Trading Away Our Water Rights?Speech by Dr Patricia Ranald, AFTINET Convenor, for the Seminar on World Water Day, 22/03/02, Parliament House, Sydney.
"Today, companies like France’s Suez are rushing to privatise water, already a $400 billion global business. They are betting that water will be to the 21st century what oil was to the 20th" (Fortune Magazine, May 15, 2000 p 55).
What if our government signed a legally binding international agreement which meant that water had to be treated purely as a traded commercial good? What if the rules of this agreement meant that regulation to ensure equitable access and affordable pricing of water services could be challenged by transnational corporations as a barrier to free trade? What if the agreement meant that governments had to open up the funding of publicly owned water services to privatisation by transnational corporations?
What if the negotiations for such an agreement took place behind closed doors and it was legally binding on all levels of government without any legislation being passed in the Australian parliament?
Impossible? Unfortunately not.
The Australian government is taking part in negotiations over the next two years in the World Trade Organisation (WTO) which could have these results in Australia, and have even more devastating impacts in developing countries.
These negotiations are about changes to the General Agreement on Trade in Services (GATS). They seek to reduce that right of governments to regulate services, to remove all barriers to trade in environmental services and to define all water services as commercially traded goods rather than public goods requiring public regulation . This is a fundamental attack on democracy .
Decisions about essential services like water should be made democratically at the local and national level, not secretly signed away in trade agreements.
Why, you might ask, would governments want to sign away their own powers? They are under pressure form transnational corporations which see water as a source of vast profits: the oil of the 21st century.
Also many governments like our Federal government support privatisation and deregulation as part of their political ideology, but they know it is highly unpopular. By transferring the decision to an international body they can pass the political responsibility on to the WTO.
What is GATS?
The Australian government and other member governments of the WTO signed the General Agreement on Trade in Services (GATS) in 1994. It potentially applies to all services, from banking to transport and telecommunications, to health, education and prisons, but not up until now to most water services. GATS aims to promote international trade in services, and to remove barriers to such trade.
Although some GATS rules apply to all services, many only apply to those services which each government agrees to list in the agreement. However, GATS commits governments to increase over time the range of services included in the agreement, without any review of its impacts.
Under GATS rules, a government cannot give better treatment to local service companies than to foreign service companies in the services areas it has listed in the agreement. This is known as "national treatment". Governments cannot limit the access of companies by limiting their numbers or requiring them to have local content or train local people.
The GATS Agreement was signed with little public debate in Australia. Signing of trade agreements is a Cabinet decision. WTO agreements are briefly tabled in parliament and examined by a parliamentary committee, which can only make recommendations to Cabinet.
This is in contrast to UN agreements on human rights and the environment, most of which require domestic legislation for their implementation.
Like other WTO Agreements, GATS rules are legally binding on governments, and can be enforced through the WTO dispute system. Governments can complain about the laws of other governments to a panel of trade law experts and the winner can ban or tax the exports of the loser.
What changes are proposed to GATS and who wants them?
Governments are being asked to increase the range of services which they agree to be covered in the GATS, and to make changes to the rules of GATS which could reduce their right to regulate services, and to provide and fund public services.
GATS has some rules which recognise the right of government to regulate services and to provide and fund public services. These rules are there because many governments recognised that many services need to be regulated or provided by government to ensure equitable access to them.
However, the GATS rules on public services are ambiguous. The agreement says that public services are generally not covered by the GATS, except if they are supplied on a commercial basis or in competition with other service providers. Since many public services have been exposed to private competition through privatisation and competitive tendering policies, this means it is not clear whether some GATS rules can apply to some public services. The current agreement only fully covers public services if governments list them in the GATS agreement. Most governments have not listed public services like health, education or water.
Governments are now being pressured by global services corporations to reduce the right of governments to regulate services and to open public services to private investment. They see water services as trillion dollar markets which should be opened up to them. They see government regulation and provision of public services as barriers to trade.
There is a proposal to reduce the right of government to regulate by declaring that regulation in areas like qualifications, licensing requirements, and technical standards. must be "least trade restrictive" .This means that companies could challenge such regulation under the WTO disputes process and the obligation would be on governments to show that their regulation is not a barrier to trade. The disputes are heard by experts in trade law and public interest and environmental considerations are given little weight. Companies can argue that environmental or health regulation which is not found elsewhere is too trade restrictive. For example, the US and Canada successfully argued against an EU ban on beef containing high levels of hormones on the grounds that such regulation did not exist in North America and that was so burdensome for their companies that it was a barrier to trade.
There is also a move to apply "national treatment" rules to government funding. This would define the funding of public services like health and education as unfair "subsidies" to public services. Under the rules of national treatment, transnational corporations could argue for equal access to them through compulsory competitive tendering, leading to privatisation .
Australian Government Policy
The Australian government has supported a stricter WTO test to reduce national rights to regulate services. It has also supported the definition of all water services as traded goods which could be covered by GATS.
In the past, governments have recognised that equitable access to water requires careful public regulation and often government provision of water services.
Up until now, the GATS definitions of services includes sewerage and sanitation services but not drinking water services, and no government has listed water services to be fully covered by the GATS.
But the WTO Doha Ministerial Meeting in November 2001 made a general commitment to remove all barriers to trade in environmental services.
The Australian government is supporting an EU proposal to broaden the definition of environmental services to include all water services.
This means that water services could be included in GATS negotiations, and governments could face pressure to include water services in their GATS commitments. If the other changes to GATS proceed, (to reduce the right of governments to regulate and to open up the funding of public services to foreign corporations), then GATS could become a means of privatising water services.
Another proposal being debated in the WTO is for an investment agreement which would have many of the features of the OECD Multilateral Agreement on Investment which collapsed in 1998. It collapsed after public exposure and debate revealed that it was an attempt to remove the powers of governments to regulate transnational investment, and to give corporations the power to challenge laws and sue governments if regulation restricted investment. rights.
Transnational corporations are lobbying for an investment agreement with a complaints mechanism which would enable foreign investors to challenge laws which harm their investments and to sue governments for damages.
The model preferred by corporations is the infamous disputes process of the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico. Corporations have used this process to sue governments for millions of dollars on the grounds that environment or health and safety legislation has harmed their investments.
The U.S. Metalclad Corporation sued a local municipality in Mexico for US16.7 million, because it was refused permission to build a 650,000-ton/annum hazardous waste facility on land already so contaminated by toxic wastes that local groundwater was compromised;
The Canadian-based Methanex Corporation is suing the U.S for US$970 million because of a ban by California and other states on the fuel additive the company manufactures, which has become a major groundwater contaminant. Among other claims, Methanex is arguing that the ban was unnecessary because less trade-restrictive measures were available;
The U.S.-based Sun Belt Water Inc. is suing Canada for US$10 billion because a Canadian province interfered with its plans to export water to California. Even though Sun Belt had never actually exported water, it claims that the ban reduced its future profits
Under bilateral investment agreements based on the NAFTA model:
Compania de Aquas del Aconquija (a subsidiary of Vivendi) is suing Argentina for US$300 million, arising from a water and wastewater privatisation deal gone sour.
The claim alleges that public health orders, mandatory service obligations, and rate regulations all offended its investor rights;
Aguas del Tunari, an affiliate of U.S.-based Bechtel has threatened to sue Bolivia for more than US$25 million, for breach of its contract to provide water services to the City of Cochabamba. When public anger erupted over steep price increases, Bolivia cancelled its privatisation deal with the company.
(Source: Steven Shrybman, "Thirst for Control" www.canadians.org
What can we do about it?
The Australian Fair Trade and Investment Network is a network of over 50 human rights groups, churches, unions, environment groups, and community organisations which conducts public debate and community education on trade and human rights issues and seeks to make our government accountable for its trade policies.
The decisions about GATS and an investment agreement will be made over the next two years. There is time to campaign to expose these issues to public debate, and to tell our government that we do not want our rights to make decisions about essential water services signed away.
AFTINET is campaigning to put pressure on our government and is linking with movements in other countries to influence the WTO process.
Some Campaign materials are available on our website now and we will be launching new materials in April.
We are making the following demands of our government:
a review of the impact of the existing GATS agreement and full public discussion of the proposed changes;
no reductions in the ability of governments to regulate services;
clear exclusion of public services, cultural services and water services from the GATS agreement;
all GATS negotiating requests and responses should be made public and publicly debated before governments make commitments;
GATS and other trade agreements to be debated and ratified by parliament, not by Cabinet;
No WTO investment agreement which would remove the rights of government to regulate foreign investment or give corporations the right to challenge public interest legislation and sue governments for damages. 2008...2009 & 2010.Water buyback details outlined
Water Minister Penny Wong says a federal offer to buy back permanent water licences from irrigators is a 'downpayment' on fixing the Murray-Darling Basin.
Senator Wong says she will keep negotiating with Victoria to achieve a national water plan.
The interim plan will see water licences bought if irrigators are willing to sell, with the allocation used to boost environmental flows.
"The Commonwealth Government is putting $50 million on the table to purchase water in the Murray-Darling Basin to use for the benefit of the river, so this is a downpayment on the future of the River Murray now we recognise this is only a first step," Senator Wong said.
"It is the first time in the nation's history that the Commonwealth Government has directly purchased water, so we're not waiting for agreement from the states to make that water purchase because we understand the river needs it.
"Our approach, as I've made clear, is to buy water from willing sellers and that is what this $50 million will be directed towards."
Senator Wong cannot indicate how much the Government is prepared to pay individual irrigators.
"That's clearly market-sensitive information," she said.
"We also have commenced funding some irrigation modernisation planning projects to enable irrigators to prepare plans for modernisation of their infrastructure. So we are proceeding on a number of fronts."
Federal commitment welcomed by SA
South Australia says the $50 million federal plan to buy back water licences shows a commitment to fixing the drought crisis in the Murray-Darling Basin.
SA's Minister for the Murray Karlene Maywald denies the scheme has been rushed because of impatient irrigators who had been vocal in claiming government inaction.
"I wouldn't suggest so at all. The national plan is a $10 billion commitment to dealing with overallocation in the river system," she said.
South Australia has been advocating for a very long time that purchase from willing sellers to deal with overallocation must be part of the equation.
"This is working through that and it's great to see that the program is on the table."
Mrs Maywald has identified New South Wales as an obstacle to achieving a more equitable water-sharing arrangement for the Basin.
"Now New South Wales are feeling the pinch at the moment because they're saying Queensland's pinching their water," she said.
"Well hello, we've been saying that for a very long period of time down here in South Australia that New South Wales needs to get their act together.
"It is a shambles in relation to how allocation of water has been applied in New South Wales over many years and we need to address that."
Darling in better health than Murray
The Murray-Darling Basin Commission says the Darling River is now as healthy as it has been in years.
Chief executive Wendy Craik says heavy northern rainfall has led to significant inflows, helping restore ecological health.
She says the Murray remains the major concern, with current storage capacity for the entire Basin at 20 per cent compared with the usual 65 per cent for this time of year.
The South Australian Farmers Federation President, Wayne Cornish, says the price offered by the Federal Government to buy back water licences will determine if farmers will sell.
"The price would be an important factor," he said.
"Farmers aren't in the business of just foregoing income whether it's for the sale of water licences or anything else just to meet the expectations of somebody else. That's just not fair."
Kathryn Rothe, a dairy farmer near Murray Bridge in South Australia, says she has no intention of selling water entitlements to the Federal Government.
She says, with water allowances currently at 32 per cent of the usual allocation, she will need as much water as she can get.
"I am really struggling at the moment to stay on the land and personally, ourselves, we've sold more than half of our animals and - husband's working away from home up in the Northern Territory so, yeah, it's a real struggle to stay on the land," she said.
"We would like to stay but if the pressures are too great and we're just not making the funds it might be a that we have to make."
Ms Rothe says she does not think buybacks are the answer, but she agrees that water must be set aside for the environment.
"The few wetlands that we do have, we've really got to look after them and that's so important because they are the lungs of our river."Farmers rush to sell water rights.
Victorian Farmers Federation is helping several groups of farmers in the north of the state sell their water rights -- worth a total of $64 million on current prices -- and exit the industry with some dignity.
As reported in The Weekend Australian, the Victorian and federal governments have struck a deal to lift the state's irrigation cap in some cases to facilitate the commowealth's $3.1 billion environmental water buyback.
The compromise came after the Rees Government threatened to block all further federal water purchases from NSW following the $303 million purchase of allocations from the Twynam agricultural company. The planned sales in Victoria, which would have previously run foul of the 4 per cent cap on trading water out of a district, are attractive to the commonwealth because, unlike in NSW, the water is actually delivered 97 per cent of the time.
Farmer needs to win lottery to keep going
7 Jan 2010
Rees ends water sale blockage
23 Sep 2009
Rann adds fuel to irrigation wars
13 Sep 2009
Farmers left high and dry again
11 Sep 2009
Nats slam Rudd for wasteful buybacks
VFF water council chairman Richard Anderson said he was handling negotiations on behalf of one group with 50 billion litres, another with 25 billion and another with about 7 billion.
He said he was unable to reveal the properties involved but added that they were farms on the fringe of the main irrigation areas that had not received significant amounts of water during the past four or five years of intense drought.
"We are facilitating these deals on behalf of our members," Mr Anderson said.
"It's a way for them to exit with some dignity. Some of these farmers are getting a bit older and this is like their superannuation."
Mr Anderson said the VFF, which has always supported the 4per cent cap, was not opposing the compromise deal but had concerns about the long-term impact on food production of shutting down significant amounts of irrigated agriculture.
He also called on the commonwealth to extend its $150,000 exit grants for small farmers to all irrigators wishing to sell up.
Under the compromise deal, which is expected to be announced by Victorian Premier John Brumby and federal Water Minister Penny Wong within days, Victoria will permit more than 4 per cent to be traded out of certain areas, provided it is sold to the commonwealth for environmental purposes.
Trades to private buyers would be blocked and the state would judge each purchase on its merits, retain the right of veto and retain the cap until 2011.
The commonwealth will also provide $300 million for on-farm works in southern basin irrigation areas, on the basis that it can buy the saved water even if the volume of those sales breaches the cap.
The deal aims to head off an interstate war on water trading with NSW threatening to join South Australia in challenging the Victorian trading cap in the High Court.
The NSW, Queensland and South Australian governments have been queueing up to bash Victoria over the cap since the 240 billion-litre Twynam sale went through last week.Water-sucking Cubbie Station for sale
Controversial cotton producer Cubbie Station, which has long been accused of taking too much water from the Murray-Darling river system, is up for sale.
Cubbie sits at the top of the Murray-Darling system near Dirranbandi on the border of New South Wales and Queensland.
It is Australia's biggest cotton plantation and one of the largest private irrigation projects in the world, with a total land holding of 93,000 hectares.
But the station's permits to divert and store more than 500,000 megalitres of water - enough to fill Sydney Harbour - upsets downstream river users in New South Wales, Victoria and South Australia.
The latest valuation of the property is more than $450 million.
Cubbie Group chairman Keith De Lacy says the company is selling up to reduce debt and recapitalise the business to pursue other farming opportunities.
Recently Cubbie Station has come under financial pressure from banks.
The international tender closes on September 30.
The Federal Government has allocated $3.1 billion over the next 10 years to buy back water entitlements as part of its efforts to save the Murray-Darling Basin system.
The Government says it is always open to buying water entitlements from willing sellers, but will not say if it will make a bid for Cubbie Station.
Climate Change Minister Penny Wong says purchasing the plantation's water entitlements alone may not be possible.
"As I understand it, the land and water entitlement for Cubbie are not separated, so that would create some problems in terms of purchasing water from Cubbie until those two entitlements are in fact separated."
'Government should buy'
Queensland's Natural Resources Minister Stephen Robertson says the Federal Government should consider buying Cubbie.
"That is way beyond the capacity of any state government to give serious consideration to buying that property and retiring the water entitlements for the benefit of the environment," he said.
"But that's where the Commonwealth has an important role to play - they've got a $3.5 billion water-buyback fund.
"The Commonwealth should give consideration to this issue."
The South Australian Government is calling on the Federal government to buy Cubbie Station.
But SA Water Minister Karlene Maywald says certain conditions will need to be met.
"We want to make sure that any water that is purchased for the environment does get to the environment, and that downstream users are not able to siphon off that water as it comes through the system," she said.
"I think it is critically important that the Federal Government negotiate with NSW to ensure that that doesn't occur on any of the purchases that they make for the environment."
Queensland Nationals Senator Barnaby Joyce says the proposed sale of Cubbie is a test of the Federal Government's plans to buy back water for the Murray-Darling system.
"[It] would have been convenient if Penny Wong wanted to buy up water licences, then selective buying of parts of the water licences along the whole length of the system, it would be a good way to go about it.
"If she wants to put her money where her mouth is, now's the time."
However Liberal MP Bill Heffernan says Cubbie's water licences are not worth the prices being flagged.
"The resource operating plan that's been issued in draft form, subject to a court challenge, is designed to give them a 469,000-megalitre water licence that hasn't been issued," he said.
"The valuation of the farm is based on that licence being issued to them and then being sold back."
South Australia's Independent Senator Nick Xenophon says the Government should instead takeover the Murray River system.
"The risk is, based on the advice I've had from independent water experts, that if the water from Cubbie is purchased, it will simply increase the value of water licences in the Upper Darling," Mr Xenophon said.
"[This] means that the Federal Government will have to buy water twice in effect and it won't mean anything for the lower reaches of the Murray.