The Truth About Canada (42 page)

Lastly, on the subject of energy and the petroleum industry, one of the funniest things I’ve read in Canadian newspapers in years was the October 2007 headline in the
Globe and Mail
for a Doug Saunders dispatch from London, England, which read, “Energy CEOs Call for National Policy.” Anyone familiar with the history of the industry in Canada will know how ludicrous this is given the protracted and bitter opposition by oil patch executives to any sign of Ottawa getting more involved in the industry. Now, Patrick Daniel, heavyweight CEO of Enbridge, of all people, is calling for “a national energy strategy.”

It truly boggles the mind. It could be the basis for a great satirical Canadian play.

36

WATER

THE COMING CONFRONTATION WITH THE UNITED STATES

T
here’s one other natural resource to consider before we go on to other matters — water. Prior to the Canada-U.S. free-trade negotiations, incredibly, Canada’s chief negotiator, Simon Reisman, was said to be in favour of allowing water exports to the United States, but fortunately many officials in Ottawa and others on the negotiating team were not.

During the lengthy debates in Canada about the FTA in the mid-to late-1980s, Canadians were repeatedly assured that there was nothing to worry about — water was not included in the proposed agreement. There were full-page big-business ads in newspapers across the country that said expressly, “water is not included.” Either big business was intentionally lying to Canadians, or, like so many pro-free-trade advocates such as former Conservative International Trade Minister John Crosbie, they hadn’t taken the time to study closely the proposed agreement. Amazingly, Crosbie admitted he hadn’t even read it.

Water is in fact part of both the FTA and NAFTA because of the definition in the agreements of “goods” as defined in GATT’s harmonized commodity coding system, which includes Tariff Item 22.01: “Water: All natural water other than sea water.”

Moreover, in Annex 702.1 of NAFTA, any doubt about water being included is removed so that water is clearly “a tradeable good” subject to
all the onerous FTA clauses, and to NAFTA’s terrible Chapter 11, which, as previously described in my chapter on NAFTA, allows U.S. companies to sue Canadian governments. (In case you think this is just theoretical, the American Sun Belt Water Company filed suit in 2000 against Canada for $200-million because of British Columbia’s refusal to allow the export of water to the United States.)

NAFTA Article 309 prevents governments from restricting or prohibiting the export of goods. Moreover, if any favourable treatment is available to Canadian investors, Article 1102 of NAFTA accords American investors the same treatment, which means American companies must be granted national treatment status on a par with Canadian companies. It’s important to understand this. NAFTA laws are supernational; that is, they supersede national laws, whether they relate to resources or social policy.

The
Globe and Mail
’s Eric Reguly mentions a little known but crucially important point. During the negotiations,

water exports were off the table, that is, water was special and would not be treated as a tradeable good like oil. Mysteriously, the exemption did not make it into the final draft.

In short, this appears to mean that once water exports start, they can’t be stopped.

Environmental concerns aside — it’s an open question whether Canada even has a surplus of water. What’s wrong with water exports? Ask the Canadian auto industry or the Alberta oil sands companies or any manufacturer that depends on plentiful supplies of cheap water (most do). Now, imagine that water becomes a tradeable good under NAFTA. All of a sudden Canadian industry would compete for water supplies they had taken for granted.

Water is a vital economic tool. Exporting water is tantamount to exporting jobs. In a world of scarcer and scarcer reserves of fresh water, water is the most valuable economic tool this country possesses.
¹

Any wonder that the former U.S. ambassador to Canada, Paul Cellucci, has suggested that bulk water exports be traded on the open market? As the
Globe
’s Lawrence Martin has suggested, both Trudeau and Pearson “would have politely told him to go jump in the lake.”

Next to the United States, on a per-capita basis, Canada is the highest user of water in world, well above the OECD average, and ahead of 28 other OECD nations. We also have the third largest supply of fresh water but only about 6 to 7 percent of the world’s renewable supply,
²
much less than the oft-quoted 20 to 25 percent.

In terms of water withdrawal as a percentage of annual availability, Norway is at 1 percent while Canada, along with Finland, Ireland, New Zealand, and Sweden, is at 2 percent. By comparison, the United States is at 19 percent and rapidly headed higher.
³
In short, as almost everyone knows, the United States is running out of water, and global warming isn’t going to help.

How vulnerable are our water supplies in relation to potential American NAFTA demands? Economist Erin Weir explains: “Free trade does not force Canada to export bulk quantities of water to the U.S. However, if any provincial government permitted such exports, Americans could use NAFTA to require all other provinces to do likewise. The prospect of water being commodified like other natural resources is of great concern to some Canadians.”
⁴

That’s an understatement. Public opinion polls show, again and again, year after year, that Canadians are overwhelmingly opposed to water exports. Any politician who allows them won’t last long in office. Yet as sure as you are reading these words, there will soon be huge pressure from the United States to gain access to our supplies, and some character may see no harm in exporting water. (Someone like Roger Grimes, for example, who, as premier of Newfoundland, planned bulk water exports to the United States until public opposition and financial pressure from Ottawa changed his mind.)

I don’t think many Canadians need to have the importance of fresh water explained to them. If you’re unsure about the matter, I strongly
suggest you read Maude Barlow’s excellent book
Blue Covenant: The Global Water Crisis and the Coming Battle for the Right to Water
.
⁵

B.C. agrologist Wendy Holm has it right: “There is a global struggle emerging between commodity and community. Commodity is winning. It is time to draw a line in the sand and say ‘here is where the rights of commodities end and the rights of communities begin.’ Water is that dividing line.”
⁶

Howard Mann is an international lawyer based in Ottawa who specializes in sustainable development law. He says,

The key issue of whether trade law can compel states to sell freshwater through diversions, bulk exports, bottling, or other means remains a live one.

This issue became so serious in 1992-93 that Canada demanded an interpretative note from its NAFTA partners.

But, the NAFTA water statement left as much open to question as it possibly could have.

In short, there remains significant uncertainty as to how trade laws will or will not constrain government abilities to prohibit or to restrict exports of freshwater resources. This uncertainty is compounded by elements of international investment law which have led to rulings, in at least three cases in recent years, that the right to export products can be seen as part of the set of protected rights of foreign investors.
⁷

I had a long conversation with Howard Mann in April 2007. He is completely clear: Once you start exporting water you have crossed “a tripwire,” setting a process in motion that will be very hard to stop. The federal government has failed to do its job of protecting our water because we never properly closed the door to exports. In that conversation, Mann told me,

We should have clearly and firmly said no! We have the jurisdiction and we should not allow water exports. Sure as hell, a
U.S. government or private firm is going to try to use our existing trade agreements to get access to our water.

Yes, absolutely, Washington will take action itself or encourage private U.S. corporations to do so with the government’s backing.

The respected former GATT trade negotiator Mel Clark is equally clear. While under the GATT Canada had complete control of its water, under the FTA and NAFTA, the agreements

transfer control of Canada’s water to the U.S. They give Americans the same rights as Canadians to our water and they override the constitutional right of provinces to control water in their territories and accord American corporations the right to sue the federal government and/or the provinces if they fail to respect NAFTA.

NAFTA national treatment is unlimited and there is no exception for water.

Sooner or later, Americans will invoke their NAFTA rights to import water from us. We’ll have no right to stop them. The only way to regain control of our water is to terminate the FTA (Article 2106) and NAFTA (Article 2205).
⁸

I say we should definitely show the Americans that we
do
respect NAFTA, just as they showed Canadians their respect for NAFTA in the softwood lumber fiasco.

Peter Lougheed, one of the strongest supporters of the FTA and NAFTA, warned in November 2005 that “with climate change and growing needs, Canadians will need all the fresh water we can conserve, particularly in the Western provinces. Water availability is going to rise to the top of the U.S. domestic agenda.”
⁹
Like banker Gordon Nixon on the subject of U.S. direct investment in Canada, Lougheed appears not to understand just how terribly vulnerable Canada has become because of the two poorly negotiated agreements.

As I am writing these words, there is news of more secret closed-door meetings, this time held by the so-called North American Future 2025 Project, which specifically include discussion about water transfers and water diversions as part of the Security and Prosperity Partnership, which will be described further in the conclusion of this book.

“It’s no secret that the U.S. is going to need water. It’s no secret that Canada is going to have an overabundance of water.… There may have to be arrangements.” So said Armand Peschard-Sverdrup, the director of the North American Future 2025 Project, which is headed by the Center for Strategic and International Studies in Washington, D.C., in partnership with the increasingly misguided and continentalist Conference Board of Canada in yet another high-level round of behind-closed-doors, big-business-planned talks that are not open to the public or the media.

What has any of this got to do with the will of the Canadian people and the way democracy is supposed to function in Canada?

We must have a new legislated national water policy to ban the export of water. Once there are exports, it will be impossible to turn off the tap, regardless of Canadian needs.

Meanwhile, as the noted Canadian fresh water scientist David Schindler has reported, rivers and lakes on the prairies are drying up, and some river flows are already down between 40 and 80 percent. At the same time, the Munk Centre for International Studies at the University of Toronto is clear: Federal and provincial bans against bulk water exports “probably will not stand up to court challenges” as long as the FTA and NAFTA remain in place.

Canadians had better decide to protect their precious water supplies, or soon it will be too late to do so. If you’re apprehensive about any of this now, take a drive and look at what’s happened to your favourite glacier.

37

GROSS DOMESTIC PRODUCT

DEFINITELY NOT TO BE CONFUSED WITH STANDARD OF LIVING OR QUALITY OF LIFE

I
have explained many times elsewhere why frequently used GDP figures can be so very misleading and confusing. I’ll come to standard of living and quality of life in the next chapter, but here I’ll deal with how our politicians and the media consistently manage to misinterpret the relevance of GDP figures. (See the glossary at the back of this book for GDP and PPP definitions.)

Per-capita GDP rankings are not very valuable if distributions of incomes are badly skewed as they are in Canada. An example I use is this. Suppose there are 11 people in a room, and one earned a million dollars last year, and all the others earned only $10,000. The average income of the 11 would be $100,000. Sounds pretty good, but the reality, of course, would be that one person was wealthy and the other 10 were living in poverty. This same type of distortion occurs with the most commonly used measurement of standard of living, GDP per capita.

I’ll review other drawbacks in the use of GDP to measure quality of life in the next chapter, but for now let’s review how GDP is reported by our political leaders, by almost all of our economists, and by virtually all of our media.

Depending on how GDP is measured, using purchasing power parities (PPPs), or exchange rate comparisons, or per-capita comparisons, or national GDP totals, Canada comes in anywhere from ninth to 23rd place in a long list of other countries.

In the latest reliable comparative figures at this writing, Canada had the ninth largest economy in the world measured in billions of dollars. However, if you measure GDP per head in terms of purchasing power, we’re down in 11th place, below Luxembourg, Norway, the United States, Ireland, Switzerland, Iceland, Denmark, the Netherlands, Austria, and Australia.
¹

Looking at overall GDP growth from 1992 to 2006, Canada was in 13th place among OECD countries. In 2006, 21 OECD countries had a higher GDP growth rate than Canada.