THE IMPACT OF N.A.F.T.A. ON ENVIRONMENTAL PROTECTION IN CANADAOUTLINE:
- Context of project (purpose and goals)
- Why this is interesting to research
- Results:
I.
Overview of the bulk water issue
II.
Environmental regulation before NAFTA
III.
Effects of NAFTA on environmental protection
A. Is environmental protection ensured under NAFTA?
B. Constraints of NAFTA on water policy regulations
C. In summary:
Purpose:
To discover the impact of NAFTA, and more specifically Chapter 11, on environmental protection and policy regulation in Canada, using the case study of bulk water exports.
Goals:
1. to research the impact of NAFTA, and more specifically Chapter 11,
on environmental protection in Canada;
2. to evaluate whether NAFTA truly does ensure environmental protection,
using the case study of Canada's bulk water export policy;
3. to assess the effect this has on the operations of public interest
groups like STOP.
Back to outline.
WHY THIS IS INTERESTING TO RESEARCH:
We chose this research topic because current events link NAFTA and bulk water exports. Recently, Sun Belt Water Corp. of California sued the Canadian government for $15 billion of lost profit under Chapter 11 of NAFTA because the BC government rescinded its license to export water in bulk quantities. These stipulations of NAFTA have been used in other cases by foreign investors to challenge new and ex environmental laws. These include lawsuits which banned the use of MMT and the export of PCBs. This raises the issue of whether or not Canada wants to treat all its natural resources as tradable goods and services. If the government, and ultimately the public, chooses in favor of environmental protection, it will be forced under NAFTA to compensate companies, at great expense. Inversely, if it chooses to surrender its natural resources to international markets, it will put its environment in jeopardy.
The information on NAFTA and Chapter 11 was obtained through personal communications, media sources, internet searches and published books. Contact with the different members of the NGO Eau Secours also provided interesting insight this topic.
WHAT WE FOUND: Back to outline.
I. Overview of the bulk water issue:
- Canada contains 9% of the world's freshwater resources and less than 1% of the world's population, meaning there is much water in excess per capita.
- For this reason, investors are proposing to export and sell bulk quantities of it for profit.
- This would be done using cargo ships, large plastic containers or
though river diversion schemes such as NAWAPA and
Grand Canal.
- The stakeholders concerned by this issue are divided into domestic and international interest groups.
- The domestic stakeholders include corporations seeking to export water, the public and special interest groups such as first nation peoples and NGOs.
- The international stakeholders include the other NAFTA partners, transnational corporations and water-scarce nations.
- Except for the corporations, the domestic stakeholders are mostly
opposed to bulk water exports, and international stakeholders are mostly
in favor of the exports.
- In studying the effects of NAFTA on bulk water export policy, it is important to understand how environmental resources such as water were regulated before free trade.
- Using the case study of bulk water exports, we will then show how these mechanisms affect environmental regulation in general.
II. Environmental regulation before NAFTA:
With respects to water, in Canada, according to the Constitution Act of 1867 and the Canada Water Act of 1970, freshwater management is a shared responsibility among all levels of government.
- The government holds legislative authority over its waters;
- the provinces and territories own, operate and license it within their borders;
- and municipalities manage water treatment and delivery.
Other laws governing water resource use and management include:
- For the most part, these acts were implemented to protect water
quality and habitat. They imposed environmental conditions for any
activity involving the use of water in its natural state.
- Hence, as the policy behind water use indicates, natural resources before free trade were well protected by a complex set of laws and regulations which limited investors in their activities.
III. Effects of NAFTA on environmental
protection
1. Is it ensured?
- It is possible to assume that environmental protection under NAFTA is ensured because of the existence of the NAAEC.
- Based on the information we have gathered, it is our opinion however
that this statement is not true, as we will explain in the following arguments.
2. Constraints of NAFTA on water policy regulations:
- NAFTA imposes constraints upon government policy and legislative options.
- While such constraints are understood to enhance the common good of the parties to the agreement, they ultimately impede the ability of the governments to regulate trade activities even if these regulative measures are aimed at the protection of public interests.
- The most important of these constraints are found in Chapters 3, 11
and 12, which respectively treat Trade in Goods, Investment and
Services.
NAFTA Chapter 11: Investment
Chapter 11 of NAFTA was designed to protect foreign investment. It establishes the most extensive array of investor rights ever provided to foreign investors by an international treaty.
Two of the most likely bases upon which claims can be made against Canada concerning water export control measures would be founded on Articles 1102: National Treatment for Investors and Investments (1) and 1110: Expropriation and Compensation (2).
(1) National Treatment for Investors and Investments:
Canada must treat investors of other NAFTA parties the same as their own domestic investors and cannot discriminate against an investor on the basis of labor, human rights or environmental practices.
(2) Compensation for Expropriation:
Under this provision, environmental regulations represent an expropriation of investment rights. This article forces the government to compensate the investor for loss of profit for any regulation affecting his investment, even if these regulations were intended to protect human health or the environment.
This Article has already given rise to many claims for compensation
by investors such as the Nova Group, the McCurdy Group and Sun Belt Water.
For more information on Chapters 11, 3, and 12, go to: NAFTA's
constraints.
3. Summary:
NAFTA rules concerning both investment and services would apply to water, whether water is classified as a good, or not.
In fact, the federal government has conceded this point:
Chapter 11 does not prevent NAFTA Parties from prohibiting the removal of water from its natural state. But foreign investors seeking to establish investment, or with established investments, for the removal of water from its natural state would have to be treated in the accordance with the obligations of the Chapters of NAFTA, which means they would have to be compensated for lost profit.
Moreover chapter 11 provides the right of foreign investors to initiate direct action against the host government in case of expropriation.
This brief review thus reveals the considerable exposure that environmental regulations would have to free trade policy and investor claims.
Because of NAFTA the Canadian government must choose between:
(1) protecting environment
and having to face important trade sanctions.
(2) or surrendering its
natural resources to foreign investment and trade.
CONCLUSION:
We found that NAFTA's main
principle is the promotion and protection of foreign investors and their
investments. Environmental protection and conservation measures are included
in the agreement but must be applied in the least contravening way to this
principle. There is no commitment on governments to maintain high levels
of environmental standards. In fact, provisions in NAFTA could pressure
governments to lower these standards. As we have seen, Chapter 11 provisions
have been used by in many cases to challenge new environmental laws or
the application of existing ones. One lawsuit, by the Ethyl Corporation
of Virginia, has succeeded in canceling an existing environmental regulation.
And, in a reversal of the "polluter pays principle", it was compensated
for damages. Moreover, these investor-state disputes are not settled within
the host countries judicial system but use an alternative legal system
developed for NAFTA that is non-transparent, secretive and non-appealable.
It works on the fringes of democracy.
This has created
uncertainty and unpredictability for environmental regulators. It has impaired
their ability to function for the common good and in the public interest.
Our case study of the bulk water export issue has reinforced this observation.
Canada's Ministers of the Environment are consulting with trade lawyers
to formulate not the best environmental law to protect Canada's water resources
but also one that could not be challenged under international trade treaties
such as NAFTA. The Canada Wide Accord proposed by the federal government
takes a water basin approach to protection and shifts responsibility unto
the provinces to devise effective laws. This approach has caused dissension
among the province as to the best strategy for managing their water. British
Columbia, which is the principle target of many water exporting companies,
refuses to sign the Accord and maintains it's ban on bulk water exports.
It is recommended
that NAFTA should be modified to alleviate the threat to the environment
as well environmental groups must insure that they are active participants
in all trade agreements. Groups such as STOP which are actively participating
in meetings that concern NAFTA have a duty to defend the rights of the
unaware.
"The price of
democracy is constant vigilance" is a phrase that should be applied to
the environment as well. All of us should have a voice in its protection
not just a privileged few.