Global Policy Forum

By Charles Santiago*

A shared vision exists between the EU and water corporations. The vision was put together in a series of private meetings and consultations between water corporations and the EC. The shared vision involves the EU developing the ideological, legal and financial infrastructure in realizing – market access in the water sectors of countries, subsidy for water corporations, political pressure on developing nations to liberalize water services as part of GATS undertaking, reclassification of environmental services in the GATS discipline and adopting a pro-privatization or private – public partnership as the efficient form of organizing water resources – in the interests of European water corporations.

The vision is to be packaged and promoted as a sustainable development effort, one that promises a development agenda for the poor. In fact, it is suggested that the GATS regime which ensures predictability for multinationals can play a critical role in realizing the Millennium Development Goal aims in providing the poor access to clean water by 2015.

The EU and European governments organize support for its water corporations in a variety of ways. The French government was crucial in lobbying for Suez and Vivendi bid for Buenos Aires privatization project. In fact the "The Embassy of France was hyperactive throughout the concession process… Every week it invited [Argentinean] political leaders to lunch attended by French ministers" In addition, The EU development aid is used to subsidies its water corporations. The EU is using the current round of the GATS negotiations to force liberalization of the water sectors of other countries for the purposes of market expansion of its corporations.

The EU and water corporations work together with the WTO to force countries to open their water services to free-market dictates. The International Consortium of Investigative Journalists (ICIJ) reveal that the EC trade officials work with European water companies RWE/Thames, Suez and Vivendi to demand for removing trade barriers with the WTO. In fact, the ICIJ reveals the contents of a 2002 letter from an EU trade official thanking EU water corporations for "their contributions towards negotiations to reduce trade barriers in water and waste water services with a view to opening these markets to European companies".

The European Commission consults water corporations on its problems and concerns in framing its GATS negotiating efforts and strategies. Specifically, the EC attempts to resolve obstacles and problems faced by its water corporations through its GATS efforts, for example in the area of market access . In this way, the EC ensures that barriers to entry in other countries are removed and thus paves the way for European water corporations to expand its market share and profitability in the water sector. Central to the EC's strategy is an effort to ensure that its water corporations concerns and investments rights are permanently protected under GATS discipline, given that its water corporations need to maintain its market leadership in the water sector and GATS undertakings are irreversible. Thus, the EC uses the GATS discipline as the basis of organizing its commercial relationship with other countries in pursuing its water corporation's interests and investment rights.

At present there is no agreed upon definition of what constitutes Environmental Services at the WTO. It is suggested that the existing definition is rather narrow and does not reflect market reality. In the present round, the EC proposed a new classification which includes, inter-alia, water for human use and wastewater management, solid waste, and protection of bio-diversity. The proposal marks a significant posturing on the part of the EC in representing the interests of its water corporations. It would bring water distribution services within the GATS rubric. The new classification would open up the drinking water sector to competition, an area that offers enormous business opportunities to European corporations.

The EU as part of the GATS Requests – Offer process has requested opening up of various sectors in 109 countries. The EU is seeking to liberalize water distribution services in 72 countries. It is scandalous, that the EC is targeting the water distribution sector of some of the world's poorest nations, including 14 out of the 41 Least Developed Countries (LDC's). Essentially, the EU is paving the way for its water corporations to acquire greater market access to countries in the South, further deregulation of services already in private hands but publicly-regulated and lucrative markets in the developed countries. This would involve countries adopting full market access, national treatment and ‘more burdensome than necessary' requirements and other GATS rules.

Embracing GATS discipline would mean that countries would come under WTO legal and judicial supervision, an issue that has ramification for autonomous policy making and democratic governance in these nations. The universal access to water could be challenged under the GATS regulations. Also regulations on ‘restrictions on fee-setting' would violate GATS disciplines. Here, the state will no longer be in a position to determine prices or demand socially responsible pricing systems to cater for the needs of the poor.

The EU requests targets countries in which water distribution is organized on an alternative and participatory model of water management. The Municipal Department of Water and Sanitation Services, (DMAE) in Porto Alegre, Brazil practices participatory management systems where the local community is central to the decision making in areas of pricing, planning and management and local governance participatory budgeting processes. In fact Porto Alegre participatory budgeting processes is a UN cited model in local governance. DMAE is a not for profit company and is financially independent of the municipal government.

The city of Porto Alegre has successfully improved water coverage to 99.5 percent of its citizens and reduced infant mortality to 13.8 deaths per thousand births compared to a national average of 65. The price of water in the city is one of the lowest in Brazil. Furthermore, the cities non revenue water has decreased from 50 percent in 1991 to about 34 percent in 2001. The DMAE is a good example of a municipality undertaking that is organized around transparency, accountability and public participation, a combination that has achieved efficiency and outstanding performance. The achievements of DMAE are far more impressive compared to the accomplishments of privatized water corporations.

Embracing GATS commitments such as market access rules would effectively prohibit stipulating the legal form of operators. The non-profit nature of cooperatives is a specified legal form and would violate GATS Article XVI.2 (e). GATS disciplines might find the participatory character of the DMAE or the not for profit water supply system in violation of its rules on the basis of a barrier to market access and discrimination against the foreign for- water corporation. For the EU and water corporations GATS serves as an international legal instrument of neo-colonial control, one that is organized to serve the interests of the dominant water corporations.

Imposing GATS discipline in the Brazilian water sector would make no ‘development' sense. The DMAE model has been successful in meeting the needs of the people, especially the poor. It is economically viable and in fact, a profitable model worth emulating. The EU's efforts will undermine successful and alternative arrangements in water management. But more importantly, embracing GATS will eliminate non-market based solutions in the area of water distribution. Put differently, once a country accepts GATS disciplines, water resources will have to be organized to make profits and it is irreversible, thus privatization efforts cannot be reversed. Undermining alternative model of water management will contradict the European Parliament's Committee for Development draft resolution on water management in developing countries. The draft resolution stressed the need for the EU to support "innovative, participatory and democratic systems of public water."

By undermining a highly efficient and effective model of water management and wanting to bring the Brazilian water sector under the GATS discipline exposes EU's own agenda. It aims to ensure as much market access and serves the interests of its water corporations. The EU is invariably doing the bidding for Vivendi, Suez and RWE in the global conquest of water resources and water trade . The EU priority was never poverty reduction or development agenda for the poor.

In 2003 the European Union launched a French government sponsored EU Water Fund. The Fund worth 1 billion Euros aimed at providing financing for safe drinking water and adequate sanitation in 77 African, Caribbean and Pacific (ACP) countries. Most of these countries are poor and are former colonies of the European Union member states. Many of the ACP countries are in various stages of planning and implementation of private-public partnerships and the EU Water Fund will provide the necessary financial support. The Fund is to be administered by the IMF and World Bank. The ACP countries will be subjected to Bretton Woods's institutions conditionality and lending policies including de-regulating their water sector and pushed to accept GATS disciplines.

The EU Water Fund appears to be echoing ‘the Camdessus Report' which called for public funding and development aid to subsidize private sector investments in water. At the heart of the Report is an initiative to use public money to protect water corporations against risk. The notion of risk is defined as the inability of the poor to pay for increased water rates. Essentially, the Camdessus report proposes a franchising model for global water corporations in order to bolster private enterprise. The Report should be appropriately re-titled as ‘Financing for Water Corporations'.

The Group of 8 wealthy nations, the G8 in its annual meeting in Evian, France put forward the Global Water Plan. The Plan stipulates either an independent private sector involvement or in partnership with the state in the water sector. The commitment of these two most important grouping to public – private partnership is significant. Collectively, they are the largest development aid donors to the underdeveloped and developing world. Furthermore, they provide the ideological and policy ‘signal' for multilateral trade and business institutions to follow its respective economic policies and lending arrangements.

In the view of the neo-liberal multilateral institutions, the EU and the G8 pro – free market polices are efficient methods to resolve poverty and realize the United Nations Millennium Development Goals (MDG). Central to this proposition is to reduce government regulation and intervention in the market place. Thus, privatizing water services, health care, education, electricity, and other essential services is perceived as one among the many strategies to reduce the number of people living in poverty by half by the year 2015. But one can't help but wonder, weather despite - the billions spent on poverty reduction and beneath the compassionate sounding pro-market policies - lies an agenda for corporate control and profits. In fact, free market centered globalization has brought about a race to the bottom and have caused more uncertainty and poverty in the developing world.

It is time to move away from poverty eradication approaches which have proven to exacerbate poverty and embrace strategies where growth and wealth of nations are equitably shared, as an effective and sustainable solution to resolving poverty. This would require that economic development is organized democratically or democratic economic development be embraced as the cornerstone in which to restructure the economy. Central to the realization of such a process is the political participation of people in ensuring political control over their economic affairs.

*About the Author: Charles Santiago is researcher with TNI Alternative Regionalisms Project.

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