THE FAILURE OF GOVERNMENTS

from the booklet

Blue Gold

The global water crisis and the commodification of the world's water supply

A Special Report issued by the International Forum on Globalization (IFG)

by Maude Barlow
National Chairperson, Council of Canadians
Chair, International Forum on Globalization (IFG) Committee
on the Globalization of Water

TOO LITTLE TOO LATE

Governments all over the world have been remiss in not recognizing the crisis surrounding the world's water resources and for not taking steps to offset the coming emergency.

In the industrial world, there are some real success stories in the reclamation of rivers, lakes and estuaries choked with sewage and industrial pollution. The Hudson River in the U.S. was once given up for dead; now it abounds with life. Citizens and governments have worked to ban some of the most egregious toxins entering our water, such as DDT, and in December 2000 concluded a historic treaty banning the major persistent organic pollutants (POPs). As well they have forced the partial clean-up of industrial effluent such as waste from pulp and paper mills.

The partial recovery of the Great Lakes through joint action of the bordering provinces and states, for example, is being studied by scientists all over the world. After discovering that phosphorus was causing much of the deterioration, the governments of Canada and the United States signed the Great Lakes Water Quality Agreement in 1972, which strongly curbed the dumping of phosphorus and municipal sewage into the lakes.

As well, conservation efforts in Europe and North America have resulted in some reduction in household and industrial water use, helping to slow the rate of aquifer withdrawal. Water use has actually dropped in some regions and industrial sectors in the U.S. by 10 to 20 percent since 1980, according to the United States Geological Survey. In the last decade, govern

In industrial countries, where the technology and resources are available for improvements, governments have instead cut spending on public works and eviscerated environmental laws in the name of global competitiveness. Already crumbling inner-city systems are deteriorating in most industrialized cities. In Britain, for example, Worldwatch Institute estimates that one-quarter of the water that enters the distribution network is lost because of broken pipes and other problems. Until it started to address the problem, Boston, Massachusetts, lost almost 40 percent of its municipal water supplies annually from similar neglect. The average Canadian household uses about 500,000 liters a year, but almost half is wasted in washing cars or dripping taps. The Canadian government estimates that it will cost $53 billion (Can $80 billion) to upgrade deteriorating water infrastructures.

A coordinated effort by the world's governments could change this pattern of waste within a decade. With current technologies and methods available today, a conservative estimate suggests that the agriculture sector could cut its water usage by close to 50 percent, industries by 50 to 90 percent, and cities by one-third without sacrificing economic output or quality of life. What is missing is political will and vision.

As well, millions of people die every year from contaminated water because many governments don't allow local communities to manage their own resources. A March 1999 study by the World Bank and the United Nations Development Program reports that international aid programs channel too much money through government agencies and utilities and don't trust local communities to manage their own systems. The report also accuses international agencies and governments of forcing new technologies on communities that cannot afford to maintain them. As an example of what can work, the report highlights a pilot project in Uttar Pradesh, India's most populous and least developed state, in which villagers elect their own water-management committees and oversee public budgets. The local test projects cost two-thirds less than those delivered by the government water board.

Governments are also culpable by their massive subsidization of the global transportation system that underpins economic globalization. If the full cost of transporting consumer goods across the ocean for assembly and then back again was reflected in the final price, the volume of world trade would diminish significantly.

Governments subsidize the water-guzzling high technology sector in many ways. The city of Austin, Texas, not only awards tax breaks to high-tech companies (recently $125 million to Samsung and $56 million to Sematech), but also reduced water rates. Austin's industrial water rates are less than two-thirds of what residents pay. For its Rio Rancho facility in New Mexico, Intel recently received a tax subsidy of $8 billion via an industrial revenue bond and an additional $250 million in tax credits and other subsidies. The Southwest Network and the Campaign for Responsible Technology reports in Sacred Waters, "The greatest form of cost externalization related to water...comes in the form of water price subsidies, water delivery and treatment infrastructure subsidies, and restricted access to traditional and low-income water users caused by the massive use by this industry."

Further, in the absence of legislation or even debate in most countries, the privatization of water and wastewater services is steadily advancing. Through "public-private partnerships," municipal governments in many countries are blurring the lines between private companies and democratically elected governments. Often, these "partnerships" are the first step to full privatization. Because many of the same companies providing these services are likely to move into the area of bulk export, dams and water diversion, governments are granting them access to water resources through the back door.

TRADING AND BUYING WATER RIGHTS

Commercial water trading is growing in many parts of the world, usually with governments' blessing In Chile, where privatization is a government goal, water companies are buying water rights from farmers and selling them to cities. Informal, small-scale water trading among farmers is common throughout the non-industrial world. As long as these arrangements are made between local farmers and local communities, the system can work equitably; but if the practice is unregulated, it is often used to drive up the price of water for the poor. When large corporations enter the game, they typically buy up block water rights, deplete water resources in an area, and move on.

A similar practice is already common in the fishing industry. Large corporations are buying up government-granted fishing licenses called Individual Transferable Quotas (ITQs)-an entitlement that can be leased or sold, permitting the holder to catch a specified quantity of fish. Originally designed by governments to control overfishing, ITQs are now concentrating the fishery industry in the hands of a small number of giant fishing corporations who encourage destructive fishing practices and strangle local communities. As one out-of-work Newfoundland fisher said, "For the first time in history, the fish are owned before they are caught."

In California, water rights trading is becoming a very big business. In 1992, the U.S. Congress passed a bill allowing farmers, for the first time in U.S. history, to sell their water rights to cities. In 1997, (then) Interior Secretary Bruce Babbitt announced plans to open a major water market among the users of the Colorado River. The new system would allow interstate sales of Colorado River water among its southern users- Arizona, Nevada and California.

Wade Graham (Harper's Magazine) calls this development "the largest deregulation of a national resource since the Homestead Act of 1862" and adds that the only thing that could have topped it would have been the privatization of all U.S. federal lands. Government leaders are counting on the free market to do what politicians and the courts have not been able to do- referee between the many claims to the Colorado's water.

The deals are expected to be small at first (Nevada has already arranged to pay Arizona to store water for future use), but in the long run, the fast-growing areas where high-tech industry is concentrated will be able to obtain vast quantities of reasonably priced water from a virtually limitless source. As a warning, Graham points to a failed experiment in water privatization in the Sacramento Valley in the early 1990s.

For the first time, Southern California cities and farmers were no longer prevented from buying water directly from Northern California farmers, hoarding it and selling it on the open market. Large-scale operators helped themselves to huge amounts of water and stored it with the Drought Water Bank until the price was right to sell. A small handful of sellers walked away with huge profits, while other farmers found their wells run dry for the first time in their lives. The results were disastrous; the water table dropped and the land sank in some places.

Graham compares this incident with the Owens Valley tragedy at the turn of the last century. The once lush, water-rich Owens Valley was bled dry when water officials from Los Angeles devised a scheme to divert Owens Valley water to southern California. The Owens Valley scam demonstrated that although only a few individuals or corporate entities hold registered water rights, the entire community depends upon those rights... Water in California is prosperity, and if the legal right to use it can be privatized and transferred away, then the prosperity of the community may go with it.

Water rights trading, however, is growing in California despite the storm warnings. In 1993, the billionaire Bass brothers of Texas quietly bought up 40,000 acres of Imperial Valley farmland in order to sell water to the city of San Diego, California. The project fell through when it was discovered that the district, not private farmers, owned the property. In January 1999, U.S. Filter Corp. bought a ranch and 14,000 acre-feet of water north of Reno, Nevada, which it intends to divert by pipeline to Reno for commercial sale. The local community of Lassen County says it will be left without its lifeblood. Santa Monica-based Samda plans to pump well water from its 2,000-acre ranch in Fremont Valley north of Mojave and deliver it by pipeline to Los Angeles. The Stockman Water Co. has received an endorsement from the city of Parker, California, to pump water out of the San Luis Valley to Denver, Colorado.

In early 2001, the Metropolitan Water District of Los Angeles contracted to buy as much as 47 trillion gallons of water from the state's largest farming company, Cadiz Inc. In a move of great concern to environmentalists and farmers, who fear a repeat of Owens Valley, the water will be pumped from an aquifer deep under the Mojave Desert. Tony Coelho, formerly a powerful Democratic congressman and a chairman of Al Gore's presidential campaign, says that this water source is so valuable, no dollar figure can be put on it. "Careers are made and lost in water politics, and that will be true here." Adds Keith Brackpool, the British entrepreneur who runs Cadiz, "If you do the math, the price of our water just soars."

Little wonder California's Governor Gray Davis says, 'Water is more precious than gold." In a private market, the superior purchasing power of large cities such as Los Angeles and of corporations such as Intel could force the cost of water up far enough to price farmers, small towns and indigenous peoples out of the market.

CLOSED DOOR DEALS

Companies with water interests stand to reap huge windfalls as governments around the world, having allowed municipal infrastructures to crumble, now hand the water market over to the private sector. And they are doing it with the full participation and approval of international government agencies such as the United Nations and the World Water Council.

In July 2000, the United Nations announced a "Global Compact" with a number of major transnational corporations, including Nike, Shell Oil and Suez Lyonnaise des Eaux. Many NGOs were surprised and deeply concerned about the UN giving its blessing to corporations noted for their bad environmental and labor practices in return for their agreement to a handful of purely voluntary guidelines. But this development is very much in keeping with the pro-privatization position the UN has been following for some years now.

At a March 1998 conference in Paris, the UN Economic and Social Council Commission on Sustainable Development proposed that governments turn to "large multinational companies" for capital and expertise and called for an "open market" in water rights and an enlarged role for the private sector. The UN promised to mobilize private funds for the vast investments needed for networks and treatment plants and for the technology needed to ensure future water supplies.

The UN, with the World Bank and the International Water Resources Association, is also a founding member of the World Water Council, "the world's water-policy think tank" as the Council describes itself. The World Water Council's 175 member groups include leading professional associations, global water corporations, government water ministries, and international financial institutions. One of its two vice presidents is Rene Coulomb of Suez Lyonnaise des Eaux.

The Council held the first World Water Forum in Marrakesh, Morocco, in 1997, and the second in The Hague in March 2000, attended by 5,700 participants from all over the world and chaired by then World Bank Vice-President Ismail Serageldin. While ostensibly called to bring together "stakeholders" in the water issue from around the world to address the global water crisis, the Forum was instead used as a showcase for the transnational water and energy companies and even big food corporations such as Nestle and Unilever in order to promote privatization and full cost recovery as the only solution to the world's water shortages. Most panels and workshops were chaired by World Bank and corporate executives who also made up the lion's share of panelists; only one public sector union representative was invited to speak during the entire five-day conference.

NGOs were allowed to attend, but the prohibitive cost of the conference fee and accommodation ensured that only a small number were present. Government officials from more than 160 countries attended, but were relegated to observer status and approving the final report of the Forum, which refused to name water as a human right, calling it instead a "human need." This is not semantic; if water is a human need it can be serviced by the private sector. A human right cannot be sold. Throughout this process, corporations emerged as the dominant players on the world water stage.

A second new international water agency was also created in 1996, composed of many of the same players. The Global Water Partnership (GWP) describes itself as an "action-oriented network" of organizations interested in water issues with a mission to find "practical tools" for solving water problems, particularly in developing countries. Its membership includes a number of NGOs, government agencies (such as Canada's Canadian International Development Agency, whose former head, Margaret Catley-Carlson, is GWP's new chair), multilateral banks and the private sector. Suez Lyonnaise des Eaux executive, Rene Coulomb, sits on the steering committee, as does a representative of the Switzerland-based World Business Council for Sustainable Development and the World Bank. Another representative of Suez Lyonnaise des Eaux, Ivan Cheret, sits on the GWP's Technical Advisory Committee.

Its operating principle that water is an "economic good" and has an "economic value in all its competing uses," is the basis for GWP's priority on the privatization of water services. For instance, in November 1997, this advisory group held a meeting in Vitoria, Brazil, in partnership with the Brazilian Association of Water Resources and the Inter-American Development Bank. Among the issues considered were "public-private partnerships for water management." Suez Lyonnaise des Eaux, through its membership on this committee, is in a privileged position to bid for these "partnership" contracts with the "good housekeeping seal of approval" of the world's governments and the United Nations.

It is clear that transnational water corporations are waging an offensive on many fronts to take over the agenda of international sustainable development programs for their own profit and that political leaders, the World Bank and the United Nations are openly colluding. Their way is paved by the utter failure of governments everywhere to protect their water heritage. The private sector argues that it is time to give the private sector the chance to manage this precious resource and even some environmentalists, having given up on governments altogether, agree.

In fact, governments are losing their right to protect their water heritage by default. Most governments have very few laws or regulations regarding their water systems. Most haven't even begun to address the issues of privatization, commercialization and trade in water. Yet, while they leave their water resources unprotected by legislation, they are actively negotiating and signing international trade and investment agreements that supersede national law. These treaties include trade in water, and some explicitly grant water rights to the private sector. The most immediate example is NAFTA signed by Canada, the United States and Mexico in 1993.

Blue Gold

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