International Trade Regulation, Economics, Water, and the Environment

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Without vision the people perish

International Trade Regulation,

Economics, Water, and the Environment.

April 2000

West Coast Environmental Law, Water Export Controls and

Canadian International Trade Obligations, 17 August 1999.

Introduction

At issue in the West Coast legal opinion are competing

values between capitalism and environmentalism and the power to

promote or deny these values as concerns bulk water exports.

This essay will attempt to outline the various issues brought

forward by West Coast Environmental Law legal opinion and the

implications of Canadian trade obligations under the NAFTA and

the WTO. In order to do this however, the paper will begin with

a brief outline of economic history, tracing the root of

current economic theories that influence trade regulation

decisions and free trade, as well as alternative economic

milestones ignored by the WTO including a Canadian economic

perspective. This paper will eventually seek to view WTO trade

policies within a broader framework that includes environmental

principles as demonstrated by our legal and political systems.

Part I : Economic Theory and International Economic Policy

It is only by understanding the limitations of economic

theories that they become useful. Economic theories are often

declared and viewed as uncertain, and amorphous. Generally they

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are accompanied by the warning that in practice theory should

be applied in a contextually limited manner taking into

consideration other competing models and values.

International economic policy is influenced by pragmatic

considerations and a bit of economic theory. Pragmatic

considerations which benefit specific groups are probably more

indicative as to the rational for the current global economic

climate than any theory used to justify the trading regime.

However, economic theory is used as a building block to justify

international trade obligations and should therefore be

examined on its merits, even though an analysis of benefitsmight be more revealing.

The first premise that underlies international policy is

the idea that it is desirable to have international trade. It

is difficult to disagree with this proposition. Underlying this

desire is the motivation for material advantage and benefit.

The statement assumes that international trade is beneficial,

and so long as it is, the material advantage does provide a

motivation for trade. I can only think of two peace-time

scenario's where international trade would not be desirable.

First, if one party did not actually benefit, either at the

time of each exchange or over the entire duration of the trade,

calculating the full social costs and benefits involved. This

would create a situation where either neither party benefits,

or one party benefits at the expense the other, such as occurs

under many colonial relationships. Second, if the nation was

primarily self-sufficient or religious to the degree that

materially advantage was no longer a prime motivation. Neither

of these considerations are relevant to Canada.

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The second premise that underlies international policy is

the idea that interference with trade and the resulting effects

should be avoided. The proposition is not self-evident. It

assumes that any benefit caused by intervention is outweighed

by net negative effects. This may or may not be true, as is

particular to the trade distortion. The effects of interference

can vary from creating higher prices, to increasing wages, to

improving our environment, to extra costs related to non-

proportional retribution.

Overall, the effects remain hard to define, are not

restricted to monetary evaluations, and are beyond the abilityof most statisticians to measure or forsee. It is obviously

possible for intervention to benefit trade, much of the GATT

limits the ability of nations to intervene in a beneficial way

within their region, under the rational of avoiding trade

retribution.

Another reason used to avoid interference is that lower

costs of production benefit the consumer. Of course, this

assumes that pricing is the result of supply and demand and

that products are priced relative to their cost, passing the

benefit the consumer, which is mostly artificial posturing.

Lower costs do not always benefit the consumer, sometimes they

provide the incentive for cutting corners on quality. It is

producers who benefit most from a low cost of production,

usually at the expense of labour.

Less to the point, this statement also assumes that trade

exists a priori interference, suggesting that free trade is

part of the natural law of the world. It is basically premised

on the idea that trade can exist without interference.

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Realistically, regulation should be viewed as the starting

point for trade and the building blocks from which fair trade

and free markets develop. Without intervention, the markets may

not exist, and fair trade might not take place at all.

Absolute Advantage

If one region can produce a commodity with less expense

than another, and they exchange, then both should benefit. In a

nutshell, this is the law of comparative advantage. It is used

as the justification for WTO trade regulations.

Some land grows corn better than other land. This

economical insight into farming in early 18th Century was the

cornerstone of the law of absolute advantage. Some farmland

will yield more corn per acre than another, therefore the good

land confers an absolute advantage over other regions. The

conclusion drawn from this argument is that the farmer of the

poor land should change products that it can produce to its

absolute advantage, such as grazing sheep.

The law of absolute advantage is based on the assumption

that competition is the best paradigm within which to build an

economy, it assumes that competition will improve production.

The problem with the use of this paradigm is that it creates

winners and losers. In every competition someone is excluded.

That the farmer of the poor land should go raise sheep is not

self-evident. This conclusion requires a firm faith in the

motivation for profit as the raison d'etre of people and

nations. It also follows that the net negative effects of the

sheep farmer do not outweigh the benefits gained by that farmer

or others in the region, or nation. Such may not be true.

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Competition is often used as an ideology to justify capitalism

and the free market. Markets however, are primarily co-

operative endeavours. Except for Darwinian battles of life and

death, every competitive endeavour is established by first co-

operating, setting rules, and agreeing to compete. Co-operative

markets allow for competition, not the other way around. To

this end, competition should never be seen as a natural law,

but merely as a by-product of co-operation, an agreed upon

behaviour.

Comparative Advantage

Comparative advantage developed from ideas generated

around the "labour theory of value" in economic debate by David

Ricardo. Ricardo was operating under the assumption that the

value of any given product was to be derived from the total of

its labour content. In a more complex society, we recognize the

additional costs of land and capital involved in the evaluation

of a good.

The law of comparative advantage1 posits that within a

country, a region will produce goods it can make cheaper than

other regions. That the value of a commodity within a country

is determined by its labour, land, and capital content. During

the production life of a good, the supply will expand until the

price is levelled down to the total value of the labour, land,

and capital that it contains. Therefore a country should export

the product in which it has the greater advantage, or

comparative advantage, and import the commodity in which its

advantage is less, or in which it has a comparative

disadvantage. Even when one country can produce both

1 Jackson, International Economic Relations,Kindleberger, 3rd ed. (West Group) Minn, 1995. P.8.

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commodities more efficiently than another country, both can

gain from specialization and exchange, provided that the

efficiency advantage is greater in some commodity or

commodities than in others. International trade does not

require offsetting absolute advantages but is possible where a

comparative advantage exists. However, a comparative advantage

is always accompanied by a comparative disadvantage.

In order for this to be true, the theory of comparative

advantage must be restricted to a set of highly artificial and

limited applications. The theory must assume efficient

transportation, efficient labour and ready capital. All factorsthat fluctuate depending on social conditions. It also assumes

that the value of a product is the sum of its production costs.

The theory requires that full social costs be calculated in a

benefits analysis of comparative advantage. This is a very

difficult endeavour requiring techniques to measure large

intangibles. Even if the costs were known as to labour, land,

and the capital involved, the benefits of a public bus route,

phone lines, or transportation systems, plus a thousand other

contributions are very difficult to measure.

Another problem with the general application of this

theory is the limitation on sources of value for a good.

Production costs are not the total cost involved over the life

of a good. Products that end up polluting our land and water

must be cleaned up, adding to the social cost of having the

product. The total value of a good should include production

costs and the final distribution costs in order to adequately

reflect the full social value accruing to the good.

Distribution costs can either be included in the price of

delivery, or they can be an added expense after the sale. It is

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usually not known what the distribution costs of a product will

be until it is consumed or used, or finds a last resting place.

But so long as the theory of comparative advantage limits the

evaluation of a product to production costs it will not

accurately predict which trade in goods result in benefits.

Limiting the value of a product to its production costs creates

a false sense of benefit, if the advantage is offset by

distribution costs.

Goods can fit into four different categories. Goods can be

useful, useless, durable, or disposable. Obviously goods traded

that are more useful and more durable are of better advantagethan goods that are useless and disposable. Profit can be made

on goods of any category, however comparing costs of useless

goods to real goods may be misleading as to the actual values

and benefits involved. The theory of comparative advantage does

not adequately discriminate between products that are more

useful than others. Trade in totally useless widgets,

regardless of cheap production costs do not benefit the

receiving parties.

The law of comparative advantage should distinguish

between the production of durable, useful goods over goods that

are merely profitable. To be accurate it its claims, the theory

of comparative advantage only holds true if the value of the

goods traded is of a similar nature. The character of the good

should be taken into consideration in any value assessment.

Cheap products of useless junk backed up by a great marketing

campaigns do not create a comparative advantage of real value,

although they do lead to speculative profit making. It would be

better to import durable goods than trade them in exchange for

non-value adding, or useless products. Importation of goods

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that are generally disposable and useless, in the long run will

only disadvantage a community.

The current economic theory of comparative advantage

really is only valid in a limited set of circumstances. If we

are to have economic theory help guide us in trade policy

decision making we must survey other contributions to economic

theory before and after Ricardo.

Part II : Economic Theory 1650-1950

Economists from the 19th

Century would argue that we shouldallow growth of trade to occur strictly in the private sector.

Economic theory trends suggest otherwise. A condensed history

of economic thought will be useful.2

Classical Economics

Beginning with the ideas of Adam Smith (An Inquiry into

the Nature and Causes of the Wealth of Nations, 1750),

including the ideas of David Ricardo, and ending approximately

with John Stuart Mill (1850's) the framework was established

for classical economics.

Mill in particular established the foundation for free

trade in advocating individual libertarian autonomy rights

which had the effect of limiting legislative authority in

matters effecting the private economy. In the context of 19th

Century Europe, this argument makes much sense, monopolies had

been granted to crown corporations for most major state

projects and independent private business moguls were working

2 The following information is fromA History of Economic Thoughtby William Barber, 1967.

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toward respectability. In the context of our 21st Century

corporate global climate the argument may validly be reversed.

It can be argued that individual rights have the effect of

lending legitimacy to legislation over matters effecting the

private economy.

Overall, the first classical theorists began the analysis

of wealth or economic growth by focusing on determinations of

economic value based on the agrarian model. Land, capital, and

labour were the three categories that created wealth. These

relate to value derived from the use of rents, profits, and

labour.

The Progress of Industrialization

The first ripple encounter by classical economics came

from sources such as Karl Marx, around the 1850's. He focused

on the disparity of equality between the various classes and

proposed reorganization of the traditional economic model that

divided people into landowners, capitalists, or labourers. Marx

advocated the overthrow of the bourgeois capitalist by the

proletariat labourer, and the confiscation of land under the

centralized control of a Communist government. He also

predicted that capitalism and the wage system would end in

revolution because the mass of people, the labourer, would not

allow the ownership of resources to be managed by the few, the

rich, once capitalism ran its course creating a gulf of

disparity between the rich and the poor.

Anarchist economic theorists proposed other models of

economic reorganization. Free trade has its origins in

anarchist thinking. Although Mill's ideas are described as

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libertarian, his free trade ideas were anarchist. Anarcho-

capitalism is the unwaivering extreme view that absolute free

trade will promote the benefit of capitalists and trickle down

to benefit everyone. Free trade ideas have their origin in the

economic work of Pierre Proudhon, the "father of anarchism."

Proudhon, 1850's

Pierre Proudhon libertarian ideas involved advocating a

form of sovereignty association in the guise of decentralized

federalism. Anarchism was presented as a pragmatic solution to

commerce and trade. Anarchism was to be founded on concrete andpractical solutions of organized society for the mass of

people, a conscious attempt to avoid abstractions and self-

created power ideologies.

It was proposed that a tariff free environment would allow

for individual effort and needs to efficaciously guide the flow

of material goods from union owned manufacturing centres to the

people. The minimal impairment of the individual by the

government was key to a cost effective environment, as least

intrusive as possible, while eradicating the govern/governed

class difference. He coined the refrain, "Property is theft,"

and was concerned with limiting the role of authority in

society to the maximum.

Proudhon did not advocate an absolute or extreme position

but rather warned against utopianism, and absolutism as a kind

of thought that fails to distinguish between concrete reality

and abstract products of the mind. In The Federal Principle,

1852, Proudon sought to find a realistic pragmatic balance in

political life between,

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"Authority and Liberty, two principles which underlie all forms of organized

society, on the one hand contrary to each other, in a perpetual state of

conflict, and on the other can neither eliminate each other nor be resolved,

some kind of compromise between the two is necessary. Whatever the system

favoured, whether it be monarchical, democratic, communist or anarchist, its

length of life will depend to the extent to which it has taken the contrary

principle into account."

Anarchist society is to be achieved by reducing,

simplifying, decentralizing and suppressing, one after another,

all the wheels of the state. He labelled himself a practical

reformer and saw the life of society as perpetual reformation,

reform which should go on unceasingly. The role of thefederation was to reserve power for the citizen rather than the

state based on free association concepts. Proudhon was in

favour of private ownership of small-scale property. He opposed

the corporate ideal of individual ownership over large

industries because workers would lose their rights and

ownership. Property was essential to building a strong

democracy through co-operative associations, like labour

unions, but only as to empower the mass of people, not for the

benefit of the bourgeoisie. Although anarchist thought after

Proudhon was also used as an absolutist doctrine representing

the demand "for every human being the right and means to do

whatever pleases him." Proudhon's contribution to history is

still reflected in politics represented by comity, free trade,

and the federalist movements of today.

The Economics of Kropotkin. The Conquest of Bread.

Most anarchists rejected capitalism and strove to create a

system beyond the free market. Kropotkin claimed that economics

should be approached from the standpoint of consumption--of

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human needs. The needs of mankind should govern production, and

the means of satisfying production should include the least

possible waste of human energy. According to Kropotkin,

personal property should be abolished, the wage system, cash

and credit discarded, and to the extent possible, all goods and

services should be provided free of charge to all. Goods

available in abundance should be available without limit; those

in short supply should be rationed. He envisions a

decentralized anarchist economic polity to oversee production

and distribution of necessities, in all their variety, not on

the basis of position or productivity, but on need in a free

and democratic society.

Bakunin, 1914.

Bakunin offered a critique of capitalism, in which

authority and economic inequality went hand in hand, and a

critique of state socialism, (Marx) which was said to be one

sided in its concentration on economic factors while grossly

underestimating the dangers of social authority. Marx was

centralist. Bakunin opposed centralism with federalism.

Bakunin believed that representative democracy, or

parliamentary democracy, had found a way of gaining legitimacy

through the illusion that some how the voters were in charge of

running the system. The reality, he posits, is that the

capitalist class is in permanent control. So long as the great

mass of the population has to sell its labour power in order to

survive, there cannot be democratic government. So long as

people are economically exploited by capitalism and there are

gross inequalities of wealth, there cannot be real democracy.

Economic facts are much stronger than political rights. No one

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can govern for the people in their interests. Only personal and

direct control over our own lives will ensure that justice and

freedom will prevail. To abdicate direct control is to deny

freedom. To grant political sovereignty to others, whether

under the mantle of democracy, republicanism, the people's

state, or whatever, is to give others control and therefore

domination over our personal lives.

Anarchism

Anarchism is the name given to a principle or theory oflife and conduct under which society is conceived without

government - harmony in such a society being obtained, not by

submission to law, or by obedience to any authority, but by

free agreements concluded between the various groups,

territorial and professional, freely constituted for the sake

of production and consumption, as also for the satisfaction of

the infinite variety of needs and aspirations of a civilized

being.

As to their economical conceptions, the anarchists, in

common with all socialists, of who they constitute the left

wing, maintain that the now prevailing system of private

ownership in land, and our capitalist production for the sake

of profits, represent a monopoly which runs against both the

principles of justice and the dictates of utility. Capitalists

are the main obstacle which prevents the success of modern

techniques from being brought into the service of all, so as to

produce general well-being. True progress lies in the direction

of decentralization, both territorial and functional, in the

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development of the spirit of local and personal initiative, in

a free federation of autonomous sovereign groups.

Political organization ought to be governed by the

expressions of individual and group opinions, not directing

centres which control people. They should balance group rights

of self-determination with the freedom to associate or not with

larger political bodies, free from coercion. Anarchy is based

upon the free federation of participants in order to maximize

individual and collective well-being. Self-protection is the

only end for which society may legitimately infringe upon the

liberty of action of any individual. Power should be exercisedto prevent the individual from doing harm to others, but that

is the only part of conduct for which a person should be

answerable to society. In every other way people should have

freedom.

In Canada some provinces would like to see more

decentralized federalism or other forms of sovereignty

association. For example, Free trade zones and the elimination

of borders tariffs are the goals of modern investment treaties.

The free trade argument is an unconscious use of anarchist

thought as applied to finance and the international arena,

although it is to benefit a different abstract state creation,

the international corporation, rather than local unions.

International law concepts of sovereignty are used as a basis

for the relations between states. It is not a coincidence that

democratic policy makers make use of free trade arguments and

notions of sovereignty, the ideas were proposed as pragmatic

solutions that seem to fit our existential reality. Founded in

pragmatics, anarchism should not be ignored as a policy source

for international trade.

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Neo-Classical Economics

Neo-classical economics began around the turn of the

century. It provided more analysis on the processes through

which the market system allocates economic resources. The

application of supply and demand curves, micro-economics and

price theory helped to calm many of the disquieting aspects

that Marx had created around classical economics. It

accomplished this by ignoring the class division and working

from the assumption of the existence of the "autonomous"

rational wealth maximizer as subject for study.

Alfred Marshall was a professor at Cambridge in the late

1890's. He created the idea that supply and demand can be used

to determine a fair price for the exchange of commodities in an

industrialized society. These mathematical equilibrium curves

assume that people act as rational agents pursuing economic

ends. Another assumption required was formulated in Say's Law,

which says that all income must be spent. Hoarding was seen as

irrational, and the cause of a poor economic climate. The

interaction of rational economic consumers and producers was

suppose to create an equilibrium and fair price, so long as

rational economic actors sought to maximize wealth. In this

environment, market objects gravitate toward optimum value and

use, wasting nothing. Government intervention was seen to bear

a heavy responsibility for waste, inefficiency and

misallocation of economic resources.

The neo-classical preoccupation with efficiency in

production and exchange diverted attention from distributional

inequality and from divergent interests of various groups

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within society, while focusing on the myth of the rational

person as a conforming economic agent. Although Marshall

himself warned against using this fiction as justification or

explanation of the reality of economics, (because people made

decisions for reasons other than maximizing wealth) many

theorists since claimed that these models are mathematical

formulas that actually govern market situations and decisions.

The problem with the application of these ideas to real world

is that they do not validly consider other rational goals

beyond the accumulation of money. Environmental considerations

and a host of other rational concerns not related to money

should be included in the idea of a rational actor.

Economist promoted these ideas as truth gospel and

strongly influenced turn-of-the-century America, represented by

the wide spread belief in laisse-faire market principles based

on individual initiative and reward.

Keynesian Economics,

General Theory of Employment, Interest and Money, 1932

Keynes represents the next major change in economic theory

and his ideas were created between the two world wars. The

contribution of Keynes to economic theory re-evaluated laissez-

faire capitalism, which was seen as inadequate to the increased

problems of industrialized societies. Government initiative,

hereforto seen as wasteful, should support and safeguard the

economy, for example, with the implementation of anti-trust

competition law. As well, the theory believes it is prudent to

hoard as a hedge against risks of capital loss, in opposition

to Say's Law.

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With these important economic recognition governments had

license to move toward creating a variety of schemes aimed at

maintaining market security and predictability. Keynes

economics acknowledges the market as a construct that does not

run itself, but requires government intervention if it is to

continue to exist. Governments must intervene to support the

market system and correct potentially devastating problems.

Keynes also advocated deliberate government deficit

spending during conservative times to artificially increase the

demand for consumption. The idea is that by spending money oninfrastructure, public works, or boondoggling, money spent will

trickle down the line and benefit everyone by increasing

consumer spending. These ideas are responsible for our current

level of debt to G.N.P. ratio. Ironically, a large part of

Keynes contribution to economics was the determination of the

G.N.P.

Canadian Economist Harold Innis3

A Plea for Time, 1951

"In the long run, utility, like everything else, is simply

a figment of our imagination and may well be the fatal

stupidity by which we shall one day perish." Nietzche

The contribution of Harlod Innis to Canadian economic

history and theory is quite significant. His earlier works

recount how the history of Canada is also the dynamic of

3 Harold Innis, Essays in Canadian Economic History, (University of Toronto Press), 1956 and

Harold Innis,A Plea for Time, The Bias of Communication (University of Toronto Press), 1951

p.75

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economic advantage. His works call for the general recognition

that economic theories and policies should unfold within the

context of the existing local conditions prevailing in the

place of production. In other words, advantages in production

and distribution can only be discerned by viewing production in

the context of the local community creating the product over

time. By understanding the whole context of production and

distribution, policy makers are then able to create appropriate

interventions that benefit the market.

Innis approached economics from a unique perspective that

does not quite fit in with previous economic models. He viewsregulation of production as promoting either the interests of

time or space. Crown monopolies for example were monopolies of

time. The conflict between different groups over monopolies of

time hastened the intervention of the state. Unfortunately,

devices emphasizing a rapid turnover of goods, whether

technological, or commercial tend to conflict with long-term

investment supported by savings.

Competition between consumers' goods with rapid turnover

and durable goods implies conflict within an economy, and

conflict between nations that emphasize the durable character

of goods, such as England, and those emphasizing a less durable

character, such as North America. To manage this conflict the

state intervenes with policies ranging from the breaking of

trusts to devices of socialism. In fields concerned with

durable goods and involving long-term investment of capital,

such as railways, electric power, forests, and steel, state

intervention has been marked. The ultimate steps are taken in a

concern with long-term budgets and long-term capital

arrangements and with five-year plans.

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Overall, a lack of interest in problems of duration in

Western civilization suggest that the bias of paper and

printing has persisted in a concern with space. The state has

been interested in the enlargement of territories and the

imposition of cultural uniformity on its peoples, and has lost

touch with the problems of time. The state has been willing to

engage in wars to carry out immediate objectives, at the

expense of long term harmony. As modern developments in

communication have made for greater realism they have made for

greater possibilities of delusion. Materialism is the auxiliary

doctrine of every tyranny, whether of the one or of the masses.

The difficulty of handling the concept of time in economic

theory and of developing a reconciliation between the static

and dynamic economic approach is a reflection of the neglect of

the time factor in Western civilization. It is significant the

Keynes should have said that in the long run we are all dead

and that we have little other interest than that of living for

the immediate future. Planning is a word to be used for short

periods - for long periods it is suspect and with it the

planner. The dilemma has been aptly described, "laissez-faire

was planned, planning is not." The results have been evident in

the demand for wholesale government activity during periods of

intense difficulty. The luxury of the business cycle has been

replaced by the concerted measures directed toward the welfare

state and full employment. Limited experience with the problem

has involved expenditures on a large scale on armaments.

Conservation of natural resources, government ownership of

railways, hydro-electric power, and flood controls are

illustrations of a growing concern with the problems of time

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but in the main are the result of acute emergencies of the

present. In 1950, concern with the position of Western

civilization in the year 2000 is unthinkable. An interest in

1984 is only to be found in the satirist or the utopian but not

applicable to North America. Attempts have been made to

estimate populations at late dates or the reserves of power or

mineral resources but always with an emphasis on the resources

of science and with reservations determined by income tax

procedure, financial policy, or other expedients. Obsession

with present-mindedness precludes speculation in terms of

duration and time.

For Innis the preoccupation with space over the interests

of time in economic theory is an important oversight, betraying

a preference for immediate gratification rather than wise

fiscal policy.

Part III : Further International Trade Policy

Tariffs and Quotas

A tariff typically raises the price of an imported good

because domestic sellers of that good now have an additional

cost of production (the tariff) that must be recouped. Domestic

producers gain a competitive advantage from the tariff but

domestic consumers pay higher prices while the government

receives revenue from the tariff. As well, tariff's encourage

domestic producers to increase production consuming resources

often thought of as better deployed elsewhere. A production

subsidy equal in size to the tariff, would yield exactly the

same benefits to producers as the tariff.

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A quota yields no revenue to the government unless the

rights to import under the quota are sold. Private

entrepreneurs will capture the difference between the price at

which imported goods can be bought on world markets and the

price in the domestic market resulting from the restriction of

import competition. "Quota rent" will be captured by foreign

sellers. Everything is the same as a tariff except that what

would be government revenue under a tariff is captured by

foreign sellers as a kind of monopoly profit.

Quotas tend to conceal from the public the degree of

protection being afforded domestic producers, the price effectof tariffs is more obvious. However, economic planning may be

easier if the precise amount of imports can be predicted.

Free Trade

Free trade is a mantra that has been uttered since early

Greek times often as an end in-itself. Free trade or regimes

related to promoting free trade are goals of current

international treaty obligations. It is natural for countries

with low labour costs to specialise in the production of labour

intensive goods that do not require a lot of skill to produce.

Their trading partners will specialise in goods that are more

capital intensive, require more skilled labour, involve

considerable innovation and technical change.

Free trade is actually used to entrench advantage for

capitalists, at the expense of the other voices within our

global community. Free trade establishes de facto control over

the means of production by the capitalist class. Only they

wield the capital necessary to rent land and hire labour for

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production. Our laws, regulations and trade regimes all reflect

this American bias. The creation of corporations and limited

liability sends a message to capitalists that they will not be

personally liable for the actions of the corporations they

organize. Environmental regimes attempt to discourage polluting

behaviour but in general only the assets of the corporation are

available if liability requires a remedy.

The efficiency argument for free trade is a corollary of

the principle that competitive markets, without externalities,

are efficient. This abstract thought loses coherence when

applied in the real world, promoting corporate predatorybehaviour disguised as survival of the fittest, while immersed

in externalities.

The best way to respond to free trade is not to abandon

industries that another region can produce cheaper. It requires

local decision makers to take a good look around and see what

resources are present, to understand the history of the region

and its communities, to acknowledge the people involved in the

industry, and then make an order to determine the production

that will benefit the community most, rather than what will

benefit the market best. In the context of production and trade

the land and the people are integrated together. Allowing

corporations, who are searching for cheaper products, to

determine local industry production is a very inefficient

allocation of market resources.

In my opinion the best economic actor is free from

decisions based on economic necessity. The best economic actor

is a man or a woman who is not forced to work for food, shelter

and clothing, but assured of survival, can choose what

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activities will benefit the area most and that also help to

provide food, shelter, and clothing.

In Jackson's International Economic Relations, recent

authors recognize the reality that free trade does not ensure

maximum benefit and that intervention can create advantages.

The Optimal Tariff4claims that free trade is not optimal from a

national perspective. That there exists an optimal degree of

trade intervention, known as the optimal tariff, that works by

turning the country's terms of trade in its favour. Each

country has available a policy that will benefit itself at the

expense of others, but, if all countries simultaneously pursuethat policy, all are likely to lose. This is a more realistic

analysis of trade over free trade arguments. The analysis

involves the conclusion that tariffs should be reduced to avoid

conflict and overall loss. The optimal tariff argument involves

a benefit for the intervening country only at the expense of

the country's trading partners. The rest of the world loses

more than the tariff-levying country gains.

In Is Free Trade Passe,5 the author provides a pragmatic

analysis of trade which disregards the theory of comparative

advantage. In this analysis trade is driven by economies of

scale rather than comparative advantage. International markets

are recognized as typically "imperfectly competitive."

Strategic trade policy is necessary to shift excess returns

from foreign to domestic firms. A government that commits

itself to subsidizing a product, for example Airbus, can take

the profits of a foreign, more efficient competitor, and

attract the profit for local producers. A government, by

4 Jackson, International Economic Relations 3rd ed.,Alan Deardorff & Robert Stern1987, (West Group) Minn,

1995. P.21.5 Ibid, Paul Krugman, 1987. p.22.

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supporting its firms, can raise national welfare at the expense

of another country. A protected domestic market can -- under

some circumstances-- promote exports and raise national income.

However, interventionist policies that promote particular

sectors draw resources away from other sectors, and therefore

do more harm than good.

Again, in this article economic theory gives way to the

reality of pragmatic considerations. The conclusion supports

low tariffs by positing that the benefit of subsidies will be

outweighed by accompanying losses of other domestic producerswho compete for resources. The gain will conceal a loss in

overall national income. The article also recognizes that

governments do not necessarily act in the national interest,

especially when making detailed microeconomic interventions.

Instead, they are influenced by interest group pressures.

Overall, beggar-thy-neighbour interventions can raise

national income but will typically raise the welfare of small,

fortunate groups by large amounts, while imposing costs on

larger, more diffuse groups.

Fair Trade

Any significant absolute reduction in real incomes of any

significant section of the community should be avoided. 6

Implicit in this statement is the rejection of the free trade

6 Ibid, Trade Policy and Economic Welfare (1974) Corden, p30.

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argument that some disadvantaged sectors, such as labour, must

necessarily suffer for the overall benefit of the economic

gains involved. In terms of welfare weights, increases in

income should be given relatively low weights and decreases

very high weights. It is unfair to allow anybody's real income

to be reduced significantly. The fact that it is known that a

government will intervene to prevent sudden or large and

unexpected income losses provides the essential security

necessary for political stability.

Policy Choice

One of the central ideas of public choice theory is that

political officials pursue their self-interest, which often

include maximizing chances of re-election, and maximizing

campaign contributions. Governments will not maximize "social

welfare" in any independent ethical sense. The battle over

protectionist measures will be fought mainly between competing

producer interests. Free trade agreements exist because they

are politically beneficial to officials in their signatory

governments. This analysis suggests that current trade

regulation is founded on self-interest rather than any economic

theory.

Environmental Law7

Water is an essential element of life. Communities are

often built up around water, without water communities are in a

desert. Evidence of environmental deterioration in the forms of

harmful pollution, resource depletion, and the decline or even

extinction of species is widely apparent.

7 Benedickson, J. Environmental Law. Irwin Law, Canada. 1997.

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Under Pennsylvania's constitution, "the people have a

right to clean air, pure water, and to the preservation of the

natural scenic, historic, and aesthetic values of the

environment." Public natural resources in the state are "the

common property of all the people, including generations yet to

come." The state is expected to conserve and maintain these

resources for the benefit of all the people in its capacity as

trustee.

Human rights are generally perceived to involve safeguards

from state interference, it is not clear how this applies toenvironmental protection. State action appears to be an

essential component of environmental protection, for the right

to a healthy environment is a right that must be enjoyed

collectively or not at all. The adverse effects of

environmental degradation are frequently gradual, cumulative,

and often difficult to link causally to individual victims,

sometimes including members of future generations.

In Friends of the Oldman River Society v. Canada (Minister

of Transport) [1992] 1 S.C.R.3. Justice La Forest of the

Supreme Court of Canada,

"The Constitution Act, 1867 has not assigned the matter of

"environment" sui generis to either the provinces or

Parliament. The environment, as understood in its generic

sense, encompasses the physical, economic and social enviroment

touching several of the heads of power assigned to the

respective levels of government. It must be recognized that

the environment is not an independent matter of legislation

under the Constitution Act, 1867 and that it is a

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constitutionally abstruse matter which does not comfortably fit

within the existing division of powers without considerable

overlap and uncertainty."

In "A Substantive Right to Environmental Quality" the

author summarizes the position of environmental regulation

groups,

"Those who search for a right to environmental quality

hope it will confer more than a right to participate or some

requirement of due process or natural justice before

environmentally harmful decisions are taken. They want a rightwhich will dictate a decision in favour of environmental

protection in difficult cases. They hope this right will be

equivalent to a civil liberty, on the one hand, constraining

government actions harmful to the environment, and, on the

other, equivalent to a property right, restraining the use of

private property in ways that are incompatible with sound

ecological management."8

Part IV : Trade Regulations under GATT and NAFTA

The use of trade restrictions designed to force policy

changes in foreign countries has become more common. Trade

restrictions are viewed as an acceptable alternative to the use

of force. The fundamental choice is whether countries will

struggle against each other for wealth and power, or work

together for security and mutual advantage. NAFTA undermines

the democratic rights of Canadians to determine the direction

of our social and economic and environmental policies.

8 J. Swaigen & R.E. Woods, "A Substantive Right to Environmental Quality" in J. Swaigen, ed.,

Environmental Rights in Canada (Toronto:Butterworths, 1981) 195 at 200.

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GATT and NAFTA agreements cover trade in goods and

services, capital mobility and labour mobility for professional

and business groups, and the activity of corporations as well

as the management of resources. These trade agreements

establish regimes governing financial, transportation,

telecommunications, and agricultural sectors. They introduce an

intellectual property code and harmonized standards in areas

such as professional qualifications, agricultural inspection,

and health. NAFTA codifies, or entrenches in treaty, a

continental integration process accompanied by changes in

national regulation. NAFTA and the WTO has stimulated a majornew round of economic integration and restructuring. NAFTA/WTO

represents a further shift in power in favour of capital,

reinforcing global conformity, further constraining government

policy, and weakening the power of labour and other social

groups.

The deregulation of capital (domestic or foreign) allows

it to operate throughout an integrated economic space in which

investment tariffs and other border restrictions are being

dismantled as standards become harmonized. Corporations are

able to make decisions about how to organize production and

where to add value, where to locate new investment, where to

close down a facility, where to conduct research and

development, advertizing, and accounting, where to source

supplies, and where to transfer management and other

professional personnel on the basis of the profit motive.

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Pierre Trudeau summarized the situation when he wrote

"Worse still" (i.e. worse than Meech Lake) "the commendable

goal of promoting freer trade has led to a monstrous swindle,

under which Canadian government has ceded to the United States

of America a large slice of the country's sovereignty over its

economy and natural resources in exchange for advantages we

already had, or were going to obtain in few years anyway

through the normal operation of the GATT." Vital national

powers are protected under the GATT, the same can not be said

of NAFTA

Bulk Exports of Water

The bulk export of Canadian water is a trade issue, and

environmental issue, and a human rights issue. It is a debate

that has all the elements of a good drama. The Canadian

government is comprised of the people's representatives who are

committed to serving their constituency and promoting

commercial trade in goods and service. The government is bound

to uphold previous agreements while at the same time

responsible to protect the rights of the people they represent.

National treatment obligations, tariff reduction commitments

and investor rights, under NAFTA and GATT provide a framework

within which bulk water exports may or may not take place. The

power to decide the extent of the Canadian obligation is

subject to the potential decision of an international panel.

GATT Article XI

In the past Panel decisions have given Article XI a broad

reading and demonstrate a consistent reluctance to limit or

circumscribe its application. This seems reasonably natural

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because panel members seek full implementation of their

jurisdiction; they have no incentive to limit their power and

do not operate under traditional Canadian judicial restraint.

The dispute resolution process desires a mutually agreeable

conclusion of conflicts as between the parties and are

committed to delivering decisions within their newly created

jurisdiction.

Article XI of the GATT is designed to eliminate any export

control measures not in the form of a tariff. In this way, all

export controls can become subject to tariff reduction

agreements. This is one of the fundamental elements of theGATT, and represents a large move toward member integration and

international conformity. It effectively eliminates most if not

all other trade restrictive regimes designed for any purpose.

It seems the main problem with the subject of water for

trade export is not the WTO rules or the NAFTA, but the

operation of the two together. Article XI of the GATT provides

for "no other restrictions other than duties, taxes or other

charge on the exportation or sale for export of any product."

It would be difficult to craft water export control

measures that would not violate Article XI unless they are

tariff based such as the adoption of a high duty, tax, or other

charge. Under NAFTA Article 302 Canada is committed to a free

trade zone that requires tariff elimination. "No party may

increase any existing customs duty, or adopt any customs duty,

on an originating good." NAFTA provisions prohibit the use of

export tariffs that might, under WTO rules, have been

implemented to effectively ban water exports to the U.S.A. In

other words, Canada has two sets of obligations, one to the

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free trade zone, and the other to the other members of the WTO.

Canada may adopt high tariff's effectively banning bulk water

exports under the WTO rules as relates to countries outside the

NAFTA agreement, however, within NAFTA, Canada may not adopt or

increase any customs duty tariff. NAFTA does however, allow for

quota restrictions, which GATT does not. It may be possible to

establish a quota system within the free trade zone and a high

tariff barrier beyond to protect Canadian water. Alternatively,

a panel may decide that Canada as concerns the U.S., is

restricted by the GATT from imposing a quota, and obliged to

not raise tariff's under NAFTA, effectively reducing Canadian

control over natural resources.

According to the legal opinion, the primary approach

advocated by federal government is that water in "its natural

state" would not be considered a "good" or "product." The

general idea is that unless water has entered into commerce,

such as in agriculture, it is not covered by any trade

agreement including NAFTA. Water in its natural state in lakes,

rivers, reservoirs, aquifers, water basins and the like is not

a good and is not traded.

Although this does not preclude water in its natural state

from being covered by being a service and therefore subject to

trade agreements, it does seem an appropriately sufficient and

consistent statement as to the parties intentions concerning

NAFTA trade obligations. The U.S., however rejects the Canadian

approach. In order to avoid in-state and out-of-state

discrimination, jurisprudence in America considers water in its

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natural state to be a good, and so do other international

jurisdictions.

Water : An Environment, a Lake, a Good, or a Service?

How should we determination the meaning of the term

"water?" Is the word best understood to refer to a good or an

environment. Semantically the word can take on many different

referents. In the Arctic Waters Pollution Prevention Act,

R.S.O.1985 c.A-12. The legislation insisted upon the importance

of "the preservation of the peculiar ecological balance thatnow exists in the water, ice and land areas," of the Arctic

region. "Water" in this context is a broadly inclusive term

alternatively describing an ocean, inland rivers and lakes, as

well as, ground water table aquifers.

"Water" is included in GATT schedules for tariff

reductions, in this context it refers to a good. A product that

is extracted from fresh water supplies for sale and export.

"Water" as referred to by the companies who desire to fill up

tanker after tanker of water for export sale to the U.S., think

of it as a commercial product.

Who has jurisdiction to determine whether Canadian water

is subject to the GATT/NAFTA regime? The obvious answer is a

WTO panel, however the GATT does operate within a number of

other competing regimes worth consideration for this paper.

At the Federal level, The Canadian Environmental

Assessment Act S.C. 19929, claims to encourage responsible

9Canadian Environmental Assessment Act S.C. 1992, c37 [CEAA]

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authorities to promote sustainable development and maintain a

healthy economy while encouraging opportunities for public

participation.

At common law, traditional private law doctrines relating

to the rights of riparian owners, nuisance, negligence, and

strict liability have also been used to regulate domestic water

use.

It is safe to assume that Canadian environmental

legislation includes the concept of "sustainability." For the

purposes of forest management, British Columbia has attemptedto codify sustainable use as conserving biological diversity,

soil, water, fish, wild life, scenic diversity and other forest

resources. The issue becomes how much water depletion is

sustainable if sustainable development is seen as development

that meets the needs of the present generation without

compromising the ability of future generations to meet their

own needs.

Canadian Environmental Law is comprised of a number of

different principles. The International Joint Commission uses

the overall guiding principles of the integrity of the

ecosystem, the precautionary approach, sustainability, water

conservation, co-operation, existing institutions, measurable

objectives, sound science, and adaptive management, and

fairness. As well the principle of waste prevention is included

by other environment regimes although not listed by the IJC.

Waste prevention is the conservation and efficient use of

resources, including the importance of reducing, reusing,

recycling and recovering the products of our society.

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Alberta's Environmental Protection and Enhancement Act

includes a typical definition of "environment," which means the

components of the earth, including the air, land and water,

together with all layers of the atmosphere, all organic and

inorganic matter and living organisms as well as the

interacting natural systems that comprise any of these

components.

Some of these definitions and principles are recognized at

International Law. The International Convention on Biological

Diversity defined ecosystem as "a dynamic complex of plant,

animal and micro-organism communities and their non-livingenvironment interacting as a functional unit. The Rio

Declaration on Environment and Development adopts the

precautionary approach, "where there are threats of serious or

irreversible damage, lack of full scientific certainty shall

not be used as a reason for postponing cost-effective measures

to prevent environmental degradation."10

Within this framework there may be room to exclude water

in its natural state from trade regulation. However, much of

Canadian water is already being used for commercial purposes.

For example, in the Great Lakes, the largest single use of

water is for hydroelectric power generation using an estimated

one trillion gallons each day. The issue becomes if NAFTA/GATT

obligations require bulk water export to the U.S. in a

proportional share, at what point in time will this breach

environmental principles such as sustainability, if ever? As

well, if trade regulations have the effect of breaching

environmental laws, will Canadian judicial jurisdiction have

the obligation and jurisdiction to enforce "sustainable" laws,

10Rio Declaration on Environment and Development, 14 June 1992, 31 I.L.M. 874, Principle 15.

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or will international trade obligations provide an exemption

under Canadian Environmental Law?

National Treatment

Article 301 of NAFTA is the source of Canada's national

treatment obligation, "Each party shall accord national

treatment to the goods of another party."

What is the scope of the national treatment obligation?

GATT Article III is restricted to import measures only.

However, NAFTA Annex 301.3 specifically exempts from NAFTAArticle 301, export controls on such products as logs and fish.

The question becomes, does Article 301 extend to exports as

well? Is it limited to imports in its application? That such a

determination may be made by a WTO panel in opposition to

Canada's view, undermines the Canadian right to set the terms

of international treaties. Such a determination by a WTO panel

will explore the intentions of the parties and the plain

meaning of the text. It is unclear whether the intention was to

restrict the application of national treatment obligations to

import measures only, or only to provide further confirmation

of export exemptions.

It is not possible to predict with any confidence how this

question might be resolved by a dispute panel at some unknown

future date. If a panel were to conclude that Article 301of

NAFTA was intended to apply to exports as well, it would

provide strong support for the argument that Canada must treat

water bound for export markets, in precisely the same way it

would water bound for domestic consumption. However, to

misconstrue the plain language of "goods of another party" to

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mean "domestic export goods," seems a bit extreme. This

determination really bends the plausible meaning of the Article

and the original intent of the drafters, even though the

Appendix specifically exempts some export controls.

Proportional Share

NAFTA Article 315 -Trade in Goods, Other export measures: A

party may adopt or maintain a restriction otherwise justified

under Art XI or XX (G)(I)(j) of the Gatt only if,

1. the restriction does not reduce the proportion of the total

export made available to the other Party relative to the

total supply as compared to the proportion prevailing in the

previous 36 months.

2. The Party does not impose a higher price for exports than the

price charged when consumed domestically. (does not apply to

a quota)

3. The restriction does not disrupt the normal channels of

supply.

This obligation gives rights to the recipients of current

exports to a proportion of the total Canadian supply of any

exported good, even if Canadian's must go short.

Notwithstanding the exceptions in GATT Article XX, Canada would

be precluded by Article 315 from ever reducing the "proportion

of total exports shipments of the specific good." In other

words, the U.S. may be entitled to a proportional share of

Canadian water resources, in perpetuity, once exports begin.

The Shrimp/Turtle Case demonstrates the difficulty of using the

Article XX exemptions, NAFTA imposes even higher standards on

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Canadian attempts to justify trade restrictions. Overall, I

doubt if any sort of protectionist measure would survive a

challenge.

Investment Rights

Americans have the same rights as Canadians to establish,

acquire, and operate any resource company with virtually no

conditions attached. NAFTA Chapter 11 establishes investor

rights relating to goods and services including a national

treatment obligation in Article 1102. NAFTA Article 1110

establishes freedom from discriminatory expropriation andadequate compensation for measures that interfere with a

business in a way deemed tantamount to expropriation.

Investment rights cover goods and services and probably include

access rights to water in its natural state.

Any investment right accorded to nationals, such as

commercial water service suppliers, must also be extended to

U.S. investors or breach this condition. The combined effect of

national treatment for investment and the expropriation regime,

require that ownership of Canadian water suppliers operating

under any grant or licence, at federal, provincial or common

law must also be open to foreign investors or risk the legal

claim of expropriation damages. For this reason it is necessary

for the government of Canada to act to restrict foreign

investment in Canadian water. As more investors become

associated with the supply of water in Canada, the risk of

investor-state claim liability increases. As well, investor

state claims would not be resolved by Canadian courts applying

Canadian law but rather would be subject to the jurisdiction of

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international tribunals operating outside the context of

Canadian judicial norms.

The Canadian Strategy

Foreign Affairs Minster Lloyd Axworthy introduced an

amendment to the International Boundary Water Treaty Act of

1911 to prevent anyone from removing water in bulk from

Canada's boundary waters. Ottawa has jurisdiction over

international waters, while the provinces control the water

basins within their own boundaries. With the purpose of further

protecting Canadian water, Environment Minister David Andersonattempted to persuade all the provinces to agree on a national

accord to ban bulk water exports. The federal strategy, seeks

to avoid the use of trade mechanisms to control water exports,

and was designed in the belief that all provinces would agree

to a national ban. Five provinces refused to sign a national

accord to ban bulk water exports. If the federal government

cannot manage to convince our own provinces to agree on

environmental measures, it seems unlikely that they will have

much success in the international arena. Not every province

wants to ban bulk water exports for obvious economic

considerations.

Part V : Conclusion

The sanction for a violation of GATT if authorized by the

WTO is a grant of permission to the aggrieved nations to

retaliate. This ensures a stable, predictable retaliatory

regime versus a unilateral retaliatory action with effects that

may not be proportional to the damage done.

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The NAFTA agreement has explicitly created obligations

within our free trade zone. Beyond this zone, WTO rules permit

the use of a high tariff. Within this region, no new tariffs

are allowed, but quota's may operate. The quota's however are

not the equivalent of tariffs because in this situation

underlying the quota policy is an obligation to keep

export/import ratio's for indefinite periods of time.

The federal strategy may involve trying to prevent bulk

water exports from Canada, however, agreements previously

signed bind us to our international obligations. Treaty law is

incorporated into domestic law.

I believe that it is wrong to approach the WTO/NAFTA water

problem from a ban perspective. Banning implies bad faith in

the international context. The agreement should always be

referred to and designed for providing what is necessary to

preserve water resources for non-commercial local use and

enjoyment.

Ultimately, a WTO panel may decide the extent of Canada's

obligations to international trade, and they may decide that

Canada is under obligations to export bulk water to the U.S. in

accordance with national treatment principles. Even if they do

not come to this conclusion, investment and therefore control

over service providers, will probably be caught.

If extraction of water in bulk does begin to occur in

Canada, it should be done under strict conditions which limit

the daily amount of water that may be collected to a

sustainable maximum amount. (i.e. One hose at the end of one

river.) Only with the passage of time does this grant of water

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begin to pay off. It is only by viewing economic policy from a

perspective of duration that our natural resources will be

maintained. Overall reductions within the Great Lakes Basin of

even a foot or two a year will have drastic effects in the

area. Any large depletion of the water table would result in

similar environmental results.

These types of trade and investment decisions have

traditionally been within the sphere of Canadian jurisdiction

granted by the people to officials and elected representatives.

Such an international determination of economic decisions seems

offensive to Canada's sovereignty over natural resources. Ifour representatives have committed our nation to obligations

that reduce our jurisdiction over the exploitation of our

national public resources, I cannot see how this is other than

a disturbing breach of a fiduciary duty owed by politicians to

the people of Canada.

Who benefits most under the provisions of NAFTA and GATT

as concerns water exports. In this case the answer is probably

U.S. agriculture. North America is moving toward one economy,

one capital market, and one investment market. NAFTA truly

creates an integrated North American economy with a single

market for all goods and services, including the use of natural

resources. That such integration undermines sovereignty seems

to have little effect, when the reality is that to reject these

agreements could bring serious financial hardship.

NAFTA even places limits on the ability of government to

regulate investment through existing or new crown corporations

or public enterprises. Under Article 1502 any government

monopoly must "act solely in accordance with commercial

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considerations in the purchase or sale of that monopoly good."

This provision alone negates the rational of establishing many

crown corporations, and limits the ability of the Canadian

government to remove water services from the commercial sphere.

In hindsight, Brian Mulroney totally undermined Canadian

democracy and sovereignty by signing the NAFTA agreement and

giving away domestic control over market levers. He did not

have the benefit of seeing the WTO dispute resolution panels,

even so, the effect of the agreement is such that the WTO may

decide interpretative issues over NAFTA Articles that bind

Canada and require bulk export of water or retribution in lieuthereof.

In my opinion, NAFTA must be a breach of the Constitution.

It is ultra vires the Constitution for foreign affairs to enter

into agreements that purport to remove legislative and judicial

jurisdiction originally granted and entrusted to these bodies

originally by the Canadian Constitution. As far as the

agreement undermines national sovereignty it offends the rule

of law. The rule of law requires that the government shall be

ruled by the law and be subject to it. Government by law and

not by men means government shall operate by general, open, and

relatively stable laws. The rule of law requires the subjection

of particular laws to general, open, and stable rules, such as

the independence of the judiciary to ensure review powers in

the face of unconstitutional executive action.

If foreign affairs has the jurisdiction to make treaties

relating to the Canadian and international economy, do they

enjoy this jurisdiction without Constitutional limitation? Can

they deprive or work toward depriving ownership of natural

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resources for future generations. Can Parliament enter into

agreements that limit the full exercise of their jurisdiction,

granted to government officials by the democratic process? Do

they have the authority to limit domestic jurisdiction that

traditionally has been important to Canadian sovereignty?

Parliamentary fiat in a majority government could push through

any type of legislation. How much power do they have to bind

future generations? Can an assembly in Canada pass a Bill that

binds our citizens and judiciary to respect the authority of a

"greater body," such as a World Trade Organization,

indefinitely. A body that operates beyond the control of the

Canadian people, independent of our sovereign jurisdiction. Isit possible for our legislature to assign our rights and

freedoms over natural resources, to that of another country,

indefinitely into the future? How can you pass up a right to a

higher independent body in full knowledge that the right might

possibly never be recovered. Can you enslave the wealth and

labour of your nation for longer than the term of your elected

mandate? I guess the easy answer is that a new Parliament can

choose to override previous legislation it finds distasteful.

It is unlikely to happen within the current market framework

because quitting the WTO agreement could bring with it

potentially sever consequences, such as loss of profit,

restriction and reduction in trade exports and even potential

volatility of global currency values. (which really begs the

question whether the GATT does not operate in effect by

wielding a big stick that demands conformity or risk an

increase in poverty by global economic regulation or trade

barriers.)

However, I do not see how it is not possible to retreat from

the WTO treaty if a state would so choose. At this point it

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would even be possible to establish the very same regime at the

federal or provincial level. Rather than using a foreign body

to negotiate for trade blocks, Canada could individually treaty

with every place that will trade with us within the GATT

framework, outside the WTO. We have the technology. I mention

this assuming that this may minimize the loss resulting from

departure of the WTO forum. One main difference would be, of

course, that the dispute settlement procedure would be within

domestic jurisdiction, properly safeguarding Canadian

sovereignty.

The better choice to retreating from the NAFTA/WTOagreement is just to allow retribution penalties for

infractions and work within that forum to limit the damage

calculated. Of course, the actual problem is not the GATT rules

so much as it is the NAFTA rules being applied in the GATT/WTO

dispute panel resolution setting.

If NAFTA investment rules apply national treatment

obligations to water and water exports, then Provincial and

Federal legislatures may be open to private expropriation

claims made by American investors. As between states, the U.S.

may insist upon nation treatment of exports as prescribed by

Article 301 of NAFTA or pay equal and proportional retribution

penalties as dictated by rules of the WTO. Which is not such a

bad outcome. But one wonders if we will find the political will

to protect our natural resources, and if we do, will it have

cost us more to participate in the WTO that it has given us in

benefit? The alternative of course is to just sell the water,

but to do so at a very high rate of profit, both domestically

and internationally. Of course, if it were to become profitable

enough, it would attract foreign investment. At this point, any

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profit seeker with a capital pool larger in scale than any

Canadian could ever amass, could buy the whole industry and

then sell us back our own water for a good profit at fair

global market value. Free trade is capitalist rule.

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Alan O.Sykes,Protectionism as a Safeguard: A Positive Analysis of the GATT Escape Clause

with Normative Speculations, 58 U.Chi.L.Rev. 255, 269-72 (1991).

Benedickson, J. Environmental Law. Irwin Law, Canada. 1997.

International Joint Commission,Protection of the Waters of the Great Lakes, Interim Report tothe Governments of Canada and the United States.

Innis, Harold. Essays in Canadian Economic History. (University of Toronto Press). 1956.

Innis, Harold. The Bias of Communication. (University of Toronto Press). 1951.

Jackson, Legal Problems of International Economic Relations, 3rd ed. (West Group, St. PaulMinn.). 1995.

Barber, William. A History of Economic Thought. 1967.

Water-Export Plan Springs a Leak, Ottawa Citizen, 1 December 1999.

It's All for One in Blocking the Export of Bulk Water, The Globe and Mail, 2 December, 1999.

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Documents