Managing World Water

By Daniel Moss, Foreign Policy in Focus
June 3, 2009

Flawed U.S. Policy

A principal U.S. policy tool for solving the world water crisis is the Senator Paul Simon Water for the World Act of 2009. This act builds on a similar law signed by President Bush in 2005. The bill seeks to provide "100 million of the worlds poorest with sustainable drinking water and sanitation by 2015." Operationally, the proposed law establishes an Office of Water within USAID, an agency that embodies the entrepreneurial and privatizing spirit associated with shrinking the public sector.

If passed, the Water for the World Act will further enable the role of private investment in public drinking and wastewater infrastructure in developing nations, according to Wenonah Hauter, executive director of Food and Water Watch.

"Water privatization has proven a commercial failure in most countries around the world because private companies have, time and again, proven incapable of meeting their obligations to both their customers and their shareholders," she argues. "Reinforcing the role of private investment in the water infrastructure systems of developing countries will only perpetuate the problems that this well-intended act is designed to solve. Instead, we must work with developing countries to implement sound water policies based on public management of this essential resource."

In reports to Congress, USAID largely measured its success in implementing the Simon water acts by the amount of dollars spent on water systems. Investments in extending service and repairing ailing infrastructure are certainly critical. In this time of financial crisis, these ought to be a core part of public spending programs to reactivate the global economy. However, it matters a great deal how the money is spent, with what oversight and based on what political agenda. Certainly, the recent damage caused by channeling public monies to poorly regulated mortgage companies ought to offer pause about a similar strategy for water. These funds must be channeled to local governments and public utilities (with no strings attached mandating privatization) and to non-governmental organizations working on community-led, commons-based water strategies.

The Obama administration's performance at the World Water Forum was lackluster. It did not sign the alternative declarations to declare water a human right or seek to move policy deliberations to the UN. Whether the administration's plate is too full to pay attention or it is intentionally, repeating the Bush administration's poor stewardship of the globe's natural resources is still unclear.

In his inaugural address, President Obama promised to the world's people "to make your farms flourish and let clean waters flow." So there is hope that the administration has been too busy to give this important issue proper attention. But hope is a poor substitute for action. It is still early on in the new administration, time enough to press for change. That change will happen when citizens insist that water debates are public debates about how to best manage our common water resources.

Globalization in Our Local Economy: Our Water, Their Profits

By Jonathan Leavitt, ZNet
July 8, 2003

Background on the Privatization of Water and Related Trade Treaties

Over the last decade we have seen a significant rise in attempts by corporations both national and international to get control over one of the last great sources of available public funds. These of course are local municipal budgets and the public spending that goes in support of everything from public education to trash pickup to water delivery systems. Almost every community has begun the slow devolution from the public sector model to the corporate model. The process of globalization has accelerated this push for privatization.

With promises of greater efficiency and cost savings for strapped communities, these corporations have begun making in-roads into what has always been a relative safe haven for local control and autonomy from the growing influence of the corporate model. Not content with simply calling all the shots in the world of International politics and economics through the IMF and World Bank and the spider web of international finance, not content to call all the shots via their powerful federal government lobbyists working out of Washington, not content to call the shots at Statehouses across the country, they now want to finish their assault on government by the people by bringing their failed model in to our backyards. As is so often the case, the first wave of this new corporate assault was aimed at disenfranchised communities whose economic distress was seen as the perfect weakness to exploit.

It's important to understand that there is a history of privatization of water delivery systems that date back hundreds of years. In fact, many of the first contracted water delivery systems were done by private companies. But the circumstances of the country were much different then. There was very little public infrastructure or municipal revenue sources that could support municipal building projects of this scale.

The nature of corporations was different as well. Multi-national trade treaties did not exist in the format we are familiar with today. And corporate charters were reviewed every year to see if the corporation had served the public good. Thankfully by the time corporations received their "personhood" (with all the rights of a US citizen, but none of the responsibilities) through a number of bad Supreme Court rulings, most of these private water efforts had moved into public hands. So as we speak today in the United States, we have roughly 85% (about 60,000 cities or towns) of our water delivery systems in the hands and control of public municipalities.

Now however it is a new age, and corporate America has spent the last thirty years trying to figure out how it could escape the basic concepts of democracy through the creation of international trade treaties where local decision making (still accessible to regular citizens and responsive to citizen outcry) could be overruled.

Here's how these trade treaties and globalization of our local economy work using three distinct examples. The first is taking place in Nottingham, NH where USA Springs, plans to build a water bottling plant. It has applied for a permit to pump hundreds of thousands of gallons of water a day from an aquifer that underlies Nottingham, Barrington, and other towns in 3 watersheds. This could mean pumping 310,000 gallons per day, enough to fill one million 20 oz. bottles every 24 hours. USA Springs has said it plans to sell the bottled water in Europe.

In a letter to US Representative (now Senator) John E. Sununu, US Trade Representative Robert Zoellick said that "nothing in the WTO agreement requires local authorities to permit bulk extractions of water that would be contrary to sound resource management and conservation or that would create hazards to human health. Of course, once local authorities decide to permit bulk water to be extracted from an aquifer, bottled, and sold as an article of commerce, WTO rules would likely apply to the sale of that article of commerce."

The State of New Hampshire claims the right to determine whether a large groundwater withdrawal such as the USA Springs proposal would harm other groundwater users. If the State grants a permit to withdraw a certain amount, it believes it reserves the right to change the amount at a later date. And under the GATT, General Agreement on Tariffs and Trade, quantitative restrictions affecting exports are prohibited, but exceptions can be made for natural resource conservation. Unfortunately the GATT trade agreement that dealt primarily with goods is no longer the main agreement of trade issues and has now been both updated and overtaken by the WTO and more severe trade agreements such as GATS which sets up privatization of services and TRIPS which governs and pushes forward Intellectual Property Rights which corporations use to make profits out of GMO seeds, or to prevent developing countries like Brazil from providing cheap HIV medicine for its poor.

Under the soon to be enacted GATS, General Agreement on Trade in Services, there are no exemptions for natural resource conservation. Under the GATS section on domestic regulations, any regulations considered "more burdensome than necessary to assure quality of service" are considered unfair barriers to trade. A trade tribunal would resolve the determination of whether or not regulations are considered fair or unfair. In other words, if the state of New Hampshire opens this door up even a crack, then the tentacles of these trade treaties will have enough maneuvering room to work their poison.

As another important example of how trade issues relate to the issue of water is the example of when Sun Belt Water of California sought to suck up tankers of bulk water from lakes in British Columbia. In response to public pressure the Canadian government denied the request and passed a law prohibiting bulk water exports in the future. However as a foreign investor under which NAFTA grants new rights and privileges, Sun Belt Water took its case to NAFTA for arbitration. Under NAFTA, foreign investors can directly sue if they believe government action has taken place which is "tantamount to expropriation" of their property; i.e. if government regulation or law harms its ability to profit from its investment. If it wins, the government must compensate it for its losses. Similar provisions are likely to be in FTAA.

If Canada loses they will either have to change the law or pay billions to compensate the corporation for "future expected profits." The same principle might eventually apply to the state of New Hampshire under soon to be enacted trade treaties and its battle with USA Springs.

The other scenario is taking place in many more cities and towns across the country and the world, including my hometown of Lawrence, MA currently faced with the possibility of their water works being turned over to United Water / French Suez.

This is how the corporations work in this particular scenario. First, they identify communities whose finances are shaky (Tax base weak resulting in a small budget, no room for capital improvements, bonding capacity already reached) and whose water delivery system needs significant replacement work or a complete overhaul. Then they connect with local "players" to serve as ambassadors of the privatization concept. (i.e. former councilors)

Keep the process as "closed" as possible. For example, make no effort for citizen input on the process. Meet in private. Avoid any and all publicity about the process. (This allows all the "players" in this kind of process (law firms, engineering firms, firms that handle municipal finance questions) to benefit richly off the process alone. For instance Lawrence has paid out nearly $4,000,000 for Wall St. Consultants already. These are names you will hear over and over again…. Hawkins, Delafield and Woods, Malcolm Pirnie, Advest, Inc when you look into water privatization all over the country.

Then they begin to circulate carefully designed public relations materials to both elected officials and the residents of the community. In these public relations pieces they list the glowing recommendations that come from citizens in communities that have relationships with the multi-national, clients of the company, and of course both employees and representatives of organized labor.

This multi-national will also begun making promises about what it will bring to the city. It lists its "Community Initiatives" like a "Buy Lawrence First" policy, scholarships to the Boys and Girls Club, Adopt a School Program, Urban Outreach Program, and support for Minority and Women Owned Small Businesses.

Let's start with a "Buy Lawrence First" policy. Exactly what kinds of materials and services will a water treatment plant need from the small businesses of Lawrence? Probably none. But it sure sounds good and looks great in print. Next, there is the promise of scholarships to local youth. Well this will be useful since by going with United Water / French Suez, many local fathers and mothers will lose their water Department jobs. Jobs that would have helped pay for college for local residents.

Then there is the "Adopt a School" program that will probably entail sending corporate speakers into 5th and 6th grade classes to tell them how great corporate economics are and that many of them should look into the exciting career opportunities in the world of water delivery systems. "Urban Outreach" for these multi-nationals means learning how to say, "Your water rates have gone up again" in both English and Spanish.

And as for the last promise of support for "Minority and Women Owned Small Businesses, these corporations know that it is these groups that are most likely to oppose this corporate takeover. These are the groups that best understand who corporate economics works for (and who it doesn't work for). So they want to appease them with false promises and token pledges of support.

Ramifications for the Community

The ramifications for the community begin on the economic level. Most communities are overextended in terms of revenue for public services. In Lawrence our community's water revenue goes directly into an "enterprise fund" that is used solely for water related issues. It's criminal that during difficult fiscal times, communities are being misled into handing over one of the few sources of revenue they have under their full control and a public service that pays its own way.

There is also the fact that money normally circulated back into the community via a public workforce (and almost guaranteed to be spent locally) is now shipped out to distant foreign shareholders. And lastly is the reality that privatization and globalization of our local economy leads to rate increases. Corporations must seek to maximize their profits. Once the workforce has been slashed at the beginning of the privatization, the only remaining way to maximize profit is to increase water rates.

In Cochabamba, Bolivia, Bechtel (who also just received almost a billion dollars worth of infrastructure re-building contracts for Iraq) oversaw a water privatization project that drove household water rates up to $20 a month in a city where most families earned $67 a month, and imposed draconian financial restrictions on water use. When the people rose up to protest they were brutally repressed and seven died. (Eventually the people succeeded in taking back the water system and Bechtel is still trying to force the city to pay $40 million for "expropriation".)

In Manilla in the Philippines, a Bechtel water privatization scheme led to a 400% increase in water rates.

In Pekin, Illinois water rates increased 204 percent over eighteen years of privatization by American Water Works.

In Nelspruit, South Africa, water rates rose by more then 400% between 1995-2000 after the system was privatized. We also need to consider the history of privatization and globalization that fosters corruption. For example

Suez and Vivendi have been convicted of bribing government officials to obtain contracts.

French Suez officials had to flea Indonesia after the government was overthrown, because of their collaborations with the dictatorship resulting in the water delivery system being thrown into complete disarray.

And only four months ago the mayor of Atlanta pulled out of the biggest contract in the nation, with United Water – Suez. The city found evidence that the company failed to perform maintenance, billed the city for work it didn't do, ignored customers cries for service, cut staff to dangerously low levels and occasionally delivered filthy, brown water.

And finally on the economic front is that privatization and globalization in our local economy leads to job losses.

In Atlanta the work forces was slashed from nearly 700 jobs to nearly 300.

Following privatization in England, over 10,000 workers were let go.

Following privatization in the Philippines half of the original workforce was let go.

Following privatization in Indianapolis nearly 200 workers were laid off.

The issue of local control is also vitally important to understand. Companies are accountable to shareholders, not consumers. If CEO's and corporate boards don't seek to maximize their profit, then they are subject to lawsuits on behalf of these shareholders. This means that rather then being held accountable by the residents of a city or town, multinationals will conduct business by the terms of what will increase their bottom line for the short term.

We need to keep in mind that Privatization and globalization isn't simply a matter of signing off on a local company to do some contracting for a city/town. Instead we are dealing with an almost irreversible process. The fact is that once the infrastructure of a system has been turned over to privatization all the "institutional memory" is lost from the city. When it comes time to renegotiate a contract, the corporations hold all the cards because it would require a huge capital investment from cash starved cities to re-claim. Cities and towns are then at the mercy of these corporations.

For example, the city of Chattanooga tried to buy back its water system from American Water Works in response to exorbitant fire hydrant rates. During the battle, American Water Works paid lawyers and public relations firms more then $5 million. Unable to match this campaign, the city had to abandon its buyback efforts. And under closed trade tribunals (the highest law of our land), a private corporation can challenge the reversal of privatization as being an act of "expropriation" and win huge financial settlements from cities or towns.

The remaining issue for us to consider is the quality of Water. Privatization and globalization of our local economy undermines water quality. Corporations can reject local, state, and federal laws that apply to water quality again as "barriers to free trade" and are backed up by the lobbying group for private water companies, the National Association of Water Companies (NAWC). NAWC intensively lobbies both Congress and the EPA to prevent higher water quality standards from being adopted.

A likely scenario to be repeated here in the United States is the situation that took place in Walkertown, Ontario, seven people died and 2300 others became ill as a result of E. Coli contamination in the drinking water. The private company charged with testing the water knew the water was contaminated. But under regulations designed to encourage privatization, they were not required to report it.