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FUTURE TRADING OF WATER AS A COMMODITY

By

Dr. Isabel Al-Assar, LLM.
Oxford University
Brookes College

Oxford, England

August 25, 2002

UPDATE MARCH 28, 2008

          I was recently asked by a reporter for a prominent business publication whether water will become a traded commodity in the future? It is already happening. On March 25, 2004, Israel and Turkey concluded an agreement for the sale of 50 million cubic meters of water per year for twenty years. The water will be taken from the Manavgat River in Turkey, purified in Turkey and then transported in converted oil-tankers to Ashkelon in Israel. This shows that the idea of importing fresh water is not an academic one. In the future, this trend will, no doubt, increase due to an increasing water scarcity worldwide.  Jonathan Peled, spokesman for the Israel Foreign Ministry said that this landmark agreement turns water into an internationally accepted "commodity."

         Whereas in the past water was viewed as a common good of mankind, it is now more and more viewed as a tradable good, something for sale. The privatization of water services that is taking place on a global scale has opened the door for the concept of water as a service and as a good. Water is no longer perceived as a gift from God (or the State), but a commodity for which one has to pay. Whether or not water will become like oil one day, I have no doubt about it. Water is essential for life, whereas oil is not. Oil is fungible and can be replaced, but water cannot.

         I definitely believe that due to the provisions of the General Agreement on Tariffs and Trade (GATT), no country can prohibit the export of its water once it has been ‘commoditized’ (which means: taken out of its natural state and diverted or transferred into containers of any size). This is why the Canadian Federal Government has enacted legislation that prohibits diversions and removals of large quantities of water from the Great Lakes Basin. Water in a lake, a river or an aquifer is protected from bulk-water export as long as it remains in its natural state.

         The question is excellent. When water is being sold in the marketplace, as any other good, what will happen to those who cannot afford its price? Two answers can be give to this question. First, if water becomes a commodity, only those who have the means to pay for it will be able to drink water, and all the others will die of thirst. This is a too simplistic view. Second, once water is being sold in the marketplace, there is likely to be competition between different suppliers and this is likely to bring the price down. In addition, it is up to Governments to prioritize their expenses and pay for imported water for their population. Governments should seek help and advice regarding how to use the (scarce) water resources that are available to them naturally in the most efficient and sustainable manner.

          Ideally, water import should always remain an option for the short-term alleviation of water scarcity. The apparent opposition between the "corporate price" and the "consumer need" is a false one. The consumers need water. The private sector is able to supply water to them, but at a higher price than the public sector used to charge them. The public sector would have been unable to supply water at this low price forever. In the case of water export, once water exports become wide-spread, and private companies are trying to sell water to thirsty countries, it is up to these countries to find the means to buy the water. There is no moral duty upon anyone, or any country to supply water-scarce countries with drinking water for free. The service of getting the licence to remove and export the water, of organizing transportation, all this costs money and someone has to pay for it.

          I’m sorry, but communism is dead. And, the GATT is not a complete resource-sharing regime. For a while, water export will take place by means of treaties between Governments. It is only later that I foresee the involvement of private companies from the outset. The problem faced by the private companies in the developing world, where they are connecting millions of people to the water grid, is due to the context in which these companies operate.

          It is up to the Governments to provide their poorer people with financial support so as to enable them to pay for the water-supply service. (same argument as regards the issue of water export) One has to bear in mind though, that without the private sector, there would be no service, and no water. Progress has a price and this price should not solely be borne by the (poor) individual but also by the State. Regarding water imports; if the imported water is too expensive for a certain section of the population, the Government should assist these people so as to enable them to buy this water.

          The problem is not the private companies or the commoditization of water; the problem is one of unequal wealth distribution which, when it comes to paying for the essential good ‘water’, should be alleviated where possible. But again, communism didn’t work. And, with communism, no-one would have any water, imported or otherwise.

WEBMASTER'S NOTE

          Dr. Al-Assar is one of the foremost scholars on the application of the GATT and NAFTA and bi-lateral treaties to the trading of water as a commodity.  She has written widely on the subject.  Newsletter 18 on this website is another of her pieces with links to peer reviewed journal articles she has written.  Dr. Al-Assar is also an expert on structural changes necessary in national law to protect natural resources from the provisions of GATT and NAFTA.

         On November 24, 2005, MacLeans Magazine published a long article on America's need for water entitled "America is Thirsty."  Dr. Al Assar was quoted from these pages noting her comment above that "Water is no longer perceived as a gift from God, but a commodity for which one has to pay."

          Dr. Al-Assar graduated in 1997 with her law degree from the Catholic University of Leuven in Belgium.  She earned her LLM degree from the College of Energy Petroleum and Mineral Law at the University of Dundee in Scotland in 2000.  Dr. Al-Assar completed her PhD from the International Water Resources and Mineral Law program at the Department of Law at the University of Dundee in October 2002 under Dr. Patricia Wouters.  She is an expert in the GATT and NAFTA. She is currently a Lecturer at Oxford Brookes University.

UPDATE SEPTEMBER 19, 2009

          Dr. Al-Assar has informed the webmaster that she has entered the job market and will review placements that deal particularly with international trade matters.  She can be contacted at the link at Dr. Isabel Al-Assar, LLM.

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