TED CASE STUDIES

US-Canada Water Case

IDENTIFICATION
LEGAL CLUSTERS
GEOGRAPHIC CLUSTERS
TRADE CLUSTERS
ENVIRONMENT CLUSTERS
OTHER FACTORS

I. Identification

The Great Lakes - North America

1. The Issue

Canada is attempting to ban its massive exports of fresh water to its neighbors including the United States. Canada believes that water will become the most essential environmental source in the next century. The United States on the other hand, has always been refusing this ban that may harm other nations who lack such a vital source. Canada, as it holds a fifth of the world’s fresh water supply, fears to face a huge environmental problem if it carries on shipping a huge quantities of water to external nations.

2. Description:

Canada possesses 20% of the earth’s fresh water. Half of this percentage is renewable and can be accessed from rivers and lakes. While the rest of it remains untouchable in the form of snow in the north.

Water plays an important role in both Canada and the United states. Both Canadians and Americans are considered to be the world’s most consumers of water. They use 100 gallons per day per person which are mostly lost in toilets and bath drains. Moreover, their usage of drinking fresh water is three times higher than that in Europe. Water also plays an essential role in agriculture in which irrigation is considered to be the biggest user of water. It accounts for 80% of water consumption.

    The case began when the Canadian public started to become more concerned about the huge artificial diversion of fresh water into the southern regions such as the United States and Mexico. They believe that such an artificial diversion is the most damaging way to the Canadian environment and social identity. Especially with the increasing demand of southern urban industrial and agricultural. In 1985, the Canadian Federal government released a report including nine water diversions from Canadian basins. Furthermore, the North American Water and Power Alliance (NAWPA) recognized a huge diverted fresh water from the Canadian rivers to the Great lakes and Mississippi in the United States. These huge artificial diversions of water led the federal government to pursued the Canadian provinces to place a dam on fresh water exports.

    Recently, the Canadian government has announced a strategy to prohibit the bulk water exports from Canadian basins. Foreign Affairs Minister Lloyd Axworthy and Environment Minister Christine Stewart announced in reply to the Canadian concerns about the security of their water resources.
The new strategy includes the followings issues:
            a) Federal government must be given the regulatory power to ban the massive water exports especially from
                Canada’s great lakes boundaries by altering the International Boundary Waters Treaty Act (IBWTA).
            b) A mutual study about the influence of water usage, diversions, and export with the United States should take place at
                The International Joint Commission (IJC) which will provide a variety of recommendations for both countries on the
                management and protection of shared water.
            c) Canadian provinces and territories must work together and adapt to that moratorium in order to protect their
                Canada’s natural resources from the huge water removal .

    The Canadian government argues that its strategy consistently meets the free trade agreements. It insists on the statement of Canada, The United States, and Mexico agreement in 1993 which states that “ unless water in any form has entered into commerce and become a good or product, it is not covered by the provisions of any trade agreement, including the NAFTA.”

    Trade specialists argue that Canada is attempting to avoid getting their water exports involved under the NAFTA. That is they fear that one day the Canadian fresh water will be considered as a tangible good rather than an important natural resource if one single shipload is to be made. In October, 1992 the Mulroney government released its environmental review of the NAFTA. It state, that “ the large-scale movement of water was neither raised nor negotiated during the NAFTA negotiations. While Rawson Aquatic Institute stated in their Analysis on water exports under the NAFTA that “ Canadian water exports are not exempt or excluded from the provisions of NAFTA, it also appears that indirect controls on water exports are made more difficult through NAFTA’s general investment and national treatment provisions.” Moreover, many trade specialists see the new moratorium as a temporary case in which Ottawa and the provinces need time to devise a coherent water policy and pricing strategy.

    Some provinces such as. British Columbia and Alberta have already took serious actions towards this issue. While Ontario’s regulation about this issue is still in progress.

    A clear example of the ban was when the province of British Columbia imposed a complete halt on water shiploads to California. Sun Belt Water Inc. of Santa Barbara who used to have a permit to ship water in the mid 1990s to California was deprived from having this permit. Thus, Sun Belt now seeks compensation of $220 million from Canadian governments and filed a complaint under chapter 11 of the North American Free Trade Agreement.

    Another example was when the Environment Minister announced in May 14,1998 that the water-taking permit given to Ontario-based company was cancelled. That permit allowed the company to transfer water from Lake Superior to Asia. Furthermore, Ontario was stopped from selling three billion liters of Lake Superior water to a customer in Asia.

    As the world’s rate of water use increases, environmentalists and economists argue that fresh water will be the most important source in the next few decades. They agree that many nations will be suffering a severe shortages in fresh water.

3. Related Cases
        1) ARAL SEA case
        2) ISRAELH2O case
        3) COLORADO RIVER case
        4) Ataturk Dam and Water case

Keyword Clusters
      (1): Domain                                 =   North America
      (2): Bio-geography                      =   DRY
      (3): Environmental Problem          = WATER

4. Draft Author:

Mohammed Karroum
April, 1999

II. Legal Clusters

5. Discourse and Status:

Disagree (DIS) and INPROG
The United States considered this ban on water is against the NAFTA provisions.While the government of Canada stated that “ unless water in any form has entered into commerce and become a good or product, it is not covered by the provisions of any trade agreement including the NAFTA.

6. Forum and Scope:

NAFTA and REGION
This case was introduced to the NAFTA as a compliant under chapter 11 by Sun Belt Water Inc. which was deprived from having a permit to transfer water shiploads to California.

7. Decision Breadth:

This case is basically between Canada and the United States. But since Canada holds 20 percent of the earth’s fresh water, this ban may impact a lot of nations who lack sufficient amount of water. Therefore, this ban on exports may cause water shortages in different parts of the world. Especially as the world’s rate of water use is increases.

8. Legal Standing:

TREATY
The United States along with some water companies are trying to settle this dispute at the NAFTA.

III. Geographic Clusters

9. Geographic Locations

a. Geographic Domain: North America (NAMER).

b. Geographic Site: North East.

c. Geographic Impact: The United States of America.

10. Sub-National Factors: No

11. Type of Habitat: Snow Forests (COOL)

IV. Trade Clusters

12. Type of Measure: Export Ban (EXBAN)

13. Direct v. Indirect Impacts: Direct (DIR)

The Canadian ban on their fresh water exports has a direct impact on trade with the united state.

14. Relation of Trade Measure to Environmental Impact

a. Directly Related to Product: YES- AGRICulture

b. Indirectly Related to Product: No

c. Not Related to Product: No

d. Related to Process: YES-WATER

15. Trade Product Identification:

Product Type: Water

16. Economic Data

According to UN statistical figures, Canada’s renewable fresh water is 11 times greater than those in the United States. In other words, 28.7 million gallons of fresh water for every Canadian compared to 2.6 million gallons for every American.

17. Impact of Trade Restriction:

This trade restriction will cause great losses in many water-import companies in which those companies will lose there permits of importing water from the Canadian basins. For example, the California water company, Sun Belt Inc., filed a compliant to the NAFTA of $220 million as a compensation from the Canadian government for losing their permit.

18. Industry Sector: UTILity.

19. Exporters and Importers:

Case Exporter: Canada.
Case Importer: The United States of America.

V. Environment Clusters

20. Environmental Problem Type: HBITAT Loss

>From Canada’s point of view, Canada believes that the continuous fresh water removal will have an enormous impact on the environment as follows:
a) The possible climatic changes in and around the area of these large water diversion operations.
b) Erosion and a decrease in biological reproductively in lakes and rivers.
c) Loss of productive agricultural land and wildlife habitat.
d) Destruction of ripairian ecosystems.
e) Loss of fish habitat
f) Adverse effects on the food chain due to mercury releases caused by flooding.
g) The introduction of potentially harmful species of fish, plants, parasites, bacteria, and viruses into the drainage basin ecosystem.
While the United States believe that this ban will be the major cause of many water shortages in different parts of the world during the next few decades.

21. Name, Type, and Diversity of Species

Name: Wildlife and fish habitat.

Type: Many.

Diversity: Many.

22. Resource Impact and Effect: HIGH and SCALE

23. Urgency and Lifetime: MEDium and 100s of years

24. Substitutes: Conservation [CONSV]

Although there are no substitutes for water; however, there are
many advanced technique in the way of water conservation such as, micro-sprinklers and drip irrigation.

VI. Other Factors

25. Culture: YES

This ban tends to be protective for the cultural identity of Canada as one of the world’s greatest nations in possessing fresh water.

26. Trans-Boundary Issues: YES

Canada and the United States share many water basins along their borders such as the Great Lakes and many rivers.

27. Rights: YES

Water is an essential natural resource for humans. Therefore, this ban may seriously impact other nations including the United States by causing water shortages among those nations.

28. Relevant Literature:

Canada seeks to dam the flow of water exports. Feb 9, 1999. CNN interactive.

DePALMA, A. Mar 7, 1999. Free Trade in Fresh Water? Canada Says "No". The New York Times

Lewington, P. Jan, 1991. Water Exports. http://web.lexis-nexis.com/universe Vol.98; No.1; Pg.40

Lake Superior water-taking permit being cancelled. May 14, 1998. http://www.ene.gov.on.ca/envision-news/05/98.htm

Nickerson, C. Mar 4, 1999. Water-rich Canada shuts the spigot. Financial Times

NPD demands action to stop sale of Ontario’s water. Dec 3,1998. http://www.ndp.on.ca/press_release/dec_98/12_03_98_water.html

Sullivan, D. March, 1993. NAFTA Drinks Canada dry. http://web.lexis-nexis.com/universe
Vol.27; No.2; Pg.16

Mohammed Karroum