolia that Canada is “open for business” for water profiteers.

While it is true that nothing in CETA will be able to force municipal governments or Crown corporations to privatize or contract out water services, there are limits in services agreements on how covered sectors can be regulated. For example, CETA would ban limits on the number of investments a firm can make, the value of its transactions, or its total number of operations. Foreign ownership caps, such as those that exist in financial services, fisheries, telecommunications and other sectors in Canada, would be prohibited, as well as measures requiring a certain type of legal entity or joint venture to deliver the service. Furthermore, as a recent CUPE legal opinion of Canada’s initial CETA offers says, “Where water systems are privatized, efforts to establish water standards or water rates have been challenged as infringing investor rights under international investment rules very much like those proposed for CETA.”

Remunicipalization (bringing private services back into public hands) where privatization has failed, or where unforeseen circumstances demand it, becomes expensive under CETA because Canada would be required to compensate a firm not just for its assets, but for its projected profits over the course of a contract. These contracts can run as long as 20 or 30 years. In Canada, where the federal government is tying transfer payments for water infrastructure to the consideration of private-public partnerships, there is a risk that CETA will make it difficult to hold water firms involved in P3s accountable for cost overruns or poor service. There is an added risk in CETA procurement rules that may give firms competing in P3 projects the right to challenge a municipal decision to keep the service public.

Recommendation

The Council of Canadians and CUPE made a simple request to the federal, provincial and territorial governments in our January 2012 report. If governments truly wanted to exclude water services from trade and investment liberalization rules that encourage privatization, our offers to the EU must be changed to reflect this, and to mirror what the EU is seeking. “These CETA carve outs should apply across the board to public services, in particular to all health and education services, regardless of existing private investment in these sectors. But municipal services must be excluded also, such as transit, waste management, energy and other social services,” we stated in the report.

* The EU has since amended this reservation so that it only excludes drinking water services. Sanitation services would be covered by CETA as they are for the EU in the General Agreement on Trade in Services (GATS).