"THE LIKELIHOOD OF CANADIAN BULK WATER EXPORTS - BREATHING NEW LIFE INTO STAPLES THEORY"
Andrew Phillips Bachelor of Arts, University of Alberta, 2005
THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF
MASTER OF ARTS
In the Department of Political Science
O Andrew Phillips 2007
SIMON FRASER UNIVERSITY
Summer 2007
All rights reserved. This work may not be reproduced in whole or in part, by photocopy or other means, without permission of the author. APPROVAL
Name: Andrew Phillips Degree: Master of Arts, Department of Political Science Title of Thesis: "The Likelihood of Canadian Bulk Water Exports - Breathing New Life into Staples Theory"
Examining Committee: Chair: Dr. Anthony Perl, Professor Department of Political Science, Director of Urban Studies
Dr. Michael Howlett, Professor Senior Supervisor Department of Political Science
Dr. Andrew Heard, Associate Professor Supervisor Department of Political Science
Dr. Karl Froschauer, Assistant Professor External Examiner Simon Fraser University Department of Sociology and Anthropology
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Simon Fraser University Library Burnaby, BC, Canada
Revised: Fall 2006 ABSTRACT
Canada's water sovereignty is increasingly threatened by the growing scarcity of this resource around the globe, particularly within the United States. This thesis explores the political and economic factors poised to drive future commodification and export of
Canadian water resources. Despite federal opposition to water exportation, I illustrate how Canada may be forced to pursue this practice in the absence of drastic reforms to current federal water policy.
Engaging staples theory, this thesis provides a comparative analysis of determinants driving early Canadian staples development with those encouraging bulk water exportation today. Early staples discourses are utilized to explore the likelihood of water exportation, while illustrating the utility of the staples approach to modern
Canadian contexts. My research identifies several new factors an updated staples theory must consider in contemporary analyses of Canadian resource development, including, the modern environmental movement, the growth of international trade frameworks, and a decentralized Canadian federation.
Keywords:
Water export-Canada Water-Government policy-Canada Staples Theory I dedicate thisfrrst andforemost to my parents for their endhss
suppb of love andsupport over the years - I wouU 6e lost without you!
I aLo dedicate this to BudandAnne Godderisfor lighting my passion for
politics andteaching me to lookat the worliiwith a criticaleye. ACKNOWLEDGEMENTS
I would like to thank my supervising committee, Dr. Michael Howlett and
Andrew Heard for their valuable guidance throughout this research endeavour and for their patience when reading my often long-winded work! I would also like to thank Lori
Beckstead for her constant support in preparing my final manuscript. Your guidance was
more than enough to make up for my computer illiteracy! TABLE OF CONTENTS
.. Approval ...... 11 ... Abstract...... ill Dedication ...... iv Acknowledgements ...... v Table of Contents ...... vi .. List of Acronyms ...... v11 ... Quotation ...... vm Chapter 1 : Introduction ...... 1 Justification ...... 4 Methodology ...... 6 What is Bulk Water Exportation ...... 9 Bulk Water Proposals: "A Canadian History" ...... 14 The Federal Government's Approach to Bulk Water Exportation...... 18 Staples Theory: Is It Relevant Anymore? ...... 24 The Environment & Sustainable Development: New Factors at Play ...... 32
Chapter 2: The Demand For Canadian Staples -- An External Affair ...... 42 American Water Demand: A Product of Politics ...... 47 Feasibility of Staples Production: More than Just 'Supply & Demand' ...... 59 The Feasibility of Bulk Water Exportation: Tried. Tested & Occurring Elsewhere ...... -65 Chapter 3: Trade obligations. and Vague Federal Jurisdictions ...... 73 Canadian Federalism: Decentralized Governance. Decentralized Control ...... 88 American Unilateralism: Why Ottawa May Choose to Export Anyway ...... 98 Chapter 4: Conclusion ...... 05 Reference List ...... 119 LIST OF ACRONYMS
CANDU CANada Deuterium Uranium
CUSTFA Canada-US Free Trade Agreement
DFAIT Department of Foreign Affairs and International Trade
FERC (American) Federal Energy Regulatory Commission
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
GVRD Greater Vancouver Regional District
IJC International Joint Commission
NAFTA National Roundtable on the Environment and the Economy
NAWAPA North American Water and Power Alliance
NDP New Democratic Party
NRTEE National Roundtable on the Economy and Environment
OPEC Organization of Petroleum Exporting Countries
WTO World Trade Organization
vii "When the well's dry, we know the worth of water"
-Benjamin Franklin
... Vlll CHAPTER 1: INTRODUCTION
Water is undoubtedly one of the most important resources needed for the preservation of human life. Forming seventy percent of the human body's total composition it is so essential to biological processes that a person rarely survives more than a week if deprived of it (Department of Environmental Quality, 2006). As a vital element, water is a prerequisite for many activities essential to modern human society's development, including sanitation, agricultural production and industrial growth. The intrinsic relationship that binds human societies with water, means that Canada as a nation sits in a tremendously favourable position within the world community, possessing nearly twenty percent of the planet's total freshwater resources (National Roundtable on the Environment and the Economy, 2004)'. As custodian of one fifth of the entire planet's freshwater, Canada has a great responsibility to protect its abundant supply, not solely for its own sovereign purposes, but also to safeguard a planetary hydrologic system that knows no borders and binds all of human kind. This role however, comes not without its challenges, including one likely to originate with Canada's thirsty American neighbour.
Although Canada is a nation whose economic history is rooted in the exportation of natural resources, this country's abundant freshwater supplies have yet gone untapped
I Canada is often cited as possessing approximately seven percent of global freshwater resources. This figure however pertains solely to 'renewable freshwater supplies' (i.e. water not stored in underground aquifers or glaciers). Freshwater stored in such bodies are included in the above calculation of 'total' freshwater supplies (NRTEE, 2004). as an exportable staple, to be delivered from Canada as many of this nation's other natural resources are today to the global market2. Despite the continued opposition of the federal government to the sale of Canada's freshwater resources through bulk water exportation, this thesis will illustrate that the future commodification of the nation's water supply remains highly probable, due to weaknesses in the federal government's current policy strategy regarding the prevention of bulk water exports.
Confronted with rapidly depleting freshwater resources in the United States, this paper will illustrate how Canada very likely faces a future where the government could be forced to export freshwater to its southern neighbour. Driven by an unsustainable growth in demand for water and an American government traditionally sympathetic to these requests, corporate actors, both American and Canadian, sit in a position enabling them to take advantage of Canadian federalism and Canada's economic relationship with the United States in order to facilitate bulk water exports for their economic benefit. In turn, with limited legal means to protect this resource due to jurisdictional divisions of power within the Canadian federation and Canada's trade obligations under GATT and the NAFTA, the federal government of Canada remains highly incapable under its current policy strategy of preventing the commodification of this nation's freshwater
supply, thereby exposing Canada to the environmentally unsustainable practice of bulk- water exportation.
In addition to an analysis of the various political and economic forces likely to
influence the commodification and exportation of Canada's water, I will also engage the
2 Staples industries are defined according to Gordon Bertram as industries "based on agriculture and extractive resources, not requiring elaborate processing and finding a large portion of their market in international trade" (Bertram, 1963: 1962). principles of staples theory to explain under what conditions this trade will occur. As such, staples theory will be applied to explain both why Canadian water exportation is likely to take place in the future but also why it has yet failed to occur presently. The utility of staples theory to the examination of the bulk water debate lies in the extensive analysis provided by previous staples works on the economic development of Canada's various natural resources. Historical staples pieces by scholars such as Innis (1954,
1970), Mackintosh (1967) and Lower (1 973), to name a few, provide detailed accounts of the factors required, or 'determinants' of a natural resource's successful development as an exportable staple within the Canadian economy. These determinants include:
Substantial supply of the exportable resource
Adequate external demand for the resource
Technical and financial feasibility of the resource's development
Government assistance in resource development
Entrepreneurial interest in resource development
Through my research on bulk water, I hope to utilize the works of the aforementioned (and other) scholars, to draw parallels between the development
determinants of Canadian resources such as cod, fur and lumber, with those of Canada's
freshwater. By establishing such parallels, I will illustrate how the reasons to believe the
exportation of Canadian freshwater will be pursued in the future are indeed credible, based not only on empirical evidence alone, but also on the importance these same
factors, or 'determinants' had in the development of other Canadian resources. Justification
The initial interests and objectives for exploring the issue of bulk water exportation lie in answering the following question: Is Canadian water a feasible export commodity to be developed like Canada's other natural resources and under what conditions would such a practice be possible?
Despite extensive literature on the topic of bulk water exportation, there is a glaring lack of scholarly research performed to date on this issue that provides a comprehensive account of contemporary political and economic factors involved in the matter of water exportation. Many literary works such as those by Barlow and Clarke
(1999) offer useful insight into aspects of the bulk water issue but often fail to discuss the various social, political and economic forces involved in a comprehensive and detailed manner. Other scholars such as McNab (2005), Linton (2002) and Shrybman (2000), provide insightful analysis into factors affecting the bulk water debate, such as issues of federal jurisdiction, environmental problems related to water exports, as well as international trade law pertaining to water commodification. There is a tendency by these authors however, to analyze bulk water in a piecemeal fashion. As a result, little work is done to relate their areas of focus to other factors involved in the issue of water exports.
On occasion, as in the case of Barlow and Clarke, there is a failure to mention or explore contending arguments in these analyses as well.
In addition to providing my own original insight into the political and economic
forces influencing the issue of bulk water exportation, I hope that my synthesis of discussions regarding the various factors and actors implicated, will provide a clearer and more convincing argument that commodification of Canada's freshwater supply appears likely in the future. While my analysis of bulk water may provide a modest amount of original insight into an issue of interest and great importance for many Canadians, the broader applications of my work will relate to the applicability of staples theory to a modern political and economic context, as well as to the general understanding of how natural resources develop in Canada in this contemporary period.
As the pre-eminent approach utilized within Canadian political economy for understanding the historical economic development of Canada, staples theory has contributed greatly to the knowledge of natural resource development in this nation and its subsequent effects on the shaping of Canadian societal and economic relationships.
However with the diversification of the Canadian economy, to one that encompasses not only staples production but also manufacturing and service industries, the applicability of staples theory in assessing the modern Canadian economy has waned. Despite its weakened relevance to contemporary issues facing Canada, I believe that my engagement of staples discourses will illustrate the continued utility of the staples approach when analyzing the development of new resources within Canada's economy.
Although it is hoped that this research paper will help to modestly vindicate staples theory against criticism that it is irrelevant to the contemporary study of Canadian political economy, I also wish to help revitalize staples theory discourses by adding contemporary factors or determinants of resource development to this scholarly dialogue.
As I will highlight with the case of bulk water, these factors must be considered when analyzing Canadian resource development today while utilizing the staples approach.
They include: The modem environmental movement and concerns for sustainable
development
Decentralization of power and control of natural resources within the Canadian federation
The development of international trade law and trade frameworks such as GATT and NAFTA
By highlighting these modern determinants of resource development, I will acknowledge some of the shortcomings of an outdated staples approach when utilized today, while attempting to engage those continually useful properties with new, modern factors necessary to my assessment of the bulk water issue. It should be noted that my research will not apply staples theory in a manner that attempts to analyze how water or other staples affect the overall development and diversification of the Canadian economy today (a significant objective of the traditional approach). It is hoped, however, that my analysis will help to 'breathe new life' into staples theory by expanding the range of issues this approach may consider when assessing the development of a natural resource.
By updating the relevant factors that must be considered in contemporary staples development, my research may aid in the future development of a modem staples theory where the broader effects of staples development on a modem Canadian economy may be explored.
Methodology
To achieve my goals of both illustrating in a comprehensive manner the
likelihood of future Canadian water exports while engaging and adapting staples theory to a modem economic context, I will synthesize a variety of literary works including scholarly, government, and media publications which will provide the basis for my arguments in this thesis. My descriptive analysis of the water debate will entail an examination of several factors, including domestic Canadian water supply, American water demand, technical and financial feasibility of water exportation, potential government assistance, and entrepreneurial interest in water exportation projects. My strategy as such will largely follow the analytical methods utilized by previous staples theorists such as Innis (1940, 1956) and Lower (1 973), whose careful attention to descriptive detail has proven to be a great asset in the understanding of natural resource development in Canada.
To reinforce my argument that the above factors will lead to the development of
Canadian bulk water exportation, I will provide a comparative analysis of other staples literature citing these same factors as key determinants of the successful development of other natural resources in Canada. Not only illustrating that the existence of such factors may be pivotal in leading to the development of a staples industry, this comparison will aid my argument by highlighting how such characteristics are not unprecedented patterns of behaviour. Rather, it will be shown how these factors can be viewed as persistent trends existing throughout the development of the Canadian economy, thereby meriting attention when analyzing the issue of bulk water exportation today. My comparative analysis will be based largely on an assessment of my research findings in relation to the following classical staples texts: Vernon Fowke; "Canadian Agricultural Policy: The Historical Pattern" (1 946).
Harold Innis: "The Cod fisheries: The History of an International Economy" (1 940).
Harold Innis: "The Fur Trade in Canada: An Introduction to Canadian Economic History" (1 956).
R.M. Lower: "Great Britain's Woodyard: British America and the Timber Trade" (1 973).
William A Mackintosh: "Economic Factors in Canadian History" (1 967).
While I am confident that parallels can be established between the factors involved in the bulk water debate with those determinants responsible for the historical development of Canada's other natural resources, I recognize the weaknesses of the
staples approach when applied to a contemporary context, due to the age of the aforementioned, foundational works. Noting the historical lack of concern for
environmental issues and sustainable development, as well as new economic and political
realities such as the decentralization of jurisdictional powers and the growth of
international trade regimes, I will argue how as in the bulk water debate, staples
discourses must now consider these factors when discussing the contemporary
development of natural resources in Canada. My justification for attention to these new
factors will be based largely on my analysis of the bulk water issue and how they pertain
to it. I will however, strengthen my argument through comparing my observations of
these factors with those found in other contemporary scholarly works on natural resource development, specifically hydroelectricity, as explored by Froschauer (1 999) and Cohen
(2004).
I am confident that my strategy of comparing foundational scholarly works that engage the staples approach with my research findings on bulk water exportation will prove beneficial to my argument that future exports of Canadian water appear likely. In addition this comparative analysis will illustrate that the staples approach and its discourses can be both relevant and applicable to contemporary discussions of natural resource development in Canada.
What is Bulk Water Exportation
With freshwater composing only three percent of the world's total water supply, the scarcity of this resource is further exacerbated by its unequal geographical distribution around the globe (Fry, 2006: 3). Hence, a potential strategy for supplying water to parched regions of the world, involves the exportation of this resource from areas where a plentiful source exists to those regions suffering from inadequate supplies.
While this may appear to be the basic concept of bulk water exportation, the definition of this practice has been complicated by the various technical methods used
and geographical circumstances through which the transport of water may take place. In
addition, international legal circumstances influencing Canada's policy objectives today
regarding bulk water have also largely affected how the Canadian government defines
this practice, differentiating between what it considers to be bulk water removals and
bulk water exports. Illustrating the various methods that may be used to facilitate the bulk transfer of water, Environment Canada has defined bulk water removals as:
Large-scale removals of water by man-made diversion, such as canals, tanker ships or trucks, or pipelines. It is not necessarily exported out of the province or country, but is "exported" from its basin of origin. Also, it does not include small-scale water removal, such as water in small portable containers. (Environment Canada, 2004)
In contrast to this, the government of Canada defines water exports as:
Taking water and shipping it to other countries for profit - whether in bottles, by tanker or pipeline, or by diverting rivers and building canals. (Environment Canada, 2004)
As will be discussed in subsequent sections of this thesis, the federal government has favored the former term, bulk water removal when developing legislation regarding bulk transfers of water. Environment Canada justifies its current preference for using this phrase in legislation by arguing that it is a more "comprehensive approach to guarantee the security of our freshwater resources" (Environment Canada, 2004). This is based on the assertion that all bulk transfers of water, transported either to a domestic consumer or exported abroad, are harmful to the environment and merit prevention. As such, legislation that bans bulk removals in general will protect drainage basins and watersheds
from any water transfer scheme, whether water is to be transported to another domestic region or exported to another nation.
Although the degree of scope that a bulk removal ban encompasses may be
beneficial over simply a bulk export ban, the Government of Canada's use of the term
'removals' as opposed to 'exports' is a subtle, yet important difference of language for
another reason, one which, as explored in chapter three of this thesis, may hold significant legal implications for Canada under its international trade obligations. J.C.
Day and Frank Quinn (1992) explore extensively the various methods and geographical factors that have created diverse interpretations of bulk water exportation. The two scholars note that water is currently exported between Canada and U.S. through "small- scale", cross-border arrangements, where water supplies developed by one border community are shared with a neighboring municipality located across the international boundary (Day and Quinn, 1992: 30). Day and Quinn explain how as of 1992, four such arrangements existed between trans-boundary communities. In one case, 650,000 cubic metres of water is exported annually by pipeline from St. Stephen, New Brunswick to
Calais, Maine and in another example, Coutts Alberta was found to be exporting 30,000 cubic metres of water annually to Sweetgrass, Montana (Day and Quinn, 1992: 30).
Not solely limited to water being exported south, Day and Quinn's third example cites the Manitoba communities of Gretna and Altona receiving 70,000 cubic metres of water annually from Neche, North Dakota. Finally, the community of Point Roberts,
Washington was also found to be importing 32,000 cubic metres of water in 1994 from
Vancouver B.C. (Day and Quinn, 1992: 32). In this latter case, a 50 year agreement was signed in 1986 between the Greater Vancouver Regional District (GVRD) and this
American community. In return for a "connection fee" of $2.8 million Cdn, and monthly payments (as of 1993) of $8,566 Cdn., Point Roberts is supplied with a maximum daily
allocation of 3,182 cubic metres of water, ( or 1.2 billion litres annually), piped from the
GVRD's source at Lake Seymour (Pynn, 1993: Bl; Point Roberts Water District, 2005).
Day and Quinn classify the above examples as "small-scale exports" as opposed
to bulk water exports -an opinion shared by the federal government (Day and Quinn, 1992: 30; Environment Canada, 2004); Keating, 1986: 167). Distinguishing between the two, the scholars argue that "national interest is not at stake" with these small community arrangements, however they fail to assert categorically how to differentiate between these two classifications of water export (Day and Quinn, 1992: 30). As one will see in chapter three of this thesis, these current small scale exports between transboundary communities may weaken the federal government's ability to prevent bulk water exportation as such operations may likely be considered precedent-setting for any future American demand for bulk water exports from Canada, sought under present international trade frameworks.
Other examples of water transfers briefly explored by Day and Quinn may also have precedent-setting effects in any future legal challenge to access Canadian water. As the two scholars note, however, these cases "do not, strictly speaking, qualify as water export"; one example of this is transboundary, inter-basin water diversions (Day and
Quinn, 1992: 30). Because many of Canada's water bodies are actually waters shared with the United States, any contributions or diversions from these transboundary water basins through human projects may be construed as de facto water exports between the two nations. Day and Quinn cite the Ogoki and Long Lake hydroelectric projects as
examples of these "inter-basin diversions" (Day and Quinn, 1992: 33). Constructed in the
1940s to expand hydroelectric capacity in Southern Ontario, these projects divert large
amounts of water through a series of dams and canal systems from Northern Ontario to
Lake Superior. The end result of these developments is an inter-basin contribution
between a Canadian and a transboundary watershed where the latter water body received,
as of 1992, a Canadian water flow contribution of 156 cubic metreslsecond (Day and
Quinn, 1992: 33). Although such Canadian inter-basin diversions contribute significant amounts of water to the Great Lakes system, American diversions involving the Great Lakes largely remove water from this watershed entirely. Day and Quinn note that American diversions from boundary water bodies have existed since the mid 1800s, the largest being the Chicago Diversion which diverts 9 1 cubic metreslsecond of water from Lake
Michigan to the Mississippi River system (Day and Quinn, 1992: 34).
Referred to as "virtual water" by Josha MacNab, or "water derivatives" by Day and Quinn, diverted water used in the production of exported Canadian goods such as hydroelectricity, aluminum and paper, is viewed by some as "tantamount" to water export
(Day and Quinn, 1992: 35; MacNab, 2005: 9-10). While this is perhaps a very indirect, and obscure conception of bulk water export, like the previous examples discussed, the large scale diversion of water for industrial purposes and the licences granted by government for such removals, may indeed be precedent-setting acts, (a notion which also will be discussed in chapter three).
Having explored some of the diverse conceptions of bulk water exports, I should note that my own definition is similar to those provided by the federal government and is in some ways a synthesis of the definitions provided for bulk water removal and water exports. When referring to bulk water in this essay I shall consider bulk water exportation to be:
The removal of large amounts of water from a nation, through the use of tanker ships, trucks, pipelines or canals, and selling it for profit in another country, - not including the export of bottled water or water shipped in small containers. This definition, while comprehensive in that it encompasses all forms of bulk water transfers exported internationally for profit, does not include examples such as
'virtual water' diversions. Rather, as was noted above, examples such as interbasin diversions for hydroelectric development or water withdrawals used in the production of products exported out of Canada, will be shown to be potentially precedent-setting actions which could aid in the acquirement of Canadian water through trade challenges, but do not constitute bulk water exports in and of themselves.
Bulk Water Proposals: "A Canadian History"
Interest in exporting Canadian water has a detailed history in Canada, spanning much of the past half-century. Since the 1960's, entrepreneurs and politicians alike have touted various project proposals for the exportation of massive amounts of water from
Canada to its American neighbour. Classified by Day and Quinn as "mega-diversions", various overland schemes to divert water from Canada have been explored. Through the use of dams, canals, pipelines and even natural waterways, an amount of water which would "exceed the flows of major rivers" would be used to supply the U.S. mid and southwest regions through these projects (Day and Quinn, 1992: 37). The popularity of the mega-diversions concept as a solution for addressing American water issues is apparent, given that entrepreneurs proposed nine such projects in the 1960's alone (Day and Quinn, 1992: 38-9).
Although many have been explored, two mega-diversion projects stand out as the most publicized. The first, known as the North American Water and Power Alliance, or NAWAPA, was a project envisioned by Los Angeles engineering firm, Ralph M. Parsons
Company. Under the NAWAPA scheme, a series of dams would reverse or divert several waterways, including the Yukon, Skeena, Peace, Columbia and Fraser rivers. The diverted rivers would then be directed to several storage reservoirs including an 800km lake to be created by flooding the Rocky Mountain Trench in Eastern British Columbia.
From this reservoir, water would then be distributed through a comprehensive network of canals and irrigation systems to the western United States and Canada (Day and Quinn
1992: 37,41; Keating, 1986: 154-5).
Clearly an audacious plan, and at the cost of 200 billion in 1977 dollars, an incredibly expensive proposal, NAWAPA has also faced competition from the equally elaborate GRAND Canal scheme (Keating, 1986: 155). The Great Recycling and
Northern Development Canal concept was the creation of Montreal-based engineer,
Thomas W. Kierans. Under this project, a massive, 160 kilometre-long dyke was to be constructed across the mouth of James Bay. This structure would transform the body into a freshwater catchment basin, or essentially, a large freshwater lake, fed by the various rivers that enter the bay from northern Ontario and Quebec (Reisman, 1985: 22). From
James Bay, Kierans envisioned exporting approximately 347 cubic kilometers of water annually through a system of natural rivers and canals to the Great Lakes. From here, water would again be diverted through canals including the Chicago diversion, as well as various American river systems such as the Mississippi, to parched regions of the continental United States (Keating, 1986: 155-6; Reisman, 1985: 22).
Various Canadian politicians displayed interest in developing this latter project, including former Quebec Premier Robert Bourassa and former Member of Parliament, Louis Desmarais (Keating, 1986: 158). Due to the energy requirements of this proposal needed to transport water over elevated regions of the Canadian Shield, Bourassa actively endorsed the GRAND Canal scheme, suggesting the exportation of water could be an economic boon for Quebec's hydroelectric industry (Bourassa, 1985: 150-55).
Enough corporate interest in this project allowed Kierans' to establish a consortium known as GRANDCO in 1984, composed of several large Canadian companies, included among them, SNC Group of Montreal and Bechtel Canada Limited
(Keating, 1986: 158). Donald Gamble, notes that Atomic Energy of Canada Limited also became "contractually involved" with the consortium's project research, hoping to possibly supply CANDU reactors to power pumps moving water across the Canadian
Shield to the Great Lakes (Gamble, 1987: 72-3).
Faced with both astronomical project costs ranging in the hundreds of billions, and considerable public opposition in Canada to bulk water 'mega-diversions', both the
Grand Canal and NAWAPA schemes, as well as other similar projects, have ultimately failed to be implemented (Day and Quinn, 1992: 42; Anderson and Landry, 2001: 62)3.
They have in turn however been followed by many more less ambitious proposals.
Shifting away from continental 'mega-schemes' for diverting Canadian water to
the United States, the most recent generation of bulk-water proposals have consisted of projects looking to export water by tanker ship. So many tanker proposals for Canadian
water were developed in the early 1990's that Anderson and Landry were led to state that
"international water trades among Canada, the United States and the rest of the world
Note: Cost In 1984 dollars was estimated at 100 billion dollars. An inflation conversion was performed using tables constructed by the University of Oregon. See under Bibliography: "Sahr, Robert". seemed imminent" (Anderson and Landry. 200 1 : 62). The scholars note that during this period in British Columbia alone, six licenses were issued to Canadian companies to annually export a total of over 55 million cubic metres of water by ocean tanker
(Anderson and Landry, 200 1: 62).
Josha Macnab highlights three tanker export proposals that were especially high profile in Canada during the previous decade. (MacNab, 2005: 11). The first involved a partnership between the Canadian company Snowcap Water Inc. and California-based firm, Sun Belt Water. Having obtained a contract with the Goleta Water District in northern California the two companies had planned to begin export operations but were prevented from doing so when the government of British Columbia instituted a moratorium on bulk water exports in 1991 (Day and Quinn, 1992: 43; MacNab, 2005:
11).
The second example discussed by MacNab was a proposal put forward by the consulting firm, Nova Group, to ship 600 million litres of water annually from Lake
Superior to Asia (Handelman, 2004: 45; MacNab, 2005: 11). Like the previous example,
Nova Group was initially issued an export license by a provincial government, this time
Ontario, but later saw its 5 year permit revoked following significant public opposition to the export proposal (Boyd, 2003: 57).
Soon after the Nova Group "debacle" as described by David Boyd, another
Canadian company, the McCurdy Group, began to lobby the Newfoundland government
for the right to export between 50 and 100 billion litres of water annually from Gisborne
Lake (Boyd, 2003: 57). Despite the imposition of a bulk water export ban by the
previous Liberal provincial government, led by Brian Tobin, Conservative Premier Roger Grimes "announced his support" for the McCurdy project in 2001 and formulated a committee to explore the feasibility of bulk water exports from Gisborne Lake (Boyd,
2003: 57; Mcnab, 2005: 1 1 5- 16). Ultimately the Newfoundland government's report recommended against revoking the province's export ban on bulk water exports, advice that was accepted by the Premier. Although arguing that there was "no public policy reason not to proceed with bulk water export'' in the future, the main factor influencing the committee's decision was the perceived lack of profitability of exports from
Newfoundland at the time (Mcnab, 2005: 172-3).
The Federal Government's Approach to Bulk Water Exportation
Despite the fact that bulk water exportation proposals have been promoted since the 1960s, and have been "raising concern among segments of the Canadian public" since this period, as Timothy Heinmiller notes, little action was taken by the federal government to address this issue until much more recently (Heinmiller, 2003: 499-500).
Critical of the government's earlier inactivity, Heinmiller argues that "the federal
government had the perfect opportunity to respond to water export issues" when the
government introduced the Canada Water Act in 1970 (Heinmiller, 2003: 500). Despite
provisions in this piece of legislation making attempts to promote "intergovernmental
cooperation in comprehensive water resource management" the act failed entirely to
address the issue of bulk water exports (Heinmiller, 2003: 500).
Not until 1985 did the federal government finally express interest in water
exports, upon receiving a report issued by the Pearse Commission. Authored by Dr.
Peter H. Pearse, the commission was mandated to assess the effectiveness of federal water policy with regards to challenges facing this resource, including, "future requirements for water" and "interjurisdictional dimensions" of water management
(Heinmiller, 2003: 501 ; Pearse, 1985: 13 1-2).
Significant attention was given to the bulk water issue in the report, where Pearse distinguished between tanker shipments (that were supported by the commission) and large-scale land diversions (that were rejected). The commission recommended that the federal government seek to develop a "comprehensive" water export policy, urging the government to develop a licensing scheme for water exports as well as encouraging cabinet to formulate an official position on large-scale water diversions. Urging the federal government "to take an intergovernmental approach to resolving water export issues", the commission also "called for a water-export review process that would include the provinces" (Heinmiller, 2003: 501 ; Pearse, 1985: 13 1-2).
Partially heeding the Pearse Commission's advice, the federal Conservative government under Brian Mulroney, took steps to change Canadian water policy but did so unilaterally, without consultation of the provinces. Pressured by the public to address the issue of bulk water before the Canada-U.S. Free Trade Agreement (CUSFTA) came into place, this action by Ottawa came in the form of the Canada Water Preservation Act of 1988 (Day and Quinn, 1992: 48, Pearse, 1985: 502).
Introduced to Parliament as Bill C-156, the act sought to ban bulk water
exportation with two exceptions. Although large-scale land diversions would be outlawed under the new regulations, water exports by tanker and smaller land diversions not exceeding a volume of one cubic metre per second would be permitted under a
licensing arrangement (Pearse, 1985: 502; Quinn, 1992: 1 15). While Bill C- 156 would have helped to formally clarify between those bulk water exports deemed acceptable by the federal government and those not, the Water Preservation Act ultimately failed to be adopted as Parliament was dissolved for the 1988 federal election with the bill still remaining on the order paper (Pearse, 1985: 502).
Following the 1988 election, the federal government returned to a state of inactivity on the bulk water file due to a combination of factors which according to Day and Quinn, amounted to a lack of political motivation following re-election of the
Conservative government and a "secured" CUSFTA agreement, as well as "bureaucratic inertia" with regards to prioritizing the water issue (Day and Quinn, 1992: 5 1 ). What is curious about the government's work to ban bulk water exportation is that no efforts appear to have been made at the time of bill C-156's inception to seek, in tandem with this legislation, an official exemption for water in the CUSTFA agreement being negotiated at this time. While few reasons have surfaced for the lack of attention paid by
Ottawa regarding a bulk water exemption in the CUSTFA negotiations, it is clear that some members of Canada's trade negotiation team were in fact strong proponents of bulk water transfers, including, chief negotiator, Simon Reisman (Keating, 1986: 159).
Prior to obtaining his negotiator position, Reisman had been an advisor for the
GRAND Canal scheme and a strong proponent of this bulk water project (Keating, 1986:
159). So supportive of bulk water exportation, Reisman had believed water exports would give Canada strong "bargaining leverage" in free trade talks, arguing that the GRAND
Canal project in particular could "provide the key for a free-trade agreement with the
United States" (Reisman, 1985: 23). Although Reisman has been clear to state that his
"strong personal views" regarding water exports were "private and not relevant to his role as chief negotiator" it appears that Mr. Reisman may not have been a very strong advocate for a bulk water ban being included in CUSFTA (Reisman, 1985: 23).
Following this period of government inactivity, the bulk water debate would soon be sparked again when the Mulroney government began negotiations for the North
America Free Trade Agreement. Although the Conservative government who negotiated the terms of NAFTA had asserted that Canadian water was exempt from this trade accord, this contention, as David Boyd notes, was clearly misleading to the public (Boyd,
2003: 57). Whether overlooked by Canadian trade officials or purposely excluded from
NAFTA negotiations, Ottawa did not acquire a written exemption for bulk water, despite promises that water would not be included in the trade framework (MacNab, 2005: 22).
As noted by Josha Macnab and Marc de Villiers, government officials in fact appeared to be confused over the status of water under the new agreement. When queried on the issue, both Conservative Trade Minister, Pat Carney and her assistant exclaimed their surprise when it was realized that such an exemption did not in fact exist (de Villiers,
2000: 279, Mcnab, 2005: 22).
Despite demands by the Liberal opposition to negotiate an exemption for
Canadian water under the NAFTA accord, the Chrdtien government, once in power, also failed to obtain this free trade exception. Facing strong opposition from American
President Bill Clinton for reopening NAFTA negotiations, Prime Minister Chretien relented and signed the trade agreement without a water export ban in place (Ferguson,
1993(a): A21; Ferguson 1993(b): A27).
Once the NAFTA accord was signed, the federal government again became
largely inactive on the bulk water file, that is until 1999, when public opposition to the McCurdy and Nova Group export proposals, as David Boyd notes, "forced the federal government to finally take action on bulk water exports" (Boyd, 2003: 58).
On February 9, 1999, NDP Member of Parliament, Mr. Bill Blaikie, presented a motion before the House of Commons calling on the government to "place an immediate moratorium on the export of bulk freshwater shipments and inter-basin transfers" and "in cooperation with the provinces", produce legislation to prohibit the aforementioned activities (Canada, 1999: 11607- 1 1610); Johansen, 2002). Responding to this motion adopted by the House the following day, the federal government released its strategy aiming to prohibit "the bulk removal of water from Canadian watersheds, both within
Canada and for export". The "Strategy to Protect Canadian Water" announced by Foreign
Affairs Minister, Lloyd Axworthy and federal Environment Minister, Christine Stewart, was in fact a "three-pronged strategy" (Boyd, 2003: 58; Johansen, 2002).
The first order of business under Ottawa's action plan was to request an investigation by the International Joint Commission (IJC) into the effects of water exportation from the Great Lakes. A report issued by this joint Canadian-American body recommended that the two nations not grant any new permits for bulk removals of water from the Great Lakes Basin "unless the proponent can demonstrate that the removal would not endanger the integrity of the ecosystem" (Boyd, 2003: 58).
In contrast to the Mulroney government's unilateral attempt at banning water exports, the second and third stages of the Liberal government's bulk water strategy involved considerable consultation with provincial governments. Although the previous
Conservative government had sought a blanket federal ban on bulk water exportation, the
Liberals sought a much more limited federal legislative role, recognizing the jurisdictional overlap in this matter between the federal government's control of foreign trade, and the provinces7jurisdictional rights regarding natural resources (Department of
Foreign Affairs, 2005). As such, the federal government under its bulk water strategy, created legislation regarding only those bodies falling clearly under its jurisdiction, namely, transboundary water bodies shared between Canada and the United States such as the Great Lakes. This legislation came in the form of an amendment to the
International Boundary Waters Treaty Act that "prohibited the bulk removal of water out of the Canadian portion of boundary water basins between Canada and the United States"
(Johansen, 2002). In turn, under the final component of the federal plan, Ottawa encouraged the provincial governments in 1999 to sign a national Water Accord where the provinces agreed to enact their own bulk water removal bans. Although five provinces (British Columbia, Alberta, Saskatchewan, Manitoba and Quebec) rejected the accord, refusing to sign the agreement, as of 2OO5,9 out of 13 provincial and territorial jurisdictions had legislated bulk water transfer bans of some form (Heinmiller, 2003:
506-7; MacNab, 2005: 4, 122).
This three-pronged strategy constitutes the federal government's most recent
efforts to address bulk water exportation in Canada. Although only briefly outlined in this introductory chapter, subsequent sections of this thesis will explore this most recent
federal approach to protecting Canada's water in great detail. Contrary to the position
held by the federal government however, I will illustrate how Canada's water may likely
become an exported commodity despite these efforts by Ottawa to prevent it. To illustrate how development of this resource may occur and how staples theory will assist my argument, I will first briefly outline the basic tenants of staples theory and the relevant properties of this analytical framework that I will utilize.
Staples Theory: Is It Relevant Anymore?
As Canada's most significant contribution to the study of political economy, it is perhaps fitting that the staples approach be used to analyze an issue as unique to Canada as bulk water exports. This analytical framework, although referred to as a theory, is described by Howlett and Ramesh as rather an "approach" to the study of political economy, due to the limited application of staples theory to the study of Canada and other young nations with similar economic conditions (Howlett and Ramesh, 1992: 92). This specialized nature of the staples approach is largely a product of the work of Harold Innis and William Mackintosh.
Rejecting both traditional liberal and socialist economic theories as a means of explaining the Canadian economy's development, Harold Innis noted that these conventional approaches operate defectively when applied to the study of new countries like Canada, where unique, economic, political and geographic characteristics may be found (Berger, 1976: 91; Mackintosh, 1952: 188; Howlett and Ramesh, 1992: 93). To explain contemporary trends in Canadian economic and political development, both Innis
and Mackintosh instead focused their attention on historical economic events in Canada, namely, the history of Canada's natural resource, or 'staple' industries. Like other staples
theorists that would follow, both Innis and Mackintosh acknowledged that "all history is
contemporaneous" where understanding today's economy hinges upon acknowledging the historical economic patterns responsible for contemporary realities (Laxer, 1989: 181;
Mackintosh, 1923: 13; Mackintosh, 1952: 193).
The history of Canada, argued by staples theorists to be founded on the production and exportation of natural resources, has been the basis for Canada's subsequent political and economic development. Staples theory, as explained by
Watkins, is based on the principal assumption "that staple exports are the leading sector of the economy and set the pace for economic growth" (Watkins, 1963: 144). Watkins asserts that the "central concept" of the staples approach, is what he refers to as the
"spread effects" of natural resource exportation, where one analyzes the overall impact of staples exports on domestic social and economic development (Watkins, 1963: 144).
In order to understand the spread effects of staples development and their impact
on the Canadian economy and society, Watkins argues that one must first be aware of their "determinants", or rather, the social, economic and political factors which influence
the development of staples industries as well as their broader socioeconomic impacts on
Canada (Watkins, 1963: 144). These factors, according to Watkins are varied and
include: the natural resource supply of the exporting country, the global supply and
demand for natural resources, the existence of "international transportation and
communication networks", "the international power structure" and finally, the "character
of the particular staple or staples being exported" (Watkins, 1963: 144).
Harold Innis in particular focused extensively on the character of the staples he
analyzed, exploring in great detail the technical and geographical aspects of natural
resource industries (Berger, 1976: 10 1-2; Buckley, 1958: 444; Hayter and Barnes, 1990:
160). This attention by Innis has given the staples approach a particular focus, (among others), in determining how technology facilitated both the "production and marketing of the staple", illustrating how natural resource development is really "a function of technology and tastes" (Buckley, 1958: 444). Although heavy on technical details, Daniel
Drache notes that Innis was concerned "with so much more than the staple" itself, and that the primary goal of the scholar was not simply to provide a detailed historical account of staples development, but rather, to "correlate" the formation of various political institutions and social practices with the development of staples industries in
Canada (Berger, 1976: 94,98; Buckley, 1958: 442; Drache, 199 1. The correlations provided by staples analysis permit much more than simply an understanding of the history of natural resources in Canada. They offer an explanation of staples industry's role in the formation of broader socioeconomic patterns, patterns which can include domestic capital formation and Canadian population growth (Buckley, 1958: 444).
Differing opinions on the overall effects of staples development exist in Canada.
Ranging from views of staples exports as either a generally positive or negative pursuit, a
temporary economic stage for a young country such as Canada, or a conditioning
resource dependence trap, these are all positions that have divided the staples approach
into two distinctive camps.
Representing a pessimistic view of Canada's staples economy was Innis. Innis
maintained that rather than assisting the diversification and maturation of the Canadian
economy into one based on industrial manufactures like other developed nations,
Canada's economy has become ever more dependent on the exportation of staples (Innis,
1956: 385). With little domestic capital for investment in industry and a small domestic
consumer base, Canada has relied on foreign markets both to consume its natural resources, and to supply the manufactured materials desired by Canadians (Howlett and
Ramesh 1992: 95; Innis, 1956:385; Laxer, 1991: xiv). Under this trade model, Canada has become part of the "margin" or "periphery" of the industrialized world, where the nation's ability to grow economically remains dependant on foreign demand from the industrialized "centre" for Canadian natural resources (Hayter and Barnes, 1990: 159;
Howlett and Ramesh, 1992: 95). Also plagued by a small population spread over a vast expanse of territory, Canada's dependency on natural resource production has become so institutionalized as to be characterized by Watkins as a, "staples trap" (Watkins, 1963:
151; Hayter and Barnes, 1990: 158). Within this 'trap', the heavy reliance on staples requires consistently greater investments in production and transportation infrastructures
as resources become more difficult and costly to access. As a result, capital which may otherwise be invested in diversifying the economy goes into expanding Canada's staples'
dependence, thus increasing Canada's economic vulnerability to changes in international
resource demand (Hayter and Barnes, 1990; 158; Howlett and Ramesh, 1992: 96;
Watkins 1963: 15 1).
In contrast to Innis's suspicion of the staples-based economy, William
Mackintosh viewed Canada's dependence on natural resource exports in a much more
benign manner. Mackintosh considered Canada's staples economy to be a necessary first
stage for this relatively new nation. With staples being Canada's only "comparative
advantage", Mackintosh argued that both technology and profits accrued through
resource exports would permit a diversification and maturation of the Canadian economy
to one encompassing manufacturing on a large scale (Howlett and Ramesh, 1992: 97;
Schedvin, 1990: 534). In my engagement of staples theory to an analysis of bulk water exportation, I will not concern myself with this divisive debate within the staples approach, nor subscribe to either side's explanation of the role of staples industry in Canadian political and economic development. The reason for this is my more exclusive interest in those discourses within staples political economy that explore the determinants of a staple's development, and not the broad socio economic effects of natural resource exportation in general. While clearly the broader impacts of contemporary resource development like bulk water exports, would be insightful to the study of Canadian political economy, the space and time constraints of this thesis require leaving this for other scholars to address.
It is hoped, however, that my engagement of staples theory will prove fruitful for future analyses utilizing this approach, based on my attempts to address some of the shortcomings of staples theory both in its traditional format and its modern derivatives,
(discussed below). Whether one aspires to a pessimistic or a positive view of staples economic development, scholars may be better equipped to analyze the broader impact of staples exports if attempts are made to address the economic and political factors I identify in this essay.
Although staples theory may be Canada's most significant contribution to political economic thought, it is an approach that has suffered from declining attention in modern times as well as having been the focus of significant criticism for its purported irrelevance to the study of today's Canadian economy (Howlett and Ramesh, 1992: 98;
Laxer, 1989: 151). Laxer notes how the "old political economy" of staples theory became overshadowed by "econometrics" in the 1950s - a transition involving a shift away from historical analysis to one embracing mathematics and deductive methodologies (Howlett and Ramesh, 1992: 98; Laxer 1991: xv). Although Kenneth Buckley acknowledged the utility of analyzing the early Canadian economy through the staples approach, both he and William Easterbrook questioned the theory's relevance in the late 1950's when
"other sources" of economic growth deserved to be acknowledged (Buckley, 1958: 444;
Easterbrooke, 1959: 78).
The economic reality of contemporary Canada is that while natural resources may remain important, (accounting for 13.2% of Canada's GDP in 2004), the modern
Canadian economy is now one largely based on service sector industries, encompassing nearly two thirds of Canada's economic output today (Foreign Affairs Canada, 2007;
Natural Resources Canada, 2006). The diversity of today's Canadian economy thus clearly complicates a staples analysis based largely on the primacy of natural resources, however, staples theory has not been entirely ignored in recent decades, continuing to exist in two "revised" formats (Howlett and Ramesh, 1992: 99).
With strong tones of economic nationalism pervading this framework, the "Neo-
Innisian" approach combined socialist theories of political economy popular in the
1970's and 1980's, with the work of Harold Innis, perpetuating Innis' argument that a reliance on staples exports for economic growth hindered the development of a large industrial manufacturing sector (Howlett and Ramesh, 1992: 100). Neo-Innisians were suspicious of foreign investment, particularly American capital, as they believed it inhibited the development of domestic industry due to foreign investors' greater interest in short term profits and easy access to Canadian natural resources (Howlett and Ramesh,
1992: 100-0 1). Like Innis, the neo- Innisians are pessimistic that Canada can maintain distinct social and economic spheres autonomous from American influence (Howlett and
Ramesh, 1992: 100-01).
Although later adopting many of the basic tenets argued by Neo-Innisians,
Melville Watkins was influential among liberal nationalists in recent decades as a voice echoing the optimism of William Mackintosh's earlier work on staples theory. Known as
The "New Staples" approach, Watkins remained focused on the spread effects of staples development, conceiving of three such categories: "backward", "forward" and "final demand" linkages (Howlett and Ramesh, 1992: 104-5, Watkins, 1963: 145-6). While wary of the risk of falling into a "staples trap" Watkins was optimistic that economic diversification of the Canadian economy could realistically take place through these linkages, provided that government and domestic entrepreneurs were prepared to make efforts to do so (Watkins, 1963: 145-6, 151). Howlett and Ramesh note how both the
Science Council of Canada and the Canadian Institute for Economic Policy adopted
Watkins' approach in several subsequent publications, calling on the government to pursue interventionist policies which would encourage domestic industrial development over foreign ownership (Howlett and Ramesh, 1992: 105-6).
Despite these modem variants of staples theory, some of the critiques of the
original approach remain valid within these new frameworks today, a problem I hope that my research will help to address. Howlett and Ramesh have argued that "the most
fundamental criticism of the staples theorists is that they lack a sense of the political",
whereby political institutions, actors and processes are largely ignored as factors capable
of shaping the Canadian economy (Howlett and Ramesh, 1992: 106). This criticism is
similar to that of Carl Berger who has lamented the "dehumanized" history provided by staples theory, a problem both he and Gordon Laxer recognize as a product of Innis' narrow focus on geography, economic, and technical factors, whereby cultural aspects, or
"internal political and social events" were disregarded (Berger, 1976: 98; Laxer, 1989:
181).
Indeed there is a tendency within staples theory, and particularly in the work of
Innis, to assume that economic practices are a one-way street, where natural resource development effects social and political norms in Canada, which may as a result encourage further staples development, but where political and institutional factors external to this economic relationship do not in turn, have equal influence on these economic practices.
Criticism that there is a lack of 'political analysis' is equally applicable to the two modem variants of staples theory. The problem with the neo-Innisian approach is their sole focus on the dominance of the "state and business elites" as the factor preventing industrialization in Canada beyond staples exports. This approach wholly disregards the fact that the government is elected democratically by the Canadian citizenry and held accountable for its actions through institutionalized political processes (Howlett and
Ramesh, 1992: 107). The new staples theorists, however, while acknowledging the role of the state in assisting in the transition to a manufacturing economy, do not go far enough either in their analysis of influential political factors. As Howlett and Ramesh suggest, new staples theorists "tend to assume that Canada can take whatever measures it chooses to advance its own interests" forgetting that Canada is limited in terms of the protectionist measures it can pursue due to international trade agreements it is party to
(Howlett and Ramesh, 1992: 107). In my discussion of factors new to staples discourse, including an examination of the modern environmental movement, decentralization of powers within the Canadian federation, and the growth of international trade agreements, I will not only help to broaden the scope of the determinants used in the analysis of staples development, but also help to address some of the shortcomings of this approach described above.
Whether one adheres to the pessimistic assessment of staples found in the neo-Innisian approach, or the positive account provide by new staples theorists, both approaches will benefit from this broadened scope of political and social factors, allowing a more comprehensive assessment of influential forces in natural resource production. New
Staples theorists, for example, will be shown that centralized government approaches regulating trade are indeed difficult, particularly in a world undergoing greater institutionalized economic integration. In the following section, which discusses the modern environmental movement and public opposition to bulk water exports, neo-
Innisians will be shown that government can be receptive to public opinions and indeed have opposed further staples development as in the case of water, for this very reason.
The Environment & Sustainable Development: New Factors at Play
A discussion of the modern environmental movement as it relates to bulk water
exportation is an important contribution to this introductory chapter as it predicates the normative assumption held by the federal government that Canadian bulk water
exportation should not be pursued. While the federal government has historically been
very supportive of natural resource development in Canada, providing tariff walls, tax
subsidies and grants to promote domestic staples industries, unlike its predecessors, water
exports as a resource have never been the recipient of such support from Ottawa. On the
3 2 contrary, since the 1980s, the federal government has been officially opposed to water exports, justifying its opposition based on the fact that water transferred out of its basin permanently removes this water from the natural hydrologic cycle. The un-sustainability of such exports and the potential threats they pose for ensuring an adequate water supply to Canadians and for protecting Canada's ecosystems has predisposed the federal government to a stance against the exportation of Canadian water (Environment Canada,
2004).
The concerns of the federal government are illustrated by comments made following the enactment of the Boundary Waters Treaty Act. Arguing that bulk water removals "are an unsustainable use of water," the Government of Canada states that domestic consumption must remain a "priority" for the government (Environment
Canada 2004). The environment as well as the interests of the Canadian public are cited by the government when it justified its policy attempts to prevent water exports, describing the legislation as a means,
to sustain the rich biological diversity and productivity of coastal and estuarine ecosystems dependent on fresh water inflow; and by helping to ensure sustainable use of water to meet the growing economic and population requirements within our watershedslbasins, particularly in light of the potential impacts of climate change on water availability and distribution (Environment Canada, 2004).
Contrasting the case of bulk water exportation, little attention was ever paid by
either government bodies or the general public, to the sustainability of early natural
resource production in Canada. Canada's earliest staple, the cod fisheries, is a sad
reminder today of this lack of concern for the environment. Like other staples which
would be developed during the early settlement of Canada, supplies of codfish were so abundant in the vast Grand Banks region that when stocks became scarce due to over consumption in one area, fishermen simply moved to another location and continued their excessive harvesting (Innis, 1940: 376-77).
Between 1497, the time of John Cabot's famous discovery of codfish on the
Newfoundland coast, and the early 19th century, just prior to Canada's confederation, next to no action was taken by either British or French colonial governments to alleviate the over-consumption of codfish supplies. With the exception of one regulation imposed in the colony of Newfoundland in 1786, requiring the mesh of fishing nets be widened to protect smaller, younger fish, legislation to specifically address conservation of the cod did not appear until the 1800s (Innis, 1940: 292). These pieces of legislation were modest in their effectiveness as many of them did not actually restrict the catches of colonial fisherman, but only sought to prevent foreign, (largely American) ships from accessing British fishing grounds - restrictions which were often violated by American vessels (Innis, 1940: 246-7, 350- 1,408).
Innis' account of the fur trade in Canada also displays an equal lack of concern for sustainable development displayed by those actors involved in this historic industry.
Often acknowledged for creating the geographic entity which constitutes Canada today, due to the extensive exploration, trading routes and trading posts established by the fur industry, it is the unsustainable practices followed by fir traders that led to these long distance endeavors in search of beaver pelts (Innis, 1940: 262).
Like the case of codfish, European entrepreneurs were able to develop a very efficient harvesting system for beaver firs. Equipped with guns, knives and steel traps acquired through trading, indigenous populations were so effective at meeting the European demand for beaver pelts that regional populations of the mammal were quickly decimated (Innis, 1940: 20,28,262). Rather than adapt to the reproductive limits of the beaver species by restricting consumption, fur traders and indigenous hunters simply moved west to yet untapped expanses of the Canadian wilderness (Innis, 1940: 20-1).
Not only a product of effective technology and high consumer demand, however, the competition strategies of fur trade companies also exacerbated the destruction of the beaver. This was seen in the example of the Hudson's Bay company which instructed trappers to destroy all populations of fur bearing animals in the regions they entered with the goal of deterring competition in these areas from independent traders (Innis,
1940:332).
Arthur Lower explores an equally dismal environmental record concerning
Canada's early square timber industry. Describing the wasteful practices of the timber trade in the 18th and 19th centuries as "lunacy", Lower notes that the sheer abundance of forests in Canada at this time prevented anybody from ever considering forest conservation measures (Lower, 1973: 23,3 1). According to Lower, nobody in either the
British colonies that would later compose Canada or the British government itself was ever concerned with the destruction of colonial forests (Lower, 1973: 95,99). This meant that wasteful practices where more than a third of wood cut was ultimately not
used and simply discarded, were never improved upon (Lower, 1973: 23). As a result,
provinces such as New Brunswick and Nova Scotia saw their entire forests of pine
destroyed by 1860, forcing lumberman to travel further into regions of Upper and Lower
Canada in search of adequate timber supplies for constructing British ships (Lower,
1973: 123). Although the colonial government would eventually introduce a system of licences and dues to control the timber industry, these regulations were largely ignored, and came too late to prevent the collapse of the square timber trade (Lower, 1973: 197-8).
As Lower notes, the end of the square lumber industry was not a result of inhibitory factors such as geography or a lack of technology, rather, the lumberman's ambition to
"plunder nature's storehouse as quickly as possible" was the deciding factor (Lower,
1973: 123,247).
The contemporary issue of bulk water exportation stands in stark contrast to
Canada's historical staples industries in that both the public and government have voiced their opposition to development of this resource. Although Canadians have traditionally supported and participated in natural resource production in this country, a survey performed in 2002 illustrated the strong feelings of Canadians opposed to making water a part of this tradition, where fully 66% declared their opposition to water exports in this national poll (Maich, 2005: 28). It is the public outcry against water exportation, and the pressure of lobby groups such as the Council of Canadians, that is largely responsible for pushing governments at both the provincial and federal level to institute bulk removal bans (Boyd, 2003, 57; Johansen, 2002; Linton, 2002: 8) The scientific research presented by environmental lobbyists, the federal government and the academic community itself
provides a convincing argument in favour of banning water exports on environmental
grounds due in large part to the study of water diversions performed in Canada for
hydroelectricity development.
In their 2000 report on the status of the Great lakes, the International Joint
Commission illustrated its concerns regarding bulk water exportation, noting, "there is never a 'surplus' of water in lakes and rivers" where in fact, "every drop of water has several potential uses" (Linton, 2002: 20). Researchers in Canada have highlighted in particular the contributions of freshwater flows to the regulation of diverse and interconnected ecosystems (Linton, 2002: 20). Contrary to assertions made by water export advocates such as former Newfoundland Premier, Roger Grimes, freshwater supplies that go unused by humans and ultimately drain into the ocean are not "wasted", rather, they are extremely important for maintaining Canada's natural biodiversity, both in coastal and mainland regions (Linton, 2002: 20, Macdonald, 2001: FP 6).
Sensitive to even minor changes in freshwater flows, Day and Quinn cite various environmental problems related to hydroelectricity development where water has been diverted and stored in manners similar to those proposed in bulk water export projects.
These problems are diverse and include:
"Moderate earthquakes and climate change" in regions surrounding large water impoundments;
A loss of "biological productivity in lakes and rivers";
Significant damage and loss of "forests, agricultural land and wildlife habitat";
"Destruction of fisheries habitat" (including freshwater, estuarine and maritime environments)
"Destruction of Wetlands and Freshwater Deltas";
Alterations in water quality and water temperature;
Elevated levels of mercury in fish stocks;
Disruption of salmon spawning and other "biological process" due to changes in freshwater stream flow; 0 Inter-basin transfers of animals, plants, fish, parasites and viruses damaging to native ecosystems;
And finally, elevated emissions of greenhouse gasses from artificial reservoirs
(Day and Quinn, 1992: 178; Linton, 2002: 7).
Researchers such as Leroy Poff, have acknowledge the extreme sensitivity of aquatic populations to even short-term alterations in water flows. They note that the
"physiological stress" caused by these habitat changes can lead to "a reduction in both the natural diversity and abundance of many native fish and invertebrates" through negative impacts on the navigation and feeding habits of these organisms (Poff, 1997). Studies performed on British Columbia's southern coast have revealed the significant fluctuations in "biological production" stemming from volatile fluctuations in river discharge into the
Georgia Strait (Linton, 2002: 17). Michael Bradford and James Irvine reveal that reductions in BCYscoho salmon populations are partially a result of high water withdrawal rates from the Thompson river for agricultural purposes, which during the summer months, causes not only reduced water flows but higher water temperatures in the river (Bradford and Irvine, 2000: 15).
Not only a localized environmental problem, bulk water diversions and withdrawals have the potential to affect the food chains, salinity levels and ocean current patterns of water bodies up to thousands of kilometers away from the original diversion sites thus potentially destroying or vastly altering the ecosystems of very large regions in the process (Drinkwater, 1986: 41 5-2 1,26; Linton, 2002: 13). Linton for example notes that freshwater output from the Great Lakes renews fishery waters as far as the Gulf of Maine while some researchers have hypothesized that low cod populations along the
Labrador coast are a result of the distant diversions of rivers for hydroelectric development near Hudson's Bay (Linton, 2002: 15). While in this last case a clear correlation has yet to be determined, it is an example of potential environmental impacts, both proven and unproven that have driven many individuals to err on the side of caution and oppose bulk water exports.
Concerns regarding bulk water exportation among Canadian citizens and
Canada's various levels of government are part of a recent trend in this country of public consciousness towards environmental issues. While concern for the environment and sustainable development was simply non-existent during the earlier inception of many of
Canada's natural resource industries, both Canadians and their governments have grown increasingly aware of the environmental repercussions of human activity including the negative impacts of unfettered natural resource consumption.
This attention given by Canadian towards their natural environment is a very new phenomenon in this country. As David Boyd notes, "concepts such as "biological diversity," "ozone depletion," and "climate change," simply did not exist thirty years ago
(Boyd, 2003: 213). It was only as recently as the 1970's that Canada established the federal environment department as well as much of the environmental legislation that exists in this nation today (Boyd, 2003: 2 13). Although far from perfect, Canada's environmental record has seen significant improvements in recent decades, including
successes such as drastically reducing various air pollutants and "ozone-depleting
chemicals"; ratifiying hundreds of international environment treaties; introducing
comprehensive municipal recycling and sewage treatment facilities; and greatly expanding protected natural lands through the National Park System (Boyd, 2003: 2 12-
Boyd attributes a variety of factors to these successes, including: international pressure from the world community, (both diplomatic and occasionally, market pressures); "proactive local governments;" and various Supreme Court rulings forcing changes in environmental practices. Chief among these influences however was public pressure (as well as a political system in Canada with rights to freedom of speech and access to information) that has facilitated Canadian society's influence over environmental policy (Boyd, 2003: 2 14-223). Boyd highlights "two major waves" in
Canada, during the 1970s and 1980's, where public concern made the environment a politically salient issue, leading governments in Canada to adopt "aggressive approaches" on environmental matters (Boyd, 2003: 223). This continued to some degree in the 1990s where public concern, according to Boyd, led to stricter laws governing areas such as forestry practices and the federal government's current legislation prohibiting bulk water transfers (Boyd, 2003:223).
Improvements in Canada's environmental record should not be overstated; nor should it be construed that the strong opposition of the Canadian public and government institutions to bulk water exportation is a position equally held against the development of other natural resources in this country. Despite a greater environmental conscience in this country, Canada has far from abandoned its staples industries, including those with significant environmental repercussions -such as the Alberta Tar Sands. This industry for example, continues to enjoy heavy subsidization (worth billions of dollars annually), from the federal government (Sierra Club of Canada, 2006). This occurs despite the fact that tar sands production poses significant environmental problems for Canada, including an enormous reliance on water and natural gas in its production processes, as well as its role as a heavy emitter of green house gasses that has greatly inhibited attempts by the federal government to combat climate change (McCullum, 2006: 5,34-36).
Although the degree to which environmental concerns affect the development of a natural resource may vary, what should be clear to staples theorists today is that the environmental conscience of Canadian society is a significant factor that can affect how and whether or not a new staple industry is pursued. This phenomenon, therefore, must be taken into account in modern staples analyses of natural resource production. While clearly, environmental concerns have played a pivotal role in the prevention of Canadian bulk water exports to this date, the remainder of this thesis essay will illustrate how other economic and political factors may trump these environmental concerns, potentially leading to the development of water as an exportable commodity despite the wishes of the Canadian people and their federal government. CHAPTER 2: THE DEMAND FOR CANADIAN STAPLES -AN EXTERNAL AFFAIR
Like many of Canada's other natural resources, the supply of water in this country far exceeds the present consumptive needs of its citizens. Home to less than .5% of the world's population but steward of more than 20 % of global freshwater supplies,
Canada's annual per capita water availability is estimated to be 98 353 000 litres (Johns,
C; Sproule-Jones, M; Heinmiller, T. 2006: 18). This is an enormous quantity of water when one considers that agencies such as the World Health Organization recommend access to a minimum daily supply of 20 to 40 litres per person - a volume deemed necessary to fulfil all personal consumptive, hygienic and sanitary needs (Scanlon, Cassar and Nemes, 2004: 30).
The excess supply of water in Canada is a key factor stimulating interest in bulk water exportation. Advocates of exportation, both in government and private sectors, continually highlight the fact that Canada's extensive water supplies overwhelmingly exceed present domestic needs, creating a surplus which should be tapped for profit
through international trade (Wood, 2001; MacDonald, 2001 : FP 6; Owens, 2001 : A14;
Stock, 2001:33).
The reality that natural resource supplies in Canada remain above and beyond the
quantities required by its population has always been an influential factor shaping the
export nature of staples industries in Canada. Indeed, domestic demand for natural resources has historically played a relatively minor role in stimulating staples industry growth in this nation. Rather, it is foreign demand for these vast surpluses of natural resources, particularly, from trading partners in dominant economic circumstances relative to Canada that has stimulated the development of this nation's staples sectors.
Since the time of Canada's early colonial origins, the resource needs of those who came to inhabit this new land have been a relatively inconsequential factor in relation to the role foreign demand has played in shaping resource development in Canada. In his description of the nascent Canadian timber industry in the 18th century, Arthur Lower stresses this point, noting that before British demand for Canadian lumber developed,
Canada's vast timber supplies were simply "valueless" to the small communities of settlers residing in the colonies, who as Lower states, "required little of it for themselves" (Lower, 1973: 3 1).
As highlighted by Fowke and Innis in particular, it was demand for natural resources outside of what would became known as Canada, that led to the colonization of this land by Europeans in the first place. These two scholars describe how the Europeans' desire for cod, fur and lumber supplies led not only to the initial settlement of Canada, but was largely responsible for the overall shape of this nation as a geographic entity
today, influencing the location of settlements as well as the transportation networks
established between them (Innis, 1940: 262,392-3; Lower, 1973: 137,249-50).
Demand for Canadian resources, as during the period of colonization, has
continued throughout Canada's history to originate principally with a small number, or a
singular, economically dominant trading partner. Beginning of course with the French
and British colonial powers, this demand has shifted over the course of Canadian history to a point where the United States now remains the largest consumer of Canadian staples resources, importing 86 percent of all Canadian exports and remaining the most likely destination for Canadian water should it become an exportable staple as well (Foreign
Affairs Canada, 200 1).
The concentration of demand for Canadian staples among large, singular foreign markets has meant that the economic success of Canadian resource industries is highly vulnerable to market changes affecting demand in these importing nations, -changes which can be a product of various social, economic and political factors. The works of
Lower, Innis and Fowke highlight how the successful development of staples industries in Canada has often hinged upon factors completely out of this exporting nation's control, including social norms as well as the political interests residing in the importing country.
Stressing in particular the role of social practices, for example, Innis identifies the
Catholic tradition of abstaining from meat on Fridays as a significant factor influencing the original development of the Canadian cod industry (Innis, 1940: 26,30, 501). This practice, stemming from the Christian tradition of fasting, created a large enough domestic demand for cod in nations such as France, Spain and Portugal, to justify this
transatlantic fishery's formation in the early 17th century (Innis, 1940: 26, 30). In
contrast, Britain, whose citizens were not Catholic and did not follow the same dietary
practices, took nearly half a century longer to invest in the Canadian cod fishery (Innis,
1940: 30). While the industry remained highly profitable throughout subsequent
centuries, a relaxation of these religious dietary restrictions by the Papacy, as well as the
outbreak of war between Britain and France, both helped to reduce demand for Canadian
cod in the late 18th century (Innis, 1940: 299-300). These market disruptions, however, were tempered to some degree due to the colonial practice of feeding dried cod to slave populations. As a result of this custom, colonial fisheries such as Newfoundland's were able to find alternate destinations for this staple, growing more dependent on markets such as the West Indies and the United States (Fowke, 1946: 25; Innis, 1940: 301, 501).
Similar to the cod industry, Innis' account of the early fur trade in Canada illustrates how social norms, even as trivial as popular fashion, can have significant impacts on staples industries. This is seen for example, in the European demand for
Canadian beaver pelts in the 17th century, which as Innis explains, was a factor largely responsible for creating the extensive North American fur trade industry that would develop in subsequent decades (Innis, 1940: 12). Prized for their barbed furs that are particularly suitable for producing felt, the European demand for beaver pelts was the result of the popularity of expensive, beaver fur hats considered fashionable at this time
(Innis, 1940: 4, 12'22). While popular demand for furs in Europe helped to develop this
Canadian staple industry, European demand for beaver pelts proved unstable due to changes in the public's fashion tastes. As fashion trends shifted in the 18th century to a preference for smaller hats using materials other than beaver fur, the profitability of the beaver pelt trade was greatly weakened, proving "disastrous", according to Innis, for the colony of New France in particular (Innis, 1940: 74, 83).
Political factors originating in the importing nation have also been found to heavily influence Canadian staples development. Theorists such as Fowke (1946) and
Lower (1 973) for example, focused on the political ambitions of the competing British and French empires as a stimulus influencing the growth of Canada's timber and agricultural industries. In the former case, it was Britain's need for timber to supply its war effort against France that lead to the export of Canadian lumber. Cut off from traditional timber supplies in the Baltic after Napoleon's invasion of Prussia in 1806,
Britain was forced to turn to its North American colonies for the wood needed to erect masts and construct the hulls of its naval warships (Lower, 1973: 45-49).
Strategic imperatives were also a driving factor in the development of Canadian agriculture. Although Britain and France would eventually import Canadian produce after a long period of colonization, this industry was originally established in Canada to provide security for colonial outposts and to facilitate the growth of other staples exports
- not, necessarily to provide an exportable resource in and of itself (Fowke, 1946: 4'6,
14). Vernon Fowke discusses how the French government, at the time of settlement of
New France in the 17th century, held an "official conception" of agriculture as a
"mechanism of defence for colonial enterprise" (Fowke, 1946: 14). Not solely needed to supply military outposts in the North American colonies, both France and Britain recognized the importance of agriculture for other industrial pursuits. The two colonial powers acknowledged the fact that fisherman, fur traders and lumberman also "had to eat", and as a result, went to great lengths to ensure the health of the agriculture sector, providing various forms of government aid ranging from free land to direct monetary assistance (Fowke, 1946: 14,31-2).
Although the discussion of staples works above illustrates a pattern of resource development driven by the social and political objectives of Canada's dominant trading partners, my discussion of this pattern as applied to the case of bulk water, illustrates the potential to analyze in much more depth, 'the political angle' within the staples approach.
Beyond simply the broad strategic explanations for an importing nation's demand for natural resources, my analysis of bulk water illustrates how greater attention to the internal political workings of the importing nation can further elucidate the character of demand for this resource, including its origins, its scope and perhaps, the stability of resource needs on the part of the importer.
While critics admonish staples theorists for their lack of attention to political factors influencing resource industries in the domestic producing nation - (an assertion I agree with and explore in chapter 3) -greater attention must also be paid to external political factors. I argue in the following section of this chapter that social norms and political practices regarding water in the United States have become so institutionalized within American political and economic circles as to constitute a potentially unstoppable driver leading to Canadian bulk water exports. As a result, I suggest that staples theorists, when analyzing the development of resource industries, pay attention not only to the domestic political factors which can encourage or discourage resource industry growth, but also those residing in the export destination.
American Water Demand: A Product of Politics
While Canada may be known as the "OPEC of water" according to Andrew Biro, the United States in contrast, is not a water-rich nation - a fact that could be no truer than
in the U.S. Midwest and South western states (Biro, 2006: 105). Precipitation is a rare
occurrence in many areas of the western U.S. where cities such as Las Vegas receive less
than 4.2 inches of rainfall annually (Shaw, 2005: 13). The lack of precipitation has meant
that many surface water sources in the western United States are completely tapped for
human consumption. This has resulted for example, in the failure of the Colorado River to flow into the Gulf of Mexico in 200 1, due to over- consumption by the region's population (Barlow and Clark, 2002: 9). To meet their growing water needs, western
Americans have relied increasingly on groundwater sources - water found in subterranean aquifers that collects over several decades or even centuries, and is tapped through drilling wells and the use of pumps (Glennon, 2002: 1-3). The continent's largest
"water bearing unit", the Ogallala aquifer, underlies much of the Western United States, stretching from West Texas as far as South Dakota and is believed to have once held 20% more water than Lake Huron (Barlow and Clark, 2002: 16). Prior to the discovery of the aquifer and pumping technology which could access it, the American Midwest was plagued with droughts which repeatedly led to an exodus of the region's inhabitants as seen during the 'Dust Bowl' of the 1930s (Reisner, 1993). Many agricultural producers today are beginning to see their water supplies dry up, perhaps repeating history once again -not by fault of nature depriving rain but due to human over-consumption of groundwater supplies (Egan and Bergquist, 2003).
According to hydrologist Robert Glennon, groundwater currently supplies 25% of
America's total water consumption, which in 1995 was extracted at a rate of 28 trillion gallons annually (Glennon, 2002: 2-3). This dependence on groundwater has led to highly unsustainable rates of extraction, increasing to 14 times the natural rate of aquifer replenishment in some regions of the country supplied by the Ogallala (Barlow and
Clark, 2002: 16). Depletion of aquifers is so extensive that areas of the Southwest, such
as Albuquerque, New Mexico are expected "to go dry" by 2020 while California's
shortfall of water is expected to equal the total 2002 consumption levels of all the state's
municipalities combined within 20 years (Barlow and Clark, 2002: 16). The growing problem of water scarcity in the United States will have severe economic implications for the nation if alternate sources cannot be acquired. Water after all, is an irreplaceable input in countless industrial operations and is often utilized as a coolant or a material in chemical processes. Economist Douglas Shaw notes how unlike other materials which can be replaced when resources become limited, such as substituting the use of tin with plastic, water in many situations is not as easily replaceable (Shaw, 2005: 1 l,26). A study issued by the California Urban Water
Agencies found that a drought-induced reduction of water supply by 30% would, over the course of one year, directly cost the California economy $8 billion and approximately
56,000 jobs, not including the vast, indirect economic "ripple effects" (Davidge, 1994).
The importance of water as an input to industry is apparent when one considers various other statistics, such as the fact that producing one automobile requires approximately 400,000 litres of water, or, how the U.S. mining industry pumped approximately 770 billion gallons of water for use in mineral extraction in 1995 alone.
(Glennon, 2002: 2). While such quantities of water may appear daunting, they pale in comparison to the amount of water used by the American agriculture sector, the industry responsible for 90% of total water consumption in the Western United States (Hallberg,
1992: 241).
Operating on fertile but arid lands, western American farmers' dependency on
water has been facilitated and encouraged through irrigation projects financially
subsidized by the U.S. federal and state governments. This dependence on subsidized
water, I contend, has created a 'culture of entitlement' among American agricultural
producers which when coupled with their significant clout in the U.S. political system poses a major threat to Canada in its ability to resist American demands for bulk water exports.
Since nearly the beginning of western settlement in the United States, Washington has been heavily active in feeding American farmers' incessant demand for water. Under the 1902 Land Reclamation Act, settlers were granted free land in the West and provided with state funded irrigation with the expectation that a minimal portion of irrigation costs would be repaid to the government within 10 years, with no interest attached (Hallberg,
1992: 240). By 1922, only 10% of loaned funds had been repaid to the government, a record that would fail to improve even when repayment periods were extended up to 40 years (Reisner, 1993: 1 16). Farmers, who according to Marc Reisner, began "to regard water as a rightful recompense for attempting to civilize the desert," often refused to repay their government debts. Despite this rampant defaulting on loans, the government usually continued to supply water to the settlers, using oil and mining royalties to sustain the Reclamation Fund (Reisner, 1993: 116-7).
Throughout the 20th century, the number of government funded water projects and subsidies for agriculture mushroomed, to the extent that the federal government is now responsible for 80 to 90 percent of the total funding for irrigation projects in the west
(Hallberg, 1992: 241). One of the largest irrigation operations in this region, the Central
Valley Project in California, provides an approximate annual water subsidy of $416 million per year (Biro, 2006: 102). In cases where state governments do not cover the remaining cost of federally funded projects, farmers are typically forced to pay less than
20 percent of the expenses for "structures and conveyance systems" (Hallberg, 1992:
241). According to economist M.C. Hallberg, the fact that agriculture producers pay only a fraction of the real cost for irrigation is a principle factor leading to the waste of water and the over-drafting that has caused depletion of underground aquifers (Hallberg, 1992:
245).
The ability of the agricultural sector to obtain heavy subsidies for irrigation projects even today is a reflection of their consistent political influence in the U.S. capital. In his description of American politics, David Truman notes an
"institutionalization" of the American agricultural lobby, "to the point that close and congenial relations develop between interest groups, like-minded politicians on well- placed congressional committees, and executive branch bureaucrats."(Sheingate 2003).
More recent scholars, such as Theodore Lowi, have described agriculture as "that field of
American government where the distinction between public and private has come closest to being completely eliminated" accomplished according to Lowi" by private expropriation of public authority" (Sheingate, 2003).
Despite the significant decrease in the proportion of the American population tied to the agriculture industry, (a fall from over 70% at the beginning of the 19th century to just 2.8% in the 1990's), the strength of the agriculture lobby persists within the U.S. government (Hallberg, 1992: 69-7 1). This is partially due to the concentration of agriculture production in specific regions of the country where their importance to regional economies gives producers favoured access to politician's ears. In California for example, agriculture remains one of the largest industries in the state, worth 27.2 billion dollars in 2000 (California Energy Commission, 2006).
The close ties with industries such as petrochemicals and agriculture implements producers has given agriculture an economic importance that has repeatedly allowed producers to gain support from legislators for large scale water projects (Reisner, 1993:
334). Even as a lower proportion of the population remains directly involved in the agriculture industry, the United States' rural population, at 30%, continues to be significant (Hallberg, 1992: 69-71). Hallberg contends that the "livelihood of most of the rural residents in the United States undoubtedly depends on a strong agricultural sector, leading these populations to "support favorable legislation for primary agriculture"
(Hallberg, 1992: 79-7 1).
In addition to geographic concentration, agricultural producers have benefited from the structure of U.S. federal politics in order to acquire water subsidies. Because political parties in the United States are no longer responsible for most of the funding of congressional campaigns, Delworth Gardner illustrates how there is very little incentive for politicians to "rigidly adhere to party agendas and vote the party line", allowing interest groups, through the financial backing of campaigns by means of political action committees, access to legislators who can now cater their voting record to these special interests (Gardner, 1995: 188). Even among politicians who favour small government and free market principles, as Reisner states, ideology has become "the first casualty of water development", leading representatives to promote the objectives of local constituencies in return for financial support during elections, a costly endeavour in U.S. politics which house representatives must repeat every two years (Reinser, 1993: 309- 10).
The structure of congressional subcommittees has also proved beneficial to water
subsidy advocates. Due to the division of the Congressional body into highly specialized
subcommittees, "composed of legislators who represent constituencies with the highest
stakes in a given policy area", interest groups can target their lobbying efforts towards a small number of legislators, who as Gardner states, have a "near monopoly over some set of policies and programs" (Gardner, 1995: 186). Describing water projects as "the grease gun that lubricates the nation's legislature", Reisner explains how the appropriations and public works committees responsible for approving imgation projects traditionally come from southern and western states where most projects are typically built (Reisner, 1993:
308-10). In these powerful legislative positions, committee members are able to approve funding for extensive water projects benefiting their local constituents and therefore boosting their own political popularity, often by slipping project finding into omnibus appropriations bills, -(288 water projects were inserted into a 1980 bill in this manner)
(Reisner, 1993: 309- 10). Water projects, Reinser explains, become a "kind of currency" in Congress, "rewarding" those who vote for them, (often with frivolously expensive projects for their own constituencies), "and punishing those who do not, sometimes to the point of stopping virtually any federal money from going into their districts (Reisner,
1993: 1 16,308, 3 1 1).
The division of powers within the U.S. government has greatly limited the
President's ability to address water subsidies, even when ideologically opposed to this state intervention. For example, Jimmy Carter was concerned with reducing the federal deficit and the environmental damage incurred from imgation dams, and proposed cutting the finding for 18 water projects from the 1978 Senate Appropriation's Bill.
Outraged, legislators responded by adding 12 more projects to the bill, confident in their ability to muster the 213 of house seats needed to ovemde a Presidential veto. A defeated
Carter who had originally envisioned cutting finding for 80 federal water projects was now only able to negotiate the deletion of 9 from the bill, only to find these same projects reinserted by legislators in the 1979 appropriations legislation (Reisner, 1993: 3 13-2 I).
The culture of entitlement that has developed within the American agricultural sector towards federally supplied water as well as the political power these special interests wield within the U.S. government, will likely pose an immense political force in the United States in the near future in advocating for Canada to export its water southward. Farmers however, are not the only likely source of these demands for water, as American communities are also coming under increasing water strain.
Unlike regional economies, which may be able to transform themselves from those based on water-dependent, agricultural industries, human life will always require water, making access to alternate sources not solely an interest in terms of economic
security, but of human security as well. Rapid population growth in regions considered marginal for their water supplies is further exacerbating the problem of scarcity in the
U.S. (Barlow and Clark, 2002: 16-7). In 2005, seven of the ten fastest growing
communities in the United States were located in the American Southwest (U.S. Census
Bureau, 2005). Previously topping this list and almost doubling its population between
1990 and 2000, the city of Las Vegas, which lies in the most arid region of the United
States, now relies on Nevada's total water allocation from the Colorado River (Shaw,
2005: 4,23). Despite unprecedented attempts at conservation, growing demand for
alternate water sources continues (Maich, 2005: 28). This is not solely a problem isolated
to southern municipalities however. Various Illinois and Wisconsin communities without
access to the Great Lakes are presently vying for rights to this water due to rapidly
depleting underground supplies (International Joint Commission, 2004: 3). The growing need for America to find alternate water sources appears to now be sparking the interest of its politicians. As droughts have plagued the Southwest region in the last decade, legislators from states such as Arizona and New Mexico "have mused about diverting water from the Great Lakes" through existing canals and the Mississippi
River (Toronto Star, 2005: A24). George W. Bush has also been included among those advocating for Canadian water exportation, making pronouncements on this issue despite the continued insistence by Ottawa that Canada will not export its water (Barlow, 2001 :
71). In 2001, Bush suggested the possibility of a "continental water pact" between
Canada, the United States and Mexico, proposing as well the constructing of water pipelines between Canada and the U.S. or using existing decommissioned natural gas lines to facilitate exports from Canada (Barlow, 2001 : 7 1, MacKinnon, 2001 : 6;
Mckenna, 2001: 1).
Although it is unclear if the entrance of American politicians into the bulk water debate is a product of direct lobbying by agricultural groups or communities, the lack of
explicit lobbying on this issue to date may be a result of the temporary reprieve from water stress that these groups may be able to find domestically. While water scarcity
caused by the socio-economic and political factors discussed above, will clearly act as
major impetus towards the demand for Canadian bulk water exports in the long term,
current domestic solutions within the United States may delay the need for Canadian
water for yet a few years, at least in some circumstances.
Much smaller in scale than proposed bulk water pipelines to be built from
Canada, but very expensive nonetheless, communities such as Las Vegas are pursuing
various pipeline projects that will divert water to these urban centres. In the case of Las Vegas, a 400-kilometre pipeline running from the northern portion of Nevada to the desert city has been constructed at the cost of 2 billion dollars (Maich, 2005: 27).
Facilitated by traditional water rights law in the United States and a 1992 bill passed by
Congress permitting the interstate trade in water rights, many agricultural producers have also begun selling their water to other farmers, or more commonly, to growing municipalities such as San Diego, California (Barlow, 2001: 53-4). The U.S. Department of the Interior has gone as far as to establish a water bank program to assist states in water trading. One arrangement negotiated under this system involves the purchase of
Arizona water by the states of California and Nevada. Under the deal, both California and Nevada pay Arizona for a portion of its Colorado River allotment, and in addition, reimburse the state for pumping and storing this water in Arizona's underground aquifers until needed by the purchasers (Anderson and Landry, 2001 : 65). Called by one journalist "the largest deregulation of a natural resource since the Homestead Act of
1862", these measures encouraging water trade, according to economist Douglas Shaw,
appear to be the beginnings of a water market developing in the United States (Wade,
1998: 51; Shaw, 2005: 27-8).
I argue that these large-scale pipelines and domestic trading solutions to growing
scarcity may act as precedents, (if not in a legal sense but in establishing economic
norms), that will aid in the argument for future Canadian water exports. With the creation
of a water market in the United States, and as longer water pipelines are built
domestically in the U.S., the idea that Canadian water is just another natural resource that
can be imported from Canada as part of such a market, becomes both more attractive, as
well as more technologically and economically feasible. As Cohen and Froschauer illustrate in their analysis of the hydroelectric industry in Canada, the Canadian adoption of economic norms that characterize American industries is far from being unprecedented. Although electric utilities in the United States and Canada have traditionally been capital-intensive projects, resulting in either publicly funded and owned facilities or highly regulated private monopolies, an era of deregulation in the late 1970s, quickly transformed the American electricity industry
(Cohen, 2004: 175-6). While Canada, as Cohen states, "had no compelling economic reasons to deregulate its electricity sector", remaining efficient in the stable provision of low-cost energy to Canadian consumers, Canada's electricity sector has nonetheless begun "mimicking the US experience" (Cohen, 2004: 177).
The deregulation process in the United States created a price-driven market system within the electricity industry, formulated through regulatory measures such as those dividing energy utilities into separate generating and transmission entities.
Canadian provinces have in turn adopted similar measures in recent years based on the
"perceived need to conform to US regulations in order to export into that market"
(Cohen, 2004: 180). Although for decades Canada has exported small proportions of surplus electricity to the United States, the "primary mandate" of utilities in Canada was to provide a stable supply to Canadians rather than pursue profitable energy exports
(Cohen, 2004: 177). Pressures within Canada however, including the "private sector's
desire to gain entry to a market from which it has been excluded" has brought about a
transformation from a vertically integrated electricity industry in Canada to an open,
competitive system which encourages private and foreign investment (Cohen, 2004: 182). Deregulation has been encouraged even further in Canada by U.S. regulatory agencies, regulators who have insisted that Canadian provinces follow their policies in order to access the U.S. market. While Canadian entities such as the National Energy
Board have relinquished certain controls over the Canadian electricity industry, the
American Federal Energy Regulatory Commission (FERC) has actually gained influence in Canada during this deregulation process (Froschauer, 1999: 228-232). Froschauer notes, for example, that it was FERC's order to 'unbundle' transmission and generation services that led various public utilities in Canadian provinces to reorganize their corporations into separate business units, thus following the model of de-integration practiced in the United States (Froschauer, 1999: 228).
Given cases such as the hydroelectricity industry, where Canada has wholeheartedly adopted the norms and industrial practices of its southern neighbour, it is not unrealistic to foresee a similar development regarding water. In this period when the
United States is in the midst of marketizing its water resources to address problems of scarcity, so too the idea that Canadian water should become a tradable commodity developed as part of a North American water market appears to be gaining supporters both in the United States and Canada among political, but especially business circles. The
U.S. government's bewilderment towards Canada's refusal to support a water trade is illustrated in comments made by former Ambassador Paul Cellucci in 2005:
Water is going to be - already is - a very valuable commodity and I have always found it odd where Canada is so willing to sell oil and natural gas and uranium and coal, which are by their very nature finite. But talking about water is off the table, and water is renewable. It doesn't make sense to me (Bueckert, 2005: A12). Echoing the argument of Mr. Celucci are various Canadians warming to the idea of water exportation, including members of the Fraser Institute and the Canadian Frontier
Centre for Public Policy (Ferguson, 1993a; Frontier Centre for Public Policy, 2001). The latter, a Winnipeg-based think thank, has called for water to be treated as any other resource that is traded with the United States, arguing that such a market could be worth billions to the Canadian economy (Frontier Centre for Public Policy, 2001). Also supportive of this idea is UBC professor of environmental economics, David Pearse, who argues that, "Water is a resource, like timber and fish," suggesting that its exploitation can be as easily regulated as any other resource through government licensing (Carrigg,
2004). While some academics and think tanks such as the Frontier Centre, may support bulk water exports, the most enthusiastic supporters of water exportation residing in
Canada are likely those entrepreneurs hoping to profit from this industry - a factor I explore in the following section of this chapter.
Feasibility of Staples Production: More than Just 'Supply & Demand'
While the previous section of this chapter clearly illustrated the importance of political, economic and social phenomenon driving foreign demand for staples resources, the development of a natural resource industry depends on much more than simply the coexistence of an adequate supply and the substantial demand for a resource product. As
staples theorists have acknowledged in their works, it is also a combination of many other
factors, including adequate technology, entrepreneurship and government assistance, that have aided the development of staples industries in the past - factors I argue are present
and capable of doing the same for a Canadian water export industry. The following section briefly explores the role of technology, entrepreneurship and government assistance as stimulating agents of other resources' development in Canada. This section helps to reinforce the notion of the influential role these same factors may have in stimulating a bulk water exportation industry, given the persistence of these same drivers in other Canadian resources' development.
Criticized for being too technologically deterministic in his work, Harold Innis has nonetheless performed invaluable research establishing the importance of technology to staples development, particularly in a nation such as Canada where many geographic challenges have required technological answers to facilitate the transportation of resources to markets (Berger, 1976: 101-2). In the case of the fur trade, it was the unchartered and fast-flowing waterways inhospitable to transit by boat that led European
fur traders to adopt the birch bark canoe (Innis, 1940: 20). This form of transport developed by the indigenous peoples allowed fur traders to portage deep into the
Canadian wilderness, opening access to new trapping territory - something always in
need as the fur supply quickly became decimated in any one location (Innis, 1940: 20, 11,
143).
Arthur Lower, in his discussion of the lumber industry, also discusses advances in
technology that proved essential for the transport of timber over long distances. Among
those advances cited were simple techniques such as binding lumber together into rafts
for transit on rivers. While effective at keeping timber loads together over long journeys,
lumberman and their rafts were faced with various obstructions during this transport,
particularly, the dangers posed by fast-flowing rapids and waterfalls (Lower, 1973: 207,
209). Successful transportation around these barriers required its own technical solution coming in the form of the timber slide. Slides were structures built of lumber themselves that allowed rafts, partitioned and separated into smaller 'cribs', to slide over the land to safer sections of the river. This technique proved so successful that over the course of the
19th century, slides were ultimately constructed across the country, built and operated both by the government and private investors (Lower, 1973: 209-2 13).
Within Canada's agriculture industry technology has often played an important role, permitting both the growth and diversification of Canadian exports. Several such advances were the product of government-run experimental farms, established to assist
Canadian settlers in the development of agriculture techniques suitable to a Canadian environment (Fowke, 1946: 232). Although research in cross breeding helped to create hardy strains of wheat more productive and suitable for the cold Canadian climate, it was experiments and the dissemination of results on summer-fallowing (performed to
conserve soil moisture in drought years) which proved to be most helpful to this industry.
This technique was ultimately one of the most important factors responsible for making
wheat a staple agricultural product of Canada, still grown today in regions considered
relatively arid such as the prairies (Fowke, 1946: 232-8).
Another significant advancement in technology proving highly beneficial to
Canadian agriculture was the development of refrigerated facilities and portable
refrigeration units in the late 1800s. Fowke explains how fitting warehouses and
Canadian steamer ships with refrigerated compartments allowed Canada to expand
markets for dairy products such as butter and cheese -produce which could now reach
European destinations without any loss of product quality (Fowke, 1946: 2 16-7). As with technology, staples theorists have also granted significant attention to individual entrepreneurship as a necessary factor leading to the development of staples industries. While basic factors of supply and demand remain foundational principles of commercial markets today, it is also those individual persons or firms who seek to capitalize on the international trade of natural resources that remain very responsible for the growth of staples industries. Natural resources are often capital-intensive sectors of the economy, which as result, require significant pools of investment from actors convinced of the industry's profitability.
In the case of the cod industry, while there was no shortage in Europe of fisherman or ships to send to the Grand Banks in search of cod, these transatlantic expeditions could often last several months, requiring large quantities of supplies for the crew, acquired only through significant upfront expense. Providing fishing crews with the necessary equipment, provisions, and often even the ship to make such expeditions possible, were European merchants (Innis, 1940: 19,21). These businessmen would
either fit ships with provisions, cables, guns etc. or provide loans to the crew for doing so,
and in return, would receive a portion of the profits from fish sales, and/or a percentage
or set amount of the cod harvested (Innis, 1940: 19,2l,41-3).
Similarly, in the fur industry, the growing distances over which this trade took
place required greater and greater capital expenses, both to outfit traders with supplies
needed to make the voyage, as well as to provide the goods to barter with indigenous
populations for their furs (Innis, 1956: 62, 390). Coupled with the heavy costs of
shipping furs across the Atlantic, the economies of scale needed to make the industry
profitable led to a centralization phase within this sector, concentrating the fur trade among a small number of large merchant companies who were capable of funding of expeditions (Innis, 1956: 58-9). Although this situation would eventually lead to a near complete monopolization of the industry by the Hudson's Bay and Northwest companies,
Innis stresses that even after this centralization occurred, individual initiative remained an integral part of the industry's structure (Innis, 1956: 390-1). Due to the nature of this work which required fur traders to travel long distances out of contact with merchants for extended periods of time, these company agents became partners to some degree with their firms, requiring benefits such as profit sharing and other rewards to drive their personal initiative in establishing new contacts with first nations and new sources of fur
(Innis, 1956: 112-1 13).
On occasion, when government was unwilling to assist staples industries in addressing obstacles to growth, it was the innovative measures provided by entrepreneurs in their quest for profit that facilitated resource production. This was seen for example in the aforementioned case of timber slides used by the lumber industry. Faced with a dilemma that would hinder the industry's ability to transport lumber over long distances,
the colonial government failed to act for several years to solve the problem, despite local political lobbying on this issue. Ultimately it was private entrepreneurs who constructed
the first timber slides in the early 1800's, providing an invaluable service to the industry
while generating a profit at the same time (Lower, 1973: 210-13).
Although colonial governments were slow to act in this case and grant aid to a
nascent staples industry, the lumber sector ultimately did benefit over time from
government assistance. Some of the first examples of aid came in the form of preferential
tariffs and rates to "assure profits", offered by the British government to those transporting lumber across the Atlantic (Lower, 1973: 46). The peak of early government intervention in this industry however was reached in 1870, according to Lower. By this time not only had the new Dominion purchased many of the original privately operated timber slides, the government now owned and operated over 120 lumber 'stations' across
Canada, consisting of either timber slides or dams used to facilitate lumber transport on the nation's waterways (Lower, 1972: 2 12).
From other accounts of staples development offered by theorists, it is clear that government assistance has been an important, if not vital component of successful staple industry growth. While not a direct subsidy, in Innis' account of the fur trade, he discusses the heavy expenditures made by colonial powers in an effort to protect their fur trade interests against competition. This spending was largely funneled towards the construction of military posts and the formation of alliances with first nations (Innis,
1956: 390-1). So extensive were these expenditures, considered essential for protecting trapping territory, they ultimately proved financially draining on the rest of the colonial economy, hindering economic development in New France in particular (Innis, 1956:
390- 1).
Perhaps the most extensive subsidies awarded to early staples industries in
Canada were those granted to the agricultural sector. Considered a strategic asset
necessary to the development of other staples industries, agriculture received special
attention from colonial governments during the initial European settlement of Canada.
As early as 1664, France began to subsidize the colonization of its North American
territories for agricultural purposes. Initial efforts consisted of paying the voyage costs
for early settlers travelling to New France, and in subsequent years, providing the same transport for unwed women (in hopes of encouraging family formation and expanding the agrarian population) (Fowke, 1946: 18-9).
Both French and British governments made efforts to expand livestock production in the colonies either through the temporary provision of breeding animals to promote heard expansion, or the direct purchase and distribution of animals to the colonists themselves (Fowke, 1946: 22,54-55). To encourage the growth of crops, settlers in Nova
Scotia were rewarded a bounty of 20 shillings per acre for clearing and fencing their property. If settlers chose to grow specific grains of particular need in the colonies, such as wheat, or rye, they were entitled to additional bounties based on the amount of grain produced (Fowke, 1946: 30,34-5). Efforts by the government to promote agricultural development continued to evolve and diversify over the course of this industry's history.
Among the many government measures explored by Fowke, specific attention was paid to those that promoted settlement in the west. Specific efforts included the federal funding of aforementioned experimental farms as well as smaller programs such as the organization of tours for European farmer delegations -a program designed to encourage farmer immigration to the prairie provinces (Fowke, 1946: 171,238-9).
The Feasibility of Bulk Water Exportation: Tried, Tested & Occurring Elsewhere
From the above discussion of previous staples works, it is clear that theorists within this field have acknowledged the importance of factors such as technology, entrepreneurship and government assistance as significant, if not essential components driving staples industry development. In the case of the political economy of Canada's water, 1 argue that the existence of these very same factors will likely assist in the development of Canadian bulk water exportation - an assertion accorded credibility when one considers the persistence of these determinant patterns in previous staples industry development.
The question of whether present industrial technology exists to facilitate Canadian water exportation can be answered through consideration of those technologies used in other staples industries. As was noted in chapter one, proposals to export Canadian water have relied principally on one, or a combination of methods, based on canals, pipelines or tanker-ships. It is no secret that large volumes of natural resources, primarily oil and natural gas, are already transported to and from Canada by means of the latter two methods, resulting in relatively incremental changes from pre-existing industrial technology for the transport of water. In his discussion of tanker transport of water,
Charles Birt notes that if proven to be economical, water exportation from destinations such as the British Columbia coast, could follow a process similar to that found in the oil industry (Birt, 1992: 48-56). Such a system would require an extensive infrastructure that although costly, would entail the adoption of already existing technology. This infrastructure would consist of super-tankers, with a dead weight tonnage of up to
500,000 tons, as well as tanker terminals and storage facilities capable of processing large volumes of water within short periods of time - all components found in major ports around the world already serving the oil industry (Birt, 1992: 48-56).
Due to the seemingly easy transferability of tanker-technology to the water trade, as well as the present domestic use of canals and pipelines in the United States to address regional water shortages, (at least for the time being), the feasibility of water exports due to technological capacity appears largely a moot point. What deserves to be discussed however is whether Canadian water exports can be economically feasible given both this present technology and alternative methods of water provision.
Skeptics of bulk water exportation may point to measures such as desalination as a way to avoid costly export endeavors. Although thousands of desalination plants exist worldwide, two-thirds of them are found in the arid, but oil-rich Middle East (Ismail,
200 1: 1). This is an unsurprising fact given that desalination remains a "prohibitively expensive" procedure due to the energy-intensive process of extracting brine from collected seawater (Pacific Institute, 2006). Composing nearly half of the total cost of desalination, rising energy prices have inhibited development of this form of water provision, even in wealthy regions of the world such as California (Pacific Institute,
2006).
Here, in their study of desalination, Oakland-based think tank, the Pacific
Institute, found that nearly all presently proposed desalination plants in the state remain unlikely to be built in the near-future, due to a failure of such projects to "adequately address economic realities" caused by the current energy market (Pacific Institute, 2006).
While desalination may be a solution for some water deprived communities, the utility of
these plants is largely limited to coastal cities, unable to address the problems of water
scarcity in inland regions unless the desalinized water itself is piped into these locations -
clearly compounding costs of this water source even further (Ismail, 2001 : 1).
Despite the cost concerns related to it, water export skeptics such as El Ayoubi
and McNiven consider desalination a more financially attractive source of water than
bulk exportation (El Ayoubi and McNiven, 2006: 14). The two scholars base this opinion
on a single case study they performed which discovered a lack of profitability within a fictitious water export plan, established between the Annapolis Valley of Nova Scotia and the city of Brownsville, Texas (El Ayoubi and McNiven, 2006: 1-14).
Although the scholars' study makes the correct assertion that demand for
Canadian bulk water may not presently be sufficient in the United States for all proposed export endeavors to be profitable, their selection of the Annapolis-Brownsville scenario as a representation of all Canadian bulk water export proposals appears to be questionable. What is curious about El Alyoubi and McNiven's study is that instead of analyzing the profitability of a real-life export proposal, these scholars instead selected an export source based on the convenience of available statistics. Rather than choose an export region such as British Columbia, continually selected by entrepreneurs as part of export projects believed by them to be profitable, the scholars chose the Annapolis Valley in their model, a site undocumented in bulk water proposals to this date, citing their reason for doing so as one based largely on "the availability of data on river flows and
(water) usages for the area".
I do not contend that the findings of the Annapolis-Brownsville scenario are necessarily false, as other studies of east-coast bulk water schemes, such as one conducted by the government of Newfoundland, have found similar results. Here the government investigated the cost of exporting water by tanker, between Gisborne Lake,
Newfoundland and the California coast, -a real-life project deemed unprofitable due to
the projected transport costs, (estimated at between $1.16 and $3.60 US per cubic meter
of water) compared to current market costs for treated California water, (priced between
$0.32 and $0.49 US per cubic metre) (Government of Newfoundland, 2001 : 53). It would appear, however, both premature and short-sighted to assume that all present bulk water proposals considered from a variety of geographic locations in
Canada, or those developed in the future, would be unprofitable as well. While some recently proposed projects would not be economically feasible due to current market prices for water in the United States, this does not necessarily preclude all potential projects from being profitable, even today. Furthermore, as was explored earlier, water scarcity continues to grow as a problem in the United States and although short term, domestic solutions may delay the demand for alternative water sources and an increase in market price for water, market demand for shrinking domestic U.S. water supplies will likely cause prices to increase in the future, creating a more hospitable economic environment for costly bulk water projects.
The notion that bulk water exportation can be a lucrative industry must also be
explored further given the persistent entrepreneurial interest in this potential staple sector.
Just as earlier developed staples industries depended greatly on individual initiative and
entrepreneurship, many investors both Canadian and American are keen to profit from
bulk water exportation.
Individuals such as John Febbraro, continue to promote the option of bulk water
exportation as a highly profitable industry. President of the Canadian company Nova
Group, Febrarro's firm obtained a license in 1995, (later rescinded), to export water from
Lake Superior to potential consumers in Asia. Febrarro is adamant that Canadian water
"will be a commodity" in the future, an opinion shared by Eugene Corrigan (Handelman,
2004: 45-6). Corrigan's U.S. company, Flow Inc., has identified 40 nations "interested in North American water", a market he estimates could be worth 250 billion dollars annually (Handelman, 2004: 45-6).
Illustrating that bulk water exports are not an unrealistic option, and in fact a nascent global industry, Barlow cites various export projects already in place around the world. Israel for example began negotiations with Turkey in 2000 to purchase 13 billion gallons of water annually, to be shipped by super-tanker (Barlow and Clarke, 2002: 132).
Barlow also notes how a Norwegian company has developed a technology which will allow large amounts of water to be towed in sealed plastic bags across oceans. The same company signed contracts to deliver water in this manner to Northern Cyprus, beginning in 1999, while a British corporation, utilizing this same technology, has begun the first such deliveries by sealed bag to various Greek Islands (Barlow, 200 1: 37-8). Bulk water exportation has developed into a fairly common practice, particularly for island nations.
Both Taiwan and Japan have imported a portion of their water supply through tanker, the latter nation doing so following an extended period of drought in 1994 (Anderson and
Landry, 2006: 4). Various Caribbean and Pacific islands have also been known to import this resource, including Aruba. This island nation began importing water in the 1980s to supply the local Exxon oil refining plant, a facility that needed freshwater to utilize as a coolant (Keating, 1986: 160).
Proving that bulk water exporters can find willing North American buyers for their product is British Columbia-based company Snowcap, who in 199 1 succeeded in acquiring a contract from the Goleta Water District in California to ship water from B.C. by super-tanker (Anderson and Landry, 2001). Ultimately the contract was cancelled when the B.C. government imposed a moratorium on bulk water exports. Faced with the same moratorium, California based company Sun Belt, went as far as to launch a NAFTA challenge against the Canadian government, suing it for 10 billion dollars in lost profits from bulk water exportation. Claiming that the B.C. ban contravenes NAFTA regulations, company president Jack Lindsey, stated: "Because of NAFTA, we are now stakeholders in the national water policy in Canada" (Barlow, Maude 200 1: 6 1).
Although entrepreneurs remain convinced and ready to invest in Canadian bulk water export plans, particularly those carried out through tanker ship, the profitability of some large scale projects such as the GRAND Canal may be limited without state intervention. Estimated to cost, (in 2005 dollars) over 180 billion US, and facing significant public opposition in Canada, the GRAND Canal plan ultimately did failed to develop (Anderson and Landry, 200 1: 62). While admittedly, the cost of such large scale water projects is an inhibitory factor in their future development, as my account of
American water subsidies illustrated, the U.S. government has repeatedly been willing to
intervene with billions of dollars in assistance for water projects in the past. Therefore, based on the active role of the U.S. government in water provision, the possibility of
federal assistance for future bulk water projects would seem likely if there was a clear
demand for water resources. The depletion of domestic U.S. water supplies poses a clear
and direct threat to economic and human security and as such, the cost of a bulk water
project, even in the hundreds of billions of dollars would not be insurmountable for the
United States, particularly one considers the more than 320 billion dollars spent by the
U.S as of April 2006 for its military operations in Iraq (Weisman, 2006: A14).
What differentiates the case of bulk water from previously developed staples
however, is the opposition of the Canadian federal government to this resource's development. While any large scale plans to divert Canadian or shared Great Lakes water to the United States will likely receive American government assistance if water demand continues to rise, it does not seem likely that a nascent export industry should expect the same from Ottawa. Federal opposition however, does not preclude provincial governments from providing their own subsidies to water export projects. Like the federal government, provinces too can, and do grant assistance to natural resource
industries, and some on occasion have also contemplated allowing bulk water exports. In the following chapter, one will see how both the federal relationship between Ottawa and the nation's provincial governments, as well as Canada's international trade obligations,
greatly complicate measures taken by federal government to prevent the exportation of
Canadian water. CHAPTER 3: TRADE OBLIGATIONS, AND VAGUE FEDERAL JURISDICTIONS
The growth of the environmental movement in Canada, as I asserted in chapter one, is a relatively new phenomenon in Canadian politics - a factor that nonetheless greatly affects government decisions made today regarding natural resource development.
In the case of water exportation, it was shown that environmental concerns remain the primary factor likely to inhibit growth of this resource industry in the future. As such, it was concluded that staples theorists must consider this important factor in future analyses
of resource development within the Canadian economy.
This chapter will explore two new factors that like the environmental movement
must also be considered in modern staples theory analyses. With regards to water
exportation, however, these factors will likely have the opposite effect to that of
environmentalism - that is, they are drivers that will encourage, or likely force Canada to
engage in bulk water exportation in the future.
Rules governing the trade of Canada's early staples industries, both prior to
confederation and for a significant period following, were largely the purview of
autonomous national governments equipped with the authority to regulate the flow of
goods across their borders. Tariffs, subsidies, export controls or import bans were all
measures that could be instituted freely, either by colonial powers prior to confederation, under the mercantilist model of international trade, or by the Canadian federal government following establishment of the dominion in 1867.
Several of Canada's early staples industries benefited enormously from the government's ability to control trade flows. Lower for example, discusses in great detail the use of "differential duties" by the British Crown in its efforts to stimulate the
Canadian lumber industry. He highlights how the British government purposely increased its duties on northern European timber in the early 1800s. These rates against
Baltic lumber rose to as high as 30 percent, instituted in an effort to stimulate both a colonial lumber trader facing no British duties, as well as support a British shipping industry awarded the contracts for transport of this Canadian staple to England.
Following confederation, Ottawa for many years under various "national plans", attempted to control the direction of economic growth through the institution of controls on international trade and capital flows. Measures varied from those erecting tariff walls, as established under John A. Macdonald and the first national plan, to investment and pricing controls instituted by Pierre Trudeau in his regulation of Canada's oil industry under the third national plan (McBride, 2005: 32-39).
The Canadian government's ability to regulate trade and capital flows has been
greatly reduced in recent years however, due to the nation's active participation in
international trade accords. Trade regimes such as the General Agreement on Tariffs and
Trade, the Canada-US Free Trade Agreement, and its successor, the North America Free
Trade Agreement, have all significantly increased Canada's access to foreign export
markets. At the same time, however, these trade liberalization efforts have limited
Ottawa's ability to decide what goods and what capital enter or leave the country based on strict legal provisions binding Canada now under international law. Much more than simply a list of regulations governing trade relationships between member states, NAFTA in particular accords both investment rights to foreign corporations and the legal means to challenge member governments if these rights are perceived to be violated. This unprecedented shift in Canada's international economic relationships greatly complicates
Ottawa's ability to influence domestic industrial development, or in the case of bulk water, its ability to prevent the development of this staple industry.
As discussed in chapter one, Canada has continuously failed to achieve an explicit exemption for water as a tradable commodity under the free trade accords it has become a signatory to. This failure to exempt water as a commercial good in both the GATT and
NAFTA is highly condemned by bulk water opponents. Maude Barlow, for example, contends that the lack of an exemption will ultimately open the door for legal challenges, both by foreign governments and trans-national corporations, which would force Canada to export its water under these binding trade frameworks (Barlow, 200 1: 58-9).
In the absence of a formal exemption, bulk water opponents note the additional problem posed by the inclusion of water as a tariff item under GATT Tariff Heading
22.01, which reads: "Waters, including natural or artificial mineral water or aerated
waters, not containing added sugar or other sweetening matter nor flavoured; ice and
snow" (MacNab, 2005: 20). This tariff item, which was also adopted under the FTA and
NAFTA, is clarified with an "explanatory note" highlighting that the definition of water
includes "ordinary natural water of all kinds, (other than seawater.. ..)" (MacNab, 2005:
20). The existence of water as a tariff item has potentially significant repercussions for its interpretations as a tradable 'good' or 'product' under international trade agreements.
David Johansen notes, "domestic products" as they are "understood within GATT are those products listed within this coding system (Johansen, 2002). Because water is recognized as a product under GATT's tariff listings, this in turn affects water's status under NAFTA who has also adopted the same coding framework.
In light of this argument posed by bulk water opponents, the Canadian government has responded with claims that this tariff item only refers to water that has entered the market as a "commercial good" or a "saleable commodity" -as one sees with bottled water for example (Department of Foreign Affairs, 2005). According to the
federal government, water in its "natural state", such as that found in lakes or rivers
which has not yet been transformed into a product, cannot be considered a commodity
(Department of Foreign Affairs, 2005). John Grant summarizes the federal government's
position succinctly, stating; ". . .since a good must be produced, for water to be a product
something must be done to it. Thus, water in its natural state is not a product (or good)
any more than oil or gas in the ground is a product" (Grant, 2005: 257).
The problem with Ottawa's assertion regarding the status of water is that is based
merely on the federal government's own interpretation of what constitutes a 'good' or a
'product'. Neither the GATT, nor the NAFTA explicitly define what is or is not a
product or a good (Johansen, 2002). As a result, there is no way to ascertain how a WTO
or NAFTA tribunal would rule if it was required to define water's standing as a tradable
commodity. Due to the ambiguous status of water under international trade agreements,
as well as various other factors discussed throughout this chapter, I contend that there is a great risk that Ottawa could lose a NAFTA or WTO hearing in the event that a foreign nation or corporation seeks to access Canadian water for export.
Due to the controversy caused by the lack of a NAFTA exemption for water,
Canada sought to quell domestic fears over this issue through diplomatic measures, encouraging Mexico and the Unites States in early 1993 to issue a joint statement with
Canada on the matter. These efforts produced an informal, unsigned, non-binding statement, issued as part of a media release between the three nations, reading:
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. And nothing in the NAFTA would oblige any NAFTA Party to either exploit its water for commercial use, or to begin exporting water in any form. Water in its natural state in lakes, rivers, reservoirs, aquifers, waterbasins and the like is not a good or product, is not traded, and therefore is not and has never been subject to the terms of any trade agreement. (Grant, 2006; Johansen, 2002, Shrybman, 1999).
Critics of bulk water exportation remain highly unconvinced that water in its natural state will be immune to legal challenges by those vying for this Canadian resource
(Heinmiller, 2003: 50; Shrybman, 1999). Steven Shrybman, executive director of the
West Coast Environmental Law Association notes that under both US. law and according to the European Court of Justice, water in its natural state is considered a commercial good, - a reality that may weaken Canada's defense in rulings on this matter were any cases to be brought forward under international trade regimes Canada is a party
to (Shrybman, 2000: 8-914.
Shrybman Highlights the US Supreme Court Decision in Sporhase v. Nebraska which found water to be an "article of commerce under U.S. law" (Shrybman, 1999:lO). See page X of this thesis for further discussion of this case and its relevance to Canadian bulk water exports.
7 7 The question of whether water in its natural state can be considered a tradable commodity may not necessarily be determined by the lack of an official exemption for this resource under NAFTA, but by present economic practices in Canada regarding its management of natural water resources. Despite the federal government's claims that water in its natural environment is not subject to commercial practices, various examples of common industrial water uses prove otherwise.
Highlighting the dubious nature of the federal government's claim, Shrybman argues that water in its natural state has entered into commerce in various forms as part of the proprietary claims of water license holders. Various Canadian industries purchase water licenses on a regular basis granting the right to extract water for production purposes directly from its natural sources. Shrybman notes that as of 1993, over 40,000
licenses existed in British Columbia alone, permitting surface withdrawals of freshwater
supplies in this province (Shrybman, 2000: 10-1 1 ; MacNab, 2005: 3 1).
Water licenses are purchased by various industries, particularly utility
corporations who divert natural water flows for hydroelectricity production. In British
Columbia these licenses can cost between five and ten thousand dollars - a small sum
when one considers the value of electricity produced from this resource, but a transaction
that nonetheless attaches a value to water in its natural state (Dobbin, 2006). Similarly,
other industries are required to purchase license rights for access to Canadian water
although prices range depending on the industrial sector. In British Columbia for
example, a license granted to extract two hundred cubic metres of water per day for
bottling purposes would cost the bottling firm approximately two thousand dollars
annually, while a pulp mill seeking the to extract water for industrial purposes would be expected to pay approximately ten thousand dollars (Government of British Columbia,
1988).
Although the status of water in its natural state remains unclear as a potential commodity according to international trade agreements, - a status which may only be clarified if a legal challenge is pursued under either the WTO or NAFTA, the possibility that this may be a successful legal route for a foreign government or corporation to access
Canadian water is indeed troubling. In addition to the ambiguity surrounding the state of water as a good, Canada's ability to protect itself from water exports is further weakened by the limits that these trade agreements put on the federal government from legislating its own domestic export ban.
Restrictions imposed on Canada from erecting an explicit ban on water exports, stem from provisions within these trade agreements that prohibit signatory nations from instituting 'quantitative restrictions' on trade. Within the GATT, such provisions are found under Article XI, which reads:
No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party (GATT, 1947).
Nearly identical provisions are found under article 309 of the NAFTA. Other
clauses within this agreement however, restrict even further a state's ability to institute
quantitative export restrictions. Whereas as Shrybman notes it would be technically
feasible under GATT for Canada to institute an export duty or tax on water exports, (an
effort which in the absence of the ability to institute an outright ban, could prevent water exports by making such activity prohibitively expensive), articles 302 and 3 14 of
NAFTA goes as far as to ban this potential measure as well (Shrybman, 2000: 3).
Although Shrybman describes these GATT and WTO provisions as, "a blanket prohibition against the use of quantitative export controls" both he and other scholars acknowledge the existence of exceptions occasionally permitting such barriers to export, as stipulated under article XX of the GATT and grandfathered under article 3 15 of
NAFTA (Baillat, 2005: 8; Elwell, 2001: 24; Shrybman, 2000: 2). International trade
frameworks often include provisions permitting restrictions on trade for reasons related to national security, public safety and protection of the environment. Referenced as possible
legal routes which could help just@ domestic legislation banning water exports, clause
(b) under GATT article XX permits export bans "necessary to protect human, animal, or
plant life or health," while clause (g) allows such bans for reasons "relating to the
conservation of exhaustible natural resources if such measures are made effective in
conjunction with restrictions on domestic production or consumption" (Elwell, 2001 : 24;
GATT, 1947b).
While these clauses appear promising on paper, the record of GATT permitting
such exceptions suggests that any attempt by Canada to prevent water exports under this
clause would likely be unsuccessful (Elwell, 2001 : 24, MacNab, 2005: 15). The "two-
tiered" burden of proving that export controls are a legitimate need for purposes of
conservation or health and not as Mcnab states, "a disguised trade restriction" has shown
to be a highly difficult task under the GATT (MacNab, 2005: 25). Lawyer Christine
Elwell of the Sierra Club of Canada for example, notes that prior to 200 1, "in all the
cases before the WTO involving issues of protecting environmental or natural resource interests, the WTO has ruled against those interests" - issues which have included
"controls concerning endangered species, contaminated fuels and hormone treated beef'
(Elwell, 2001 : 24; Shrybman, 2000: 2). Elwell observes that there has been only one case before the WTO that has actually upheld legislation limiting international trade based on health grounds. In this example however, it was 'import' as opposed to 'export' restrictions being defended under article XX, involving a case where France was permitted to sustain legislation banning imports of Canadian asbestos due to the health risks this product posed for French citizens (Elwell, 2001 : 24-25).
Canada's record of defending environmental export restrictions under article XX is even poorer than that for barriers to imports, due to the fact that no such controls have been successfully defended under international tribunals. Shrybman highlights how the
"leading" cases regarding article XXs application to export controls involve international disputes to which Canada was a party. Both cases implicating Canada involved challenges against legislation designed to conserve Canadian wild fish stocks.
(Shrybman, 2000: 4-5).
In the first challenge ("Measures affecting exports of unprocessed herring and salmon - l988"), the "two tiered" burden for seeking an article XI exemption proved too difficult for Ottawa (Craft and Burtsin, 1993; MacNab 2005). Here, Canada was unable to prove that export restrictions of unprocessed salmon and herring were made on environmental grounds and not as the plaintiff, (the United States) contended, to be merely a disguised barrier to protect fish-processing jobs in British Columbia (Craft and
Burtsin, 1993). Despite the fact that Canada had maintained this policy for decades, as part of a comprehensive conservation strategy, Canada's legislation was found in violation of GATT Article XI and "justified neither by clause XI (b) or XI (g) (Craft and
Bursin, 1993; WTO, 1988).
Under NAFTA, the restrictions limiting the federal government's ability to control exports are even more comprehensive than those provided under the General
Agreement on Tariffs and Trade. In addition to restrictions likes those found in GATT which nation states can impose on Canada through NAFTA article 309, foreign corporations too can seek to challenge Ottawa's export policies due to the investment rights accorded to them under this revolutionary agreement. Unlike under GATT where trade disputes remain a state versus state matter, within chapter 11 of NAFTA, foreign investors can directly sue a member government if it believes its investment rights in that nation has been violated.
The principle investor rights accorded to companies under NAFTA, and which are most relevant to Canadian bulk water exportation, are those pertaining to 'national treatment', listed under NAFTA article 1102:
Each Party shall accord to investors of another Party treatment no less favorable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments (DFAIT, 2003).
Just as water's official status as a tradable commodity remains yet undetermined
by either a NAFTA or GATT trade dispute panel, so too the powers of article 1102
remain relatively unknown in terms of their ability to force Canada to engage in bulk
water exportation. While some bulk water opponents have rashly concluded that Chapter
11 is a definitive legal route allowing foreign investors to access Canadian water for
export, this conclusion remains completely untested judicially at this time (Holm, 2001). Nevertheless, the Chapter 1 1 trade dispute scenarios illustrated below highlight yet additional potential factors -among many known economic and political drivers- capable of stimulating a Canadian bulk water industry.
Explored by John McDougall, there are two scenarios where a challenge under
Chapter 11 could allow a foreign investor the right to engage in bulk water exports following a NAFTA trade ruling in favour of the would-be exporter (McDougall, 2006:
16- 17). The first scenario would entail a situation where both an American and a
Canadian firm are seeking licenses for Canadian bulk water exports. Were a provincial or federal jurisdiction to grant an export license to the Canadian firm and not the
American investor, this would likely be found as a breach of 'national treatment' obligations under NAFTA, therefore allowing American firms equal right to access
Canadian water under the accord (McDougall, 2006: 16- 17).
Due to the federal government's consistent, long-term opposition to bulk water exportation (by either Canadian or American firms), such a scenario is not likely to develop without the complete overhaul of the government's policy stance, - a position that has been in place for over two decades and shared by all successive federal governments. Despite little probability of this policy change occurring, at least in the short-term, the latter section of this chapter will illustrate how jurisdictional ambiguities between provincial and federal governments over water resources, could very well produce such a trade scenario if a province unilaterally decides to permit water exportation.
This first scenario has already in fact presented itself, where action over water
exports taken at the provincial level has forced the federal government to defend itself for allegedly breaching national treatment obligations. This situation occurred when, as mentioned in chapter one, the government of British Columbia granted six licenses to
Canadian firms in the 1990s allowing them to export water internationally by ocean tanker. One such company, British Columbia-based Snowcap, succeeded in 199 1 in acquiring a contract to ship water from B.C. by super-tanker to the Goleta Water District in Santa Barbara, California (Anderson and Landry, 2001: 43-44).
Ultimately, the contract was cancelled when the B.C. government imposed a moratorium on bulk water exports. Faced with the same moratorium, California-based company Sun Belt, who was working in partnership with Snowcap on the Goleta project,
initiated a NAFTA challenge against the Canadian government suing it for 10 billion
dollars in lost profits from bulk water exportation. Claiming that the B.C. ban
contravenes NAFTA regulations, company president Jack Lindsey stated, "Because of
NAFTA, we are now stakeholders in the national water policy in Canada" (Barlow, 2001:
6 1).
Canada is currently being challenged under article 1102 in the Sun Belt case
where an arbitral process will proceed upon the plaintiffs completion of procedural
criteria demanded under the NAFTA framework (Department of Foreign Affairs, 2005).
Although the basis of Sun Belt's NAFTA case are not public knowledge, Sun Belt's
challenge may be partially related to the fact that following imposition of the moratorium
on water exports by the British Columbia government, Snowcap was compensated by
Victoria for the cancellation of its previously acquired water license while Sun Belt
received no such compensation (Mckeown, 2000). Elwell contends that the national treatment principle is most applicable in cases such as the above scenario, where licenses granted explicitly for export purposes by a
Canadian jurisdiction will ultimately give American corporations the same rights to pursue this practice. However, Elwell and other scholars point to a second scenario where national treatment laws may be interpreted so as to permit exports by a foreign investor without a prior export licenses ever being approved by a level of government in Canada, to any firm, domestic or foreign. (Elwell, 2001 : 26, Shrybman, 1999: 5-6, McDougall,
2006: 17).
The second scenario where national treatment principles may be exercised implicates my earlier discussion regarding water and its recognition as a good or product by a trade dispute panel. Whereas a successfil challenge seeking to permit water exports under article 309 would hinge on an interpretation of water as a good or product, Elwell and Shrybman note how NAFTA regulations pertaining to national treatment do not require this. Chapter 11, the scholars explain, "is not limited in action to the trade in goods" but can be applied to water in circumstances where this resource is considered either an 'investment' or a 'service' (Elwell, 2001: 26; Shrybman, 2000: 4) In this manner, national treatment principles can be applied to water in its natural state once a government grants firms the right to withdraw water from these sources for industrial purposes-a government practice already performed in Canada through water licensing, granted for manufacturing, agriculture, municipal distribution etc. (Elwell, 200 1: 26-7;
Shrybman, 2000: 4).
For a firm to gain the right to export Canadian water under national treatment
regulations, a trade panel must declare the economic conditions under which the foreign investor is seeking water access to be "like circumstances" to those of other firms granted water licenses domestically in Canada. A hypothetical example of this, explored by John
McDougall, involves an American utility company seeking to export water from Canada as part of its operations supplying water to U.S. communities. In this circumstance, the
American investor could potentially argue that its right to access Canadian water is a
"like circumstance" comparable to utilities that withdraw water in Canada for distribution to domestic municipalities (McDougall, 2006: 17). If a panel were to find this export proposal to be a 'like circumstance', the trade implications for Canada would be
enormous as NAFTA would essentially be restricting any geographic limit on the benefits
of this resource, due to prior domestic exploitation of water supplies (McDougall, 2006:
17).
Like many legal ambiguities in the NAFTA, however, how a trade panel would
interpret 'like circumstances' in such a case remains unknown, that is until a dispute over
this issue is initiated under the NAFTA dispute framework. It is possible, for example,
that a tribunal may consider geographic location a legitimate distinguishing factor
between "like" and "un-like" investment opportunities. As such, a panel may not find
geographical limitations on water licensing to be in violation of national treatment
provision given that all investors, domestic or foreign, are equally restricted from
exporting water out of this same political boundary.
The problem for bulk water opponents, however, is that it is equally possible for a
panel to interpret 'like circumstances' based on factors other than the geographic location
of the "intended beneficiaries of the investment" (Shrybman, 2000: 4). A trade panel
engaged in the above scenario may feel compelled to consider other characteristics, for example, the volume of water to be extracted or the intended purpose of the water license
(such as municipal consumption). Following a comparison of these factors to domestic water licenses issued for the same end uses in Canada, members of a NAFTA trade panel may find that an investment scheme to provide American communities with Canadian water would represent "like circumstances" in such a situation (Shrybman, 2000: 4).
Although the above example is purely hypothetical, the risk that Canada may be forced to export water following a successful national treatment challenge on these, or similar grounds remains possible. Furthermore, international water practices discussed in chapter one may increase the likelihood of a successful Chapter 11 challenge. As previously explored, water transfers already take place between Canada and the United
States; in at least one case, (that of Point Roberts, Washington), an American community actually purchased water from a Canadian municipal government - a practice I argue is likely to be considered a precedent-setting act if reviewed under a NAFTA tribunal.
While the outcome of a potential national treatment dispute over water remains difficult to predict, what is clear is that once a Canadian jurisdiction permits the exportation of bulk water and such a practice begins, article 1102 ensures that the right of
American corporations to export this resource as well, will be undeniable. Initial resource access accorded under national treatment is not the sole right a foreign investor would enjoy in this situation however. Other NAFTA provisions, specifically article 3 15 of NAFTA, will work to ensure a stable supply of water resources are available to any export destination, once such exports begin Article 3 15 provides stability of access by preventing a resource producer from instituting export controls that would favour domestic consumption of a finite resource at the cost of decreased supply to the foreign consumer. While the producing nation is still permitted to limit its resource exports, these restrictions must be met with proportional reduction in domestic consumption of the same resource (DFAIT, 2007). As such, article 3 15 of NAFTA will ensures that once exports of Canadian water commence to the United States, "the US is entitled to a proportional share of Canadian water in perpetuity" (Shrybman, 2000: 5). Stated otherwise, "once the tap is turned on it stays on", as any reductions of water exports to the United States would also have to be met with proportional reductions in Canadian consumption (Shrybman, 2000: 5).
Although one of the most certain ways to trigger application of NAFTA provisions to water would be for Canada's federal government to approve of water exportation by Canada's federal government, the fact that Ottawa is officially opposed to such exports may be largely irrelevant when preventing the trade of this resource. This is due to the decentralization of government authority that has occurred since federation and division of jurisdictions over natural resource development between the federal and provincial governments.
Canadian Federalism: Decentralized Governance, Decentralized Control
Encompassing the final modern factor that an updated staples approach must consider in any contemporary analysis of Canadian resource development is the decentralization of government authority between Ottawa and 13 provincial and territorial jurisdictions. Although the division of government jurisdictions is not a new phenomenon, given that Canada as a federation has existed since 1867, many of the nation's early staples industries were initially developed in an era of highly centralized government authority, a condition no longer as apparent today. As a result, the decentralized nature of governance in this modern Canadian federation is poised to be a highly influential force, capable of significantly influencing the timing and breadth of bulk water exports as a potential Canadian industry in the future.
Canada's early staples industries, as highlighted throughout this thesis, were initially developed long before Canada as a state, ever existed. As a result, authority to regulate these nascent industries followed a simple, vertically organized model, whereby colonial governments' fulfilled the economic and political objectives of both the French, and (later solely), the British crown. Even following confederation and the division of jurisdictional powers between provinces and the federal government, as stipulated in the
British North America Act, the federal government retained a centralized role, shaping development of the Canadian economy by instituting the aforementioned 'national policies' (McBride, 2005: 32).
Following the immediate post World War Two era, however, David Cameron and
Richard Simeon describe how centralized control of national policy-making by the
federal government began to unravel, as provincial governments began to assert rights
accorded to them under the Constitution (Cameron and Simeon, 2002: 49). Over the
course of the past sixty years, the scholars observed a shift from what they describe as
"cooperative federalism" to a model they label "collaborative federalism" (Cameron and
Simeon, 2002: 49). Under the former governance framework, the federal government
maintained a prominent role in areas of provincial jurisdiction in the immediate post
world war 1 1 era, using its spending power to shape the policy-design of Canada's
welfare state through "shared-cost" endeavors with the provinces (Cameron and Simeon, 2002: 50). This intergovernmental relationship changed with the rise of Quebec nationalism in the 1960s as well as the growth of regionalism a decade later in Western
Canada. Creating a "competitive dynamic" between them and the federal government, the provinces sought a more horizontal relationship with Ottawa, whereby provincial governments would be closely consulted with on substantial federal initiatives, - issues such as a free trade agreement with the United States (Cameron and Simeon, 2002: 5 1-
52).
Throughout the 1990s, this decentralization process continued as the federal government both reduced, and amalgamated its financial transfers to the provinces, thereby abdicating much authority to provincial governments who now had greater
freedom to manage their own social programs, unhindered by federal conditions
(Cameron and Simeon, 2002: 54). The result today of this gradual course of
decentralization is a collaborative intergovernmental relationship, where the roles,
responsibilities, and jurisdictions of federal, provincial and territorial governments, are
both individually asserted by these separate jurisdictions but also, mutually respected. As
such, national goals according to Cameron and Simeon, "are achieved, not by the federal
government acting alone, or by the federal government shaping provincial behaviour
through the exercise of its spending power, but by some or all of the 11 governments and
territories acting collectively" (Cameron and Simeon, 2002: 54).
Various cases exist where a collaborative model of federalism has been utilized to
achieve national goals. These include examples noted by Cameron and Simeon, such as
the Agreement on Internal Trade, as well as the Social Union Framework Agreement,
both developed in the 1990s (Cameron and Simeon, 2002: 55-57). More contemporary, and perhaps higher profile initiatives involving federal-provincial collaboration however, include the Early Learning and Child Care Agreement instituted by the previous Liberal government as well as the present Conservative government's efforts to negotiate a national wait times guarantee for essential medical services.
Despite the success, provincial and federal governments have frequently achieved developing collaborative national policy together, nation-wide initiatives promoting the development of natural resources have often met substantial opposition from provincial authorities. Emboldened by the jurisdictional rights granted to them under Canada's constitution, there has been a tendency recently for provinces to jealously guard their decision-making authority over natural resource development, despite oftentimes sharing similar policy objectives with other provinces and the federal government. This suspicion is likely in part the product of previous federal intrusions by Ottawa into provincial realms of authority, including among others, the controversial National Energy Program,
instituted under Pierre Trudeau.
An example where collaborative federalism has failed to produce tangible,
nationwide results is found in Canada's hydroelectricity industry. Froschauer highlights
how many government jurisdictions in Canada have, since the 1950s, touted the idea of a
national power grid to connect Canadian generation and transmission facilities straight
across the country (Foschauer, 1999: 2 15). A national grid was seen as beneficial for
various reasons, including its ability to provide cheaper hydroelectricity to regions that
would otherwise be forced to develop expensive oil-powered facilities. Despite this and
other benefits such as security of supply and market creation for producers with excess capacity, the federal and provincial governments have continuously failed to agree on a framework to implement this project (Froschauer, 1999: 2 15).
Although there are various political and economic factors which have inhibited development of a national power grid, among the most prominent factors highlighted by
Froschauer are those related to the provinces' unwillingness to abdicate decision making
authority to an external regulator, particularly one controlled by the federal government.
Negotiations regarding both national grid proposals and even many regional transmission
projects have ultimately failed. This is largely due to continual disagreement on issues
such as the ownership of transmission lines, provincial veto rights on project proposals,
the location of generation facilities, and the division of shared costs and benefits among
the various levels of government (Froschauer, 1999: 2 15-2 17).
Just as with the electricity industry, collaborative intergovernmental approaches to
bulk water policy have failed to produce tangible results in line with federal objectives.
The difference between the two cases of course is the development goals sought by
Ottawa for these two industries. While the federal government was attempting to
encourage the development of Canada's hydroelectric industry through a national
transmission grid, its efforts to prevent the development of a Canadian bulk water
industry are equally threatened by the jurisdictional rights granted to provincial
governments.
The jurisdictional authority for either the federal or provincial governments to
control bulk-water exports is highly ambiguous. Section 91(2) of the Constitution Act for
example, grants authority over issues of international trade to the federal government
(Heinmiller, 2003: 498; MacNab, 2005: 32-3). In addition, Section 132 accords Ottawa jurisdiction over water bodies subject to international accords, such as the 1909 Boundary
Waters Treaty (Heinmiller, 2003: 498-499). While these provisions and other federal powers over navigation, shipping, and inland fisheries, grant the federal government as
Heinmiller states, "some authority to intervene in the management of waters within provincial borders", this is tempered by the "fundamental" propriety rights over water accorded to the provinces (Heinmiller, 2003: 498).
Although Section 109 of the Constitution Act accords "proprietary rights over all public owned lands, mines, minerals and royalties" and does not explicitly mention water, Heinrniller notes that provinces retain "primary exploitative rights" to water due to common law principles related to their possession of the land, "underlying and adjacent to most of the freshwater resources" (Heinmiller, 2003: 498). As such, the federal government is prevented from enacting legislation that infringes on a province's right to make decisions about these resource supplies (MacNab, 2005: 32-3). Concluding that any blanket federal ban on bulk water exports would likely violate provincial rights as well as potentially breach international trade obligations, the federal government has favoured a multi-prong approach to prevent bulk water exportation. As the remainder of this chapter will explain however, this strategy is one that has unfortunately been plagued with
several significant weaknesses (DFAIT, 1999).
One of the principle components of Ottawa's most recently launched bulk water
strategy was a federal-provincial agreement known as The Accord for the Prohibition of
Bulk Water Removal from Drainage Basins (MacNab, 2005: 2). Between 1999 and
2000, through successive meetings of the Canadian Council of Ministers of the
Environment, Ottawa sought to negotiate the provinces' participation in this accord, whereby all provinces would agree to impose legislation banning bulk water 'transfers' from their territory (DFAIT, 1999; Grant, 2006: 252).
Although clearly an effort to respect provincial jurisdiction, one of the weaknesses of the accord was its inability to even ensure provincial participation.
Illustrating the ineffectiveness of the federal government's strategy to create a "Canada- wide approach for the protection of Canadian water," MacNab highlights how as of 2005, only five provinces, (excluding British Columbia, Alberta, Saskatchewan, Manitoba and
Quebec) had signed the accord (MacNab, 2005) 154-55). Grant points out that while all provincial governments were in favour of banning bulk water exports at the time, a consensus could not be found on the measures to implement this objective (Grant, 2006:
25 1-252). The provinces, "viewed the issue as one of provincial resource ownership and resented any federal involvement" where, according to Grant, "they were unwilling to relinquish, what they felt, was their jurisdictional prerogative to implement their own water removal policies" (Grant, 2006: 251-252). This unwillingness by provincial governments "to submit to interprovincial policy harmonization" as Heinmiller asserts, is a prime example of decentralized governance taking place in Canada today (Heinmiller,
2003: 507).
A second problem with the bulk water accord, noted by several scholars, is its
inherent weakness as a legally non-binding agreement (Grant, 2006: 252; MacNab, 2005:
155; Shrybman, 1999: 5). MacNab for example, illustrates how as of 2005, only nine of
the thirteen provincial and territorial jurisdictions in Canada had legislated bans on bulk
water exportation at all. Of those nine, six "contain clauses that make them relatively
easy to amend by authorizing Ministers or cabinet to make changes to the definition of acceptable water export" (MacNab, 2005: 155). This is problematic according to
Shrybman, as any provincial government who has a change of heart on the bulk water issue, (particularly following a change in administration, as seen with Newfoundland in chapter one), there are no legal means within the accord for Ottawa to ensure a province's continued adherence to a bulk water ban (Shrybman, 1999: 5).
The fact that provinces can unilaterally change their legislation regarding bulk water exports and pursue the exportation of water resources remains a glaring weakness of the federal government's approach and was acknowledged in Senate debates by the
Honorable Mira Spivak, who stated:
...the government is relying on studies by the International Joint Commission and on the eternal goodwill of the provinces. Even now, that goodwill is questionable. One province wants royalties from water exports when the economies of exports improve. Another waits quietly on the sidelines. Will other provincial governments reverse their current policies? It is naive to expect that none of them will want to export water when water becomes a profitable commodity. It will be the oil of the 21st century (Canada Hansard, 200 1).
Spivak's assertion that provinces may be tempted to export water due to its potential as a lucrative source of government revenue is indeed a possibility when one considers the example of Newfoundland, the province she first alludes to in her statement. Despite the fact that Newfoundland was a signatory to the federal bulk water accord, Premier Roger Grimes opened the debate on the issue in 200 1 by formulating a
committee to explore the feasibility of bulk water exports from Gisborne Lake (MacNab,
2005: 1 15-6).
The Gisborne Lake proposal received strong support from impoverished locals in
the region who could benefit from jobs created by the project. Premier Grimes however had prepared a plan to seek broad-based public support in the province for water exports, doing so by promising Newfoundlanders that any profits incurred through bulk water exportation would go to reducing tuition fees paid by university students in the province
(Barlow and Clarke, 2002: 67). Ultimately the Newfoundland government's report recommended against revoking the province's export ban on bulk water exports, advice that was accepted by the Premier. Although arguing that there was "no public policy reason not to proceed with bulk water export" in the future, the main factor influencing the committee's decision was the perceived lack of profitability of exports from
Newfoundland at the time. As Mcnab highlights, this decision did not appear based even remotely on concern for the province's presence as a signatory to the federal accord, a detail which the report failed to acknowledge whatsoever (MacNab, 2005: 172-3).
In addition to British Columbia and Ontario issuing bulk water licenses before later rescinding them, (B.C.'s Social Credit government initially did so as a strategy to
"to help grow" the province's economy), one other province has recently begun to
consider the economic potential of water exports (MacNab, 2005: 67). Despite legislating
a moratorium on bulk water exportation in 1999, the province of Quebec "decided to take
advantage of the flexibility of the legislation and reopen the question of bulk water
exportation from Quebec" (MacNab, 2005: 114). Stating his desire that Quebec "profit
from water exports, in the same way that it profits from mining", Minister of the
Environment, Thomas Mulclair, declared his intention in late 2004 to re-examine the
issue of bulk water exportation (MacNab, 2005: 1 14). It does not yet appear that the
provincial government has concluded its research on the issue. The provinces' control of their water resources clearly compromises any attempt by the federal government to manage the exportation of bulk water as a national policy.
What may further exacerbate this weakness however is the potential risk that one province choosing to export its water, automatically obliges the rest of the country to permit these exports. Like many of the issues regarding water and Canada's trade obligations, its is unclear if an investor could claim rights to the water in one province if this resource has been exported from another, and therefore been considered a commercial good in its natural state. As the legal opinions commissioned by the federal government, the government of Newfoundland and the Council of Canadians remain highly divisive on this issue, a ruling by either a WTO or NAFTA panel may ultimately be required to clarify Canada's trade obligations (Government of Newfoundland and
Labrador, 2001 : 22; Johansen, 2001 ; MacNab, 2005: 114; Shrybman, 1999: 15).
As one can see from the above discussion, the extent to which the federal government may be able to inhibit bulk water exportation at all, due to its international trade obligations, is further weakened by the decentralization of governance authority within Canada's federation. However, water is a unique case in this regard. Provincial
assertion of its jurisdictional rights has in recent years typically prevented the federal
government from developing resources such as energy as its sees fit. Decentralization
though would likely have the opposite effect in this case, instead barring Ottawa from
preventing the development of Canada's water as a commodity. Whatever the
development ends sought by the federal government for a particular natural resource, it
should be nonetheless clear from the above analysis that decentralization warrants considerable attention by staples theorists as an influential factor in modem Canadian
staples development.
American Unilateralism: Why Ottawa May Choose to Export Anyway
The final section of this chapter explores the risk of unilateral bulk water
diversions by the United States from boundary water bodies it shares with Canada, such
as the Great Lakes. Unilateralism as a factor affecting Canadian resource development is
not included in my staples analysis due to its unique application in the case of bulk water,
based on the geographical circumstances of boundary water bodies as a 'shared' resource
between Canada and its southern neighbour. Not readily applicable to other resource
industries in Canada, the risk that the United States may withdraw water from these
boundary source against Ottawa's wishes is a result of factors of demand discussed
earlier in this thesis but due also to an atypical situation of supply characterized by joint
resource ownership. To understand the risk of unilateral American withdrawals from
boundary water sources, one must first understand the Canadian federal government's
strategy to protect its share of this water supply.
Although Ottawa has respected the provinces' wishes to formulate rules on water
exportation from their territories, the federal government, as part of its multi-prong
approach to protecting Canada's water, has legislated a bulk 'removal' ban on resources
found in trans boundary water bodies falling under its jurisdiction. Passing an amendment
to the International Boundary Waters Treaty Act in 1999, the Canadian government
prohibited the transfer of water outside Canada's portion of the water bodies (principally
the Great Lakes) that it shares with the United States (DFAIT, 2005). The language of the federal amendment was carefully structured so as to protect the government as much as possible from any legal challenge posed under the GATT or WTO. Instead of an 'export' ban, the amendment prohibits the 'removal' of water from all of Canada's major drainage basins. This wording is considered very important to the federal government as it
"regulates water in its natural state, before it has become a commercial good or a saleable commodity" (DFAIT, 2005). An export ban according to the govemment could be challenged under trade frameworks as it would be tantamount to admitting that water is indeed a commercial good (DFAIT, 2005). It should be noted that many provinces did not follow a similar strategy as promoted in the federal accord, and legislated 'export' bans on bulk water, an approach that McNab argues, "may already be in contravention of
NAFTA" (MacNab, 2005: 146).
Although the federal govemment may be legitimately concerned with protecting transboundary sources from bulk water exportation, its ability to ensure the integrity of these shared bodies depends greatly on the cooperation of the United States. Since 1912,
Canada and the United States have worked together through the International Joint
Commission, a body composed with equal membership by both nations that works together to address disputes and common interests regarding boundary waters like the
Great Lakes, including issues such as pollution as well as water extractions and
diversions (DFAIT, 2005).
Despite the presence of the Commission and strong support of great lakes states
for banning water exportation from these bodies, the potential that America may
unilaterally divert water to parched regions from these shared sources remains strongly
possible given the United States' dismal track record regarding cooperation on water issues with its neighbours. For example, legally obligated by treaty to share the water resources of the Colorado River, Mexico threatened in the 1970s to take the United States in front of the Hague World Court for failing to meet these obligations (Reisner, 1993:
462-3). While Mexico was receiving its correct allotment from the river, the United
States was not ensuring that this was in the form of fresh water, giving its neighbour instead, irrigation runoff with salt contents more than double normal levels, leading to significant damage to Mexican agriculture (Reisner, 1993: 462-4).
Canada has also experienced frustrations over water issues with the United States.
Despite the Canadian government's clear opposition and the existence of the Joint
Commission for negotiating water issues, the United States in 1988, unilaterally tripled diversion flows from the Great Lakes in order to supplement the Mississippi River's water level. This was done after significant pressure from southern senators whose states were experiencing a protracted period of drought (Day and Quinn, 1992: 49).
More recently, Canada has experienced American unilateralism once again regarding the drainage of a North Dakota lake into the Canadian Red River system.
Devil's Lake, which in reality is a "befouled" catch-basin for agricultural runoff, has
been rapidly expanding in size, creating flooding and inundating vast areas of North-
Dakota farmland (Janigan, 2005: 17). In order to alleviate the problem, and in complete
disregard to its treaty obligations to consult with Canada on the matter, the U.S.
unilaterally decided to divert Devil's lake water into a regional river system that
ultimately flows north, draining across the border into Lake Winnipeg (Karunananthan,
2005). Concerned with pollution from this water body and potential invasive species
which could damage Lake Winnipeg's ecosystem, Canada has been unable to stop the American diversion, instead only convincing the U.S. to construct a temporary sand filter at the diversion outlet (Ashton, 2005: A17).
One consolation Canada may have regarding protection of transboundary waters are those allies it has among the U.S. Great Lakes states. In December 2005, the Great
Lakes Governors signed a binding agreement among themselves, as well as a "good faith" agreement with Quebec and Ontario which enacts a "virtual ban" on diversions of
Great Lakes water, doing so out of concern that their own water supplies would be threatened by bulk water exports to southern states (Government of Ontario, 2005).
Despite being touted by the Ontario government as an unprecedented measure for controlling the use of Great Lakes water, critics point to some glaring weaknesses in this accord, known as the Great Lakes - St. Lawrence River Basin Sustainable Water
Resources Agreement. In addition to being a non-binding accord of good faith where
Canada is given merely a consultative role in relation to the states' negotiations on future diversions, the Council of Canadians argues that the International Joint Commission becomes marginalized as a result of the agreement as well. While Canada enjoys equal representation as the United States within the Commission, the "parallel body" formed for state cooperation leaves Canada in a secondary role regarding decisions on water diversions (Council of Canadians, 2005).
Another significant weakness with the new agreement banning Great Lake water
diversions is the exemption granted to a waterway known as Chicago Canal diversion.
This canal was the waterway used in the aforementioned 1988 diversions where the
United States unilaterally decided to triple water flow from the Great Lakes to the
Mississippi river system (Day and Quinn, 1992: 49). Noted by John Grant, this exemption is somewhat concerning due to the risk of fbture increased diversions increase from this site (Grant, 2006: 263). Perhaps the most troubling criticism against this accord, however, is the likely incompatibility of this binding agreement established between U.S.
Great Lakes states with U.S. federal law regarding interstate water trade.
Media sources, legal experts and water entrepreneurs alike have noted that US
courts have consistently found water to be "an article of commerce" and that state
governments do not have "the authority to discriminate between in-state and out of state water use" (Glass, 2003, Shrybman, 2000: 6-7). The court case most often referenced in
such arguments is that of Sporhase v. Nebraska. In this "landmark" ruling, the U.S.
Supreme Court found that Nebraska laws prohibiting the transfer of water to out of state
destinations was a violation of federal commerce laws (Glass, 2003: 15 18). In this case,
the government of Nebraska had attempted to bar an agricultural producer from
transferring water located in wells owned in Nebraska, to farming sites found in the state
of Colorado (McCall, 2007). The court overturned previous state rulings that had upheld
the Nebraska legislation prohibiting these transfers of water based on reasons of water
scarcity (Glass, 2003: 15 18; McCall, 2007).
Charles Glass notes the difficulty a Great Lakes state may have in defending a
prohibition on water transfers from these water bodies due to the legal precedent created
in this case (Glass, 2003: 15 18- 19). Although the 2005 accord has yet to be challenged in
the US. court system, the ability to defend legislation protecting the Great Lakes on
water conservation grounds appears highly questionable, according to Glass. The scholar
notes that in Sporhase v. Nebraska, the Supreme Court did consider the environmental
need for an arid state such as Nebraska to protect its water resources. The fact that Nebraska was nonetheless found to have overstepped any "conservation and preservation rationale" does not bode well for water rich states bordering the great lakes, -states who ultimately may be forced to defend their accord on similar grounds (Glass, 2003: 1518-
19).
In the event that the United States government unilaterally decides to withdraw water from boundary sources, or an American entrepreneur gains access to this water in a successful legal challenge of Great Lakes state legislation, the federal government of
Canada may feel compelled to sanction bulk water exports despite a predisposition against such practices. Clearly this remains a hypothetical situation at this stage where many political and economic factors remain unknown. The growing water scarcity in the
United States, however, coupled with a history of unilateral American actions pertaining to water issues, trade and international relations in general, may create a climate where
Canada is forced to reverse its position on water exports due to the threat of American unilateral action. What may lead Canada's federal government to permit this practice are the stark policy choices Ottawa would otherwise face in such a situation.
Forced to choose between continuing to oppose bulk water exports, which may
encourage unilateral American withdrawals where Ottawa incurs no earnings or control
over this resource's exploitation, or choosing to permit American withdrawals and
retaining regulatory influence and revenue from a resource it is a co-proprietor of, it is
not difficult to see why Canada's federal government may ultimately concede to
exporting its fresh water. Ultimately the threat of unilateralism may force Ottawa to
pursue water exports despite its environmental concerns because the alternative would be
to lose complete control of its boundary water resources, as well as financial compensation for property it is a co-owner of, while still incurring environmental degradation to Canadian territory from its neighbour's water withdrawals.
If the above scenario presents itself in the future, like many angles of the bulk water debate it is unclear how various factors may interact to either encourage, or discourage the development of a bulk water exportation industry. As a result it is difficult
to definitively ascertain if the threat of unilateral withdrawals would cause the federal
government to reverse its opposition to bulk water exports. What should be clear
however to the reader, is that the risk of unilateral American action is indeed present, and
like so many other factors discussed in this thesis, may encourage the transfer of massive
amounts of Canadian water out of this country, whether the federal government approves
of this practice or not. CHAPTER 4: CONCLUSION
The future of Canada's water as a tradable commodity is one presently characterized largely by uncertainty. This lack of clarity, however, is based much less on the question of whether Canadian bulk water exports will proceed or not in the near future, but rather what interplaying group of factors or, 'drivers' will be responsible for ultimately stimulating development of a nascent bulk water industry in Canada. Although from the various factors discussed in this thesis one cannot definitively declare at this moment that Canada will engage in future bulk water exports to its American neighbours, this detailed analysis nonetheless illustrates how Canadian bulk water exportation is very likely a part of this nation's future in the absence of drastic reforms to current federal water policy.
Various political and economic norms were identified in this thesis as phenomena relevant to the development of Canadian water as a tradable resource. While many individual factors such as external water demand offer strong reasons on their own for why one should expect future Canadian water exportation, as staples theorists have shown, it is normally an interplay of several political and economic patterns together that habitually determine a resource industry's development. Predicting the precise 'formula' of influences that will drive future water exportation remains a difficult if not impossible task to accomplish at present. This is due to the vast array of stimulating factors existent now, or likely to exist in the future, as well as the various social, political and economic 'unknowns' which characterize new staples drivers, not present during the development of Canada's earlier staples industries.
Application of the staples approach as well as the works of various scholars in this field to the analysis of bulk water exports, proved fruitful for several reasons. First and
foremost, these works gave credence to arguments found in this thesis establishing various factors as drivers capable of stimulating commodification of Canadian water.
These stimuli included factors such as substantial Canadian water supply and adequate
American water demand, the technical feasibility of water exports, entrepreneurial
interest in water exportation, and the potential for government assistance for water export
projects.
Rather than aspects pertinent solely to the development of a bulk water industry,
parallels drawn from the staples analyses of other Canadian resource industries illustrate
how these factors, as well as many of their defining characteristics, are in fact continuous,
pre-existing patterns of economic and political behaviour, evident throughout Canadian
history. The reality that many of these same factors successfully drove earlier resource
development helps to justify their capacity as drivers capable of doing the same for a
nascent bulk water industry.
The staples approach in this study behaved much like a 'toolbox' of knowledge,
providing a range of criteria that one can apply in order to ascertain the feasibility of a
natural resource's development. While in this thesis, this approach has proven its
continued utility as applied to Canadian political economy, and particularly the study of
contemporary resource development, this research has also illustrated ways in which the staples approach may be improved, especially concerning the "determinants" of resource development in a modern Canadian economy.
In addition to the aforementioned parallel factors, (found in both the bulk water debate and previously developed resource industries), this thesis highlighted the importance of new phenomena that must also be included as part of any staples approach
'toolbox' analyzing resource industries today. For example, unlike the expectations facing Canada's earlier staples industries, today Canadian society and Canada's government bodies demand a minimal level of environmental sustainability in resource production, where negative effects such as pollution and over-consumption are avoided if
economically feasible. In the case of bulk water, this remains a particularly relevant
factor as it is the environmental risks involved with water exportation that are most likely
to impede this resource's future exploitation. Although the federal government and a
significant proportion of the Canadian public (at least for now), remain opposed to
commodification of Canada's water, it remains doubtful that this environmentalist ethic
alone will suffice to prevent bulk water exports. This is due to the vast array of factors
capable of driving water development against the will of the federal government and
environmentally conscious Canadians.
One such driver, the growth of international trade regimes, is a relatively new
phenomenon which, like today's green movement, must be considered in modern staples
analyses in order for this approach to retain its relevance to the study of Canadian
political economy. The development of international trade agreements governing the
flow of goods and capital between the world's nations have significantly weakened the
ability of states to make autonomous economic decisions. This could be no truer than in the case of federal bulk water policy. In Canada not only has the federal government been restricted from legislating comprehensive laws that effectively ban the export of its
freshwater resources, it may also be forced to permit this economic practice thanks to the
rights accorded to corporate investors under new international trade regimes.
The extent of the risk that Canada may lose a legal challenge forcing it to engage
in bulk water exportation is a threat that remains difficult to assess as many of the trade
laws pertaining to bulk water exportation remain untested in this context. Ultimately the
future of Canadian water will be dependent on the findings of trade panels accorded the
authority to interpret those trade laws Canada is bound by. Despite the federal
government's continual denials that water in its natural state is not recognized as a
tradable commodity under international law, this thesis has illustrated many reasons why
a panel could rule otherwise.
In total, the lack of an official exemption for bulk water under international trade
agreements is a dilemma that has spiralled into many more problematic factors that may
lead to the development of Canadian bulk water exports. Coupled with Canada's
inability to legislate effective environmental measures that affect international trade flows
as well as the precarious status of water as a tradable commodity under these trade
regimes, combined with the national treatment rights accorded to corporate investors
under such accords, these issues all collude to illustrate how international trade laws can
affect the modern development of a Canadian resource, and as in the case of bulk water,
in potentially troublesome manners contrary to the government's intentions.
The development of international trade regimes is not the sole factor to have
diminished the federal government's decision-making authority regarding water export policy. Unlike earlier eras of staples development, today Canada is characterized by a decentralization of governance authority where provinces share responsibility for decisions made concerning the development of natural resources. In the case of bulk water, the assertion by provinces of their jurisdictional rights has greatly inhibited the federal government's attempts to formulate effective national standards prohibiting bulk water exports. In addition, the risk that a province may pursue water exports against the federal government's wishes remains a strong possibility, as several provinces have recently expressed interest in pursuing bulk water exportation as a lucrative source of revenue.
The Canadian federal relationship and its influence in the bulk water debate does not just highlight the need for a modern staples approach to consider the decentralized nature of governance in Canada today, but also the need to become more conscious of those things 'political' affecting contemporary resource development. The staples approach has the potential to understand much more than factors such as the supply of, and the demand for a natural resource, or the technical character of a staple industry; a modem staples approach rather can also benefit from understanding the political relationships and power balances affecting those who make decisions regarding resource development as well as the initial reasons for making such decisions in the first place.
Not limited to the issue of decentralization, staples theorists can also be more
vigilant of considering the 'political' when analyzing traditional drivers of development
explored under this approach. This was demonstrated for example through the
examination of external demand for Canada's water sources, where a greater
understanding of the intensity of America's demand for Canadian water was uncovered. Here it was shown how the structure of government in the United States and the concentration of economic and political power among a small number of decision makers occupied with water policy, could intensify the future need for Canadian freshwater resources. With a more in-depth understanding taking into account the 'political' such as in the above example, an updated staples approach may be equipped to predict and decipher more accurately the forces likely to encourage or discourage a resource's development, and perhaps as a result, aid in the assessment of the overall feasibility of a nascent staple industry.
The results of this research have illustrated how staples theory can remain an effective analytical tool for helping to understand resource development within the
Canadian economy. Space and time constraints of this study however, did not allow me
to engage staples theory in a manner that explains how natural resources such as bulk
water may potentially affect the broader economic and political development of Canada
today, (a principal objective of the traditional staples approach). Future research
performed by other scholars in this field may nonetheless be assisted by the findings
illustrated in this thesis, which, in highlighting new contemporary influences of staple
development, will in turn provide a new foundation for understanding the broader
influence of staples in a contemporary Canadian economy.
My in-depth analysis of bulk water exportation and the likelihood that Canada
will be forced to export freshwater resources to its American neighbour, has painted a
pessimistic future for the Canadian federal government if it chooses not to address the
shortcomings in its current water strategy. In summary, American demand for water over
the course of the next few decades is not likely to dissipate and in fact will grow as over- consumption of this resource continues, especially in particularly arid regions of the
United States such as the U.S. mid-west. The economic and human security threat posed by growing American water scarcity, particularly to highly influential, geographically concentrated portions of the U.S. electorate, is poised to be a strong source of diplomatic pressures from the United States in the future, calling on Canada to help meet America's freshwater needs. Assisted by technology developed in the energy sector and in domestic water diversion projects, as well as encouraged by interstate water trading already occurring in the United States and internationally today, corporate actors remain prepared to exploit America's water inadequacies through investment in a nascent Canadian freshwater industry.
Although the federal government may continue to stand opposed to bulk water exportation, weaknesses in the GATT and NAFTA trade frameworks provide both the
United States and entrepreneurs alike, various potential legal routes to access Canada's water against this nations' will. Coupled with the limitations imposed by a decentralized
federation, allowing provinces to unilaterally permit water exports as a lucrative source
of revenue, so too may the United States unilaterally withdraw water resources from
transboundary bodies it shares with Canada, as it has done in the past.
Concluding Remarks: Room For Optimism
Despite this pessimistic account, the demise of the federal government's control
over this nation's water resources is not an irreversible reality, nor should Canadian water
be considered an inevitable future export based on this account, provided that Canada's
federal government makes concerted efforts to rectify significant weaknesses in its present water strategy.
There are no easy policy solutions facing a federal government that seeks to effectively protect Canadian waters from export. Domestically, the federal government must be wary of encroaching on provincial jurisdictions, jealously guarded by provincial governments suspicious of federal intentions. If not, the federal government may risk poisoning intergovernmental relationships key to ensuring the ability to negotiate and attain national standards in a variety of policy portfolios. Souring those relations the federal government holds with the provinces can effectively isolate the government politically. As such, the government may be rendered a 'lame duck' administration, unable to achieve progress on national objectives, that among others, could include domains as crucial as healthcare, education, childcare etc.
Externally, Canada must also be prudent when addressing the risks posed by international trade agreements on Canadian water sovereignty. Unilaterally instituting a water export ban which contravenes international trade laws may not only make Canada more perceptible to legal challenges, but may also risk straining international trade relationships key to Canada's continued economic success, particularly that with its neighbour, the United States.
With these restraints in mind, the federal government may nonetheless possess means to minimize the threat of commodification of Canadian water. It should be noted
that although these measures may go far to addressing the challenges posed both by
Canada's international trade relationships as well as a modern, decentralized Canadian
federation, there is no readily accessible solution one can pin point to, in order to address
the risk of unilateral water withdrawals by the United States. A strong diplomatic presence and a will to assert its economic weight as a close U.S trading partner may be the only tools Canada is equipped with to address unilateral American withdrawals from transboundary water bodies. Ultimately this may not be enough to protect the integrity of
Canada's share of these water resources. Although Canada may be able to do little more than what it has already done to safeguard boundary waters, there may still be options open to Canada to ensure it protects those waters of which the Canadian people are the sole and rightful owner.
Constitutional "Breathing RoomSS:
While the federal government's authority to legislate a comprehensive water export ban has been clouded by the proprietary rights accorded to the provinces under
section 109 of the Constitution Act, any conclusion regarding the federal government's
capacity in this regard should not be considered final unless ruled upon by the Supreme
Court of Canada. While the federal government has so far ceded the right to institute
water export legislation to the provincial governments, Josha MacNab suggests that such
actions may have been based on premature conclusions regarding constitutional jurisdictions, due to the broad legislative authority granted to the federal government
under Section 91 of the Constitution Act (McNab, 2005: 130).
Authority "to make laws for the Peace, Order and Good Government of Canada",
under Section 9 1, as MacNab notes, are "intentionally broad" and designed to permit the
federal government to create legislation in three different circumstances (MacNab, 2005:
130). Of the three situations, which include cases of national emergency and situations
where neither provincial, nor federal jurisdictions cover the issue at hand, it is the third, - cases of "national concern.. . not already assigned to the federal government", that is relevant to water exports according to MacNab (MacNab, 2005: 130).a
Due to the risk of a province unilaterally choosing to export water as a potential source of revenue, as well as the trade implications this may have nationally under
NAFTA, the federal government could consider seeking a reference from the Supreme
Court to determine the federal government's ability to overturn a provincial action such as this, and to legislate its own comprehensive national export ban. While there is a chance that the Court could rule that the federal government does not hold such authority, thereby sanctioning any province's wish to proceed with exports in the future, the federal government's already precarious situation with regards to the provinces illustrates how the government has relatively little to lose at this point by submitting such a request, even if such as strategy backfires.
The likelihood however that the federal government would be found to hold jurisdiction over the creation of such legislation is substantial according to MacNab, due to previous court rulings regarding both Section 91 and federal environmental initiatives
(Macnab, 2005: 130- 131). MacNab highlights the Supreme Court decision in R. v. Crown
Zellerbach Ltd. (1988) as particularly relevant to the bulk water situation. She quotes the
Court's test for federal interventions based on 'national concerns' as the "need for one national law which cannot realistically be satisfied by cooperative provincial action because the failure of one province to cooperate would carry with it grave consequences
for the residences of other provinces" (MacNab, 2005: 13 1).
This test of what constitutes a 'national concern' permitted the federal
government in the above case to intervene with federal legislation regarding marine pollution in water bodies falling under provincial jurisdiction (MacNab, 2005: 13 1).
MacNab suggests that the ruling in R v. Crown Zellerbach "may open up a space for consideration of bulk water exports under the national concern doctrine for two reasons"
(MacNab, 2005: 13 1). One such reason is the "grave consequence" that may be incurred by the entire nation, were one province to begin exports of water followed by a NAFTA ruling finding all government jurisdictions in Canada required to allow the same.
(MacNab, 2005: 13 1). A second, much more definitive physical risk noted by MacNab is the extra-provincial environmental damage caused by the movement of large amounts of water from shared transboundary watersheds between two provinces (MacNab, 2005:
13 1).
These two circumstances may provide sufficient grounds for the federal
government to be accorded the right to legislate comprehensive water export ban under
the Constitution Act. Although the federal government may be apprehensive to
antagonize provinces with such a reference, the benefits accrued from a ruling in favour
of the federal government may be worth any intergovernmental stress created. There is
indeed a risk that residual tension may exist between the federal government and the
provinces following the successful implementation of this strategy. The federal
government's interference into this area of provincial jurisdiction would be nevertheless
sanctioned by Canada's top court. In addition, any political fallout generated by
provincial governments publicly critical of this move could be tempered by a public
appeal from the federal government to Canadian citizens - an electorate that has
remained strongly opposed to water exports, as discussed in chapter one. Ultimately
what may be required of the federal government to allow this strategy to work is the will to prioritize an issue of national sovereignty over short- term, political interests.
Future negotiations, future opportunities:
Following a successful Supreme Court ruling, a federal government armed with the domestic authority to institute a nation-wide water export ban, would first have to address deficiencies within those trade agreements it is a party to, disallowing such legislation presently. Although both the GATT and NAFTA contain provisions that risk forcing Canada to export its water, it is NAFTA with its additional rights accorded to investors residing in the United States - (the most likely destination for Canadian water), that should be prioritized by the federal government when seeking to rectify its various water-trade problems. Shrybman notes how various sections of GATT remain troubling in terms of the threat they pose to Canadian water sovereignty. Canada could consider
however, at least as a short term measure, the imposition of export taxes on Canadian
water as a way to make this resource prohibitively expensive in a manner that does not
contravene current GATT export rules (Shrybman, 1999). Although permitted under
article XI of GATT, export taxes are strictly prohibited under NAFTA and as such,
remain yet another reason for this accord to remain the federal government's priority
(Shrybman, 1999).
One option, (although admittedly difficult) is for Canada to consider a request for
provisions concerning water exports to be added to the NAFTA agreement. Such
provisions could include a chapter eleven-specific clause, which as Shrybman suggests,
could either clarify the definition of 'investment' so as to exclude water, or could exempt
Canadian laws banning water exports from dispute resolution mechanisms-as stipulated under Annex 1132.8 of the accord (Shrybman, 1999). An even more effective measure however would be to seek a general exemption for water exports from the entirety of the free trade agreement. Such an exemption was sought and obtained by Canada for goods including raw logs and unprocessed fish during initial NAFTA negotiations (Boyd, 2003:
64).
While such provisions if included would aid considerably in neutralizing the threat to water sovereignty posed by NAFTA today, fellow accord members may be hesitant to grant these requests without demanding undesirable concessions from the federal government in return. Granting the Canadian government this wish may ultimately require renegotiation of NAFTA among member states. This option if even accepted by fellow accord members, could be politically unpalatable to the federal government were it to lead to demands for greater foreign investor rights from its trade partners, a push for greater continental integration, or even, a return to a more protectionist framework of trade that compromises Canada's access to U.S. markets. The federal government should be wary of these risks when considering its approach to
NAFTA-related water issues.
If Canada is unable to find an acceptable compromise for these provisions within the NAFTA framework, a long-term solution may be provided by future negotiations over the Free Trade Agreement of the Americas (MacNab, 2005: 148). Assuming
American calls for such an accord once again arise. Canada could consider hinging its
support for this agreement based on the inclusion of a fresh water exemption. In the event
that the NAFTA accord is grandfathered into this larger agreement, continuing to govern
trade between Canada, the United States and Mexico, Canada may demand that this exemption be declared retroactive within NAFTA as well. Although such requests may be a 'tall order' for trading partners such as the United States to accept, this may be a concession that the Americans would be willing to make were the U.S. adamant about negotiating a successful FTAA - driven for example by the pressing need to remain competitive against an ever-more integrated European Union.
These limited means, which utterly fail to address the risk of American unilateral water withdrawals, that hinge upon the positive results of a hypothetical Supreme Court reference, and which depend upon the likelihood that negotiations of a future hemispheric
trade agreement ever takes place, illustrate yet again the precarious nature of Canadian
water sovereignty today. While limited, they nevertheless highlight some modest
manoeuvrability for the federal government if it wishes to rectify this dangerous
situation. Perhaps these options, coupled with other solutions not considered here in this
thesis, may allow the federal government to properly assert control over its precious fresh
water resources. What is clear is that remaining in denial, refusing to acknowledge this
ever-growing problem will do nothing, if not make this situation much worse. A true
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