Home Our Shared Environment An Act to Amend the International Boundary Waters Treaty Act Questions and Answers

Questions and Answers

Q.1 What is the purpose of the Bill?

A. The main purpose of this bill is to prohibit the bulk removal of boundary waters out of their water basins, principally the Great Lakes. The bill will protect this precious natural resource from exploitation and environmental damage caused by bulk removal of water out of watersheds.

This is significant because the Great Lakes are of sufficient size to attract developers of bulk removals, including for the purposes of export, or diversion schemes out of water basins; and the federal government is acting within its jurisdiction to prohibit bulk removal of water, consistent with federal-provincial discussions to achieve a Canada-wide prohibition on the bulk removal of water. All provinces now have in place or are developing legislation or regulations which prohibit bulk water removal.

Separate from the prohibition, the amendments will formalize a 90 year old process under which the federal government and the International Joint Commission have examined and approved certain projects under the provisions of the Boundary Waters Treaty. Those projects have always required federal approval. Now they will need a licence from the Minister of Foreign Affairs. Such projects include dams, obstructions, causeways, etc. which would have the effect of altering the natural level or flow in boundary waters (e.g. a dam across a boundary water such as the St. Lawrence River) or in transboundary rivers where Canada is downstream (i.e. where a dam or obstruction in Canada would result in water backing up into the U.S.)

Q.2 What steps has the federal government taken to address the issue of bulk water removal?

A. In February 1999, the federal government announced a strategy to prohibit the bulk removal of water, including for the purposes of export, from major Canadian water basins. The federal strategy is based on an environmental approach. The water basin approach treats water as a resource and not as a good, and is the most comprehensive and environmentally sound way to protect our water basins from environmental damage that can be caused by bulk removals. This approach respects federal and provincial jurisdictions, and is consistent with Canada’s international trade obligations.

There are three parts to the strategy:

• by Canada: amendments to the International Boundary Waters Treaty Act, which will give the Minister of Foreign Affairs the power to prohibit bulk removals from boundary waters, principally the Great Lakes. The amendments were introduced in Parliament in November 1999. With the reintroduction of amendments to the Act, Canada is demonstrating its commitment by taking action within its jurisdiction.

• by Canada and the U.S.: a joint reference to the International Joint Commission (IJC), the independent, binational agency charged with preventing and resolving disputes, or investigating issues, over shared waters. The reference asked the IJC to study the effects of water consumption, diversion and removal, including for export, from boundary waters, with an initial emphasis on the Great Lakes. The IJC’s final report (Protection of the Waters of the Great Lakes, February 2000) concluded that the Great Lakes require protection, especially in the light of the uncertainties, pressures and cumulative impacts from removals, consumption, population and economic growth, and climate change. Recommendations for action to protect the ecological integrity of the Great Lakes Basin are directed by the IJC to all levels of government in Canada and the U.S. The IBWTA amendments are consistent with and supportive of the IJC’s conclusions and recommendations.

• federal/provincial: management of water in Canada is a shared responsibility. Therefore, the Minister of the Environment sought endorsement by provinces and territories of a Canada-wide Accord prohibiting bulk water removals from all major Canadian water basins. All provinces have put into place or are developing legislation or regulations which accomplish this goal.

Q.3 On February 9, 1999, the House of Commons passed a motion calling on the federal government to ban the export of water. Why has the federal government not followed this advice?

A. The federal government—indeed, all Canadians—agree that measures need to be taken to protect the integrity of Canada’s water resources. The federal government’s strategy of prohibiting the bulk removal of water from all major drainage basins in Canada is the best means to achieve this goal.

Prohibiting bulk water removal from water basins is a better approach than an export ban because it is more comprehensive, environmentally sound, respects constitutional responsibilities and is consistent with Canada’s international trade obligations.

• Water is protected in its water basin, before the issue of its export arises. This is an environmental protection measure of general application, aimed at preserving the integrity of ecosystems.

• Under the Canada-wide accord, each level of government has a responsibility and each level must take action. Canadian governments have full sovereignty over the management of water in its natural state, and in exercising this sovereignty are not constrained by trade agreements.

• Water is regulated in its natural state, before it has become a commercial good or a saleable commodity. This is consistent with Canada’s international trade obligations.

An export ban may appear as a quick and simple solution. However, it does not focus on the environmental dimension, has possible constitutional limitations and may be vulnerable to a trade challenge. An export ban would only regulate the cross-border movement of water once it has become a good and would therefore be subject to international trade agreements. This contrasts sharply with the federal government’s approach.

Q.4 What is the Boundary Waters Treaty?

A. In 1909, Great Britain (on behalf of Canada) and the United States signed the Treaty between the United States and Great Britain relating to boundary waters, and questions arising between the United States and Canada, more commonly known as the Boundary Waters Treaty.

The Treaty establishes principles and procedures for preventing or settling disputes, particularly regarding the quantity and quality of boundary waters between Canada and the United States.

The Canadian parliament passed an act to implement the Treaty in 1911, the International Boundary Waters Treaty Act.

Q.5 What is meant by "boundary waters" and "transboundary waters"

Boundary Waters

The Treaty defines boundary waters as "the waters from main shore to main shore of the lakes and rivers and connecting waterways, or the portions thereof, along which the international boundary between the United States and Canada passes, including all bays, arms, and inlets thereof..."

For example, boundary waters include Lake of the Woods, the Great Lakes, the section of the St. Lawrence River from the outlet of Lake Ontario to Cornwall, Ontario-Massena, New York, the Upper St. John River (Quebec/New Brunswick) and the St. Croix River (New Brunswick).

A river that forms or runs along the boundary (as opposed to crossing it) is a boundary water (e.g. the international section of the St. Lawrence).

Transboundary Waters

The Treaty defines transboundary waters as "rivers flowing across the boundary."

For example, transboundary waters include, depending on the issue under the provisions of the Treaty, the Red River, Milk River (Alberta), Souris River, Richelieu River, Saint John River.

Q.6 What is the International Joint Commission?

A. The International Joint Commission is a binational independent body established in 1912 pursuant to the Boundary Waters Treaty. It consists of three members appointed by the Governor in Council of Canada and three members appointed by the President of the United States. The Commission performs the responsibilities assigned to it under the Treaty.

A. In February 1999, Canada and the U.S. gave a Reference to the International Joint Commission (IJC). The Reference asked the IJC to study the effects of water consumption, diversion and removal, including for export, from boundary waters, with an initial emphasis on the Great Lakes. The IJC’s final report (Protection of the Waters of the Great Lakes, February 2000) concluded that the Great Lakes require protection, especially in the light of the uncertainties, pressures and cumulative impacts from removals, consumption, population and economic growth, and climate change.

Among other things, the report concluded that:

• the waters of the Great Lakes are a critical resource; on average, less than one percent of the waters of the Great Lakes is renewed annually.

• If all the interests in the [Great Lakes] Basin are considered, there is never a "surplus" of water...every drop of water has several potential uses...

• International trade law obligations—including the FTA, NAFTA, WTO and GATT—do not prevent Canada and the U.S. from taking measures to protect their water resources and preserve the integrity of the Great Lakes Basin ecosystem... so long as there is no discrimination by decision makers against persons from other countries in their application... Canada and the U.S. cannot be compelled by trade laws to endanger the waters of the Great Lakes...

Recommendations for action to protect the ecological integrity of the Great Lakes Basin are directed by the IJC to all levels of government in Canada and the U.S., and provide a basis for developing a consistent approach to protecting the waters of the Great Lakes on both sides of the border. These recommendations, if implemented, would make large-scale or long-distance removals of water from the Great Lakes virtually impossible.

The IBWTA amendments are consistent with and supportive of the IJC’s conclusions and recommendations.

Canada is reviewing the report’s recommendations, and will respond formally to the IJC early in 2001.

A. The Act implementing the Treaty was passed on May 19, 1911. Its main objective was to set up the International Joint Commission and it did not go into sufficient detail about the content of the Treaty itself.

The amendments will provide a clear prohibition of the bulk removal of boundary waters out of their water basins.

Separate from the prohibition, the amendments will clarify the Act and implement the Treaty more effectively through the introduction of a licencing system for projects under Articles III and IV of the Treaty.

A. The federal government has historically approved or rejected proposed projects on an informal basis (the IJC also gives its approval through its own process), under the authority of the Treaty. In this manner, the Government of Canada has always met its international obligations. However, in light of increasing pressures on freshwater resources, the federal government felt that stronger protections are required and that the licencing arrangements need to be formalized in order to better implement Canada’s obligations under the Boundary Waters Treaty.

The federal government also believes that a definite prohibition on bulk water removal from boundary waters is necessary to fulfil its international obligations as well as protecting the ecological integrity of these shared basins.

A. The amendments:

• will impose a prohibition on removals of boundary waters out of their water basin because it is deemed that the cumulative effect of such removal will alter the natural level or flow of waters on the other side of the border and lead to potential environmental degradation and exploitation of the water supply. Exceptions will be considered. This could include ballast water, short-term humanitarian purposes and water used in the production of food and beverages (e.g. bottled water).

• separate from the prohibition, will introduce a licencing system which will confirm the authority of the Minister of Foreign Affairs to approve or reject projects that could have an impact on the natural level or flow of boundary waters, waters flowing from boundary waters, or transboundary waters on the other side of the border. Ordinary uses for domestic or sanitary purposes would be excluded from the licencing regime in accordance with Article III of the Treaty. Such activities have traditionally been covered by provincial regulations and this would continue. Other traditional uses, such as agricultural and industrial withdrawals that remain within the basin, would not be covered by the licencing system.

A. No. A bulk water removal project would be prohibited under the Act.

The licencing system applies to any use, obstruction or diversion of boundary waters that affects or is likely to affect the natural level or flow of the boundary waters on the other side of the boundary.

A. Boundary waters, as defined in the Treaty, do not refer specifically to underground watercourses or groundwater. Groundwater was not an issue at the turn of the century and therefore it is difficult to argue that the contracting parties intended to cover this concept.

A. The amendments are aimed at fulfilling Canada’s obligation under the Treaty, i.e. not to affect the level and flow of waters on the U.S. side of the boundary. The same obligations apply to the U.S. with respect to Canada.

A. We have the Boundary Waters Treaty with the U.S. Canada has a long history of constructive relations with the U.S. in protecting shared waters. It is in the interests of all parties to protect the Great Lakes system. The Treaty contains rights and obligations of each country regarding water quality and water quantity in boundary waters, including the Great Lakes.

Also, U.S. law and practice differs along the border, from state to state.

In the Great Lakes states, the governors have a Congressionally-affirmed power to veto new "diversions" and could interpret this power to cover bulk water transfers to ships. The Water Resources Development Act (1986) provides that no bulk export or diversions from the Great Lakes can take place without the unanimous approval of all eight Governors of the Great Lakes states.

Under the Great Lakes Charter (1985), the Governors of the eight Great Lakes states notify and consult with each other, and the Premiers of Ontario and Quebec, on proposals for diversions and consumptive uses of waters within the Great Lakes Basin. The Charter is non-binding political declaration, but carries considerable weight with state and provincial governments.

A. Canada recognizes that states and provinces have important responsibilities in the management of the Great Lakes. However, with regard to the proposed Annex to the Charter, Canada has concerns on both the content and the form.

Canada considers that the standard being proposed in the Annex is too permissive and could open the door to large-scale, long-distance removals of water. Ontario, which participated in the discussions with the states that make up the Council, and environment groups on both sides of the border, have expressed similar concerns. The recommendations in the IJC final report (Protection of the Waters of the Great Lakes) represent a viable solution to the concerns of U.S. states.

Canada also has concerns that aspects of the Annex could conflict with the Canada-U.S. Boundary Waters Treaty.

Canada has registered its concerns with the Council in Chicago and the State Department in Washington. We will continue to work with the U.S. on this issue.

Regardless of the standard eventually adopted in the Annex to the Charter, Canada’s efforts will be directed at ensuring that Canadian rights under the Treaty are protected. Any new common standard agreed to by the Council should be consistent with the rights and obligations of Canada and the U.S. under the Treaty.

The Council of Great Lakes Governors is made up of the eight Great Lakes states. The Great Lakes Charter membership is the same as the Council, plus Ontario and Quebec.

A. When water is withdrawn within the water basin, most of it usually returns to the boundary waters by a natural route—there is essentially no or little net loss to the system. The effect of a removal of water within the same water basin on the natural level or flow of waters on the other side of the boundary is therefore assessed on a case-by-case basis. The amendments state that diversions of boundary waters within the same water basin will be covered by a licencing system set out in the amendments and not by the prohibition.

Does the prohibition cover the removal of non-boundary waters?
Does the prohibition apply to non-boundary waters that are connected directly to boundary waters within the same water basin?

A. No. This prohibition is based on and applies to boundary waters, only to the degree specified in the Treaty.

Provincial jurisdiction covers other waters. The federal strategy to prohibit the bulk removal of water out of major drainage basins recognizes the primary responsibility of provinces and territories for water management. As part of the strategy, the Minister of the Environment sought endorsement by provinces and territories of a Canada-wide Accord prohibiting bulk water removals. All provinces have put into place or are developing legislation or regulations which accomplish this goal.

A. The issue is being reviewed as part of the development of regulations for the amended Act. Regulations are expected to be published in the Canada Gazette in due course after the amended Act comes into force.

A. Section 132 of The Constitution Act, 1867 gives the federal Parliament the jurisdiction to implement treaties signed by Great Britain on behalf of Canada (e.g. the Boundary Waters Treaty). The federal Parliament also has the jurisdiction to amend the implementing legislation for such treaties.

Q.20 Do the amendments to the Act expand federal jurisdiction or activities into provincial areas of competence?

A. No. Federal jurisdiction is being applied only to the degree stipulated in the Treaty. Only the federal government has authority to fulfill the Treaty’s obligations.

The prohibition provision is being applied under Article III of the Treaty, i.e. bulk removal of boundary waters out of their water basin will alter the natural level or flow of waters on the U.S. side of the boundary.

With regard to the licencing provision, the informal system of federal and IJC approvals has operated for 90 years under Articles III and IV of the Treaty. Under the amended Act, the fundamental test of whether or not a future project triggers federal government and IJC involvement will remain precisely what it has been since 1909: does it fall within the scope of Articles III or IV of the Treaty? Only the federal government has the jurisdiction to discharge this Treaty obligation.

The federal government consulted extensively with the provinces on these amendments. We will continue to consult with provinces on how best to implement the licencing provisions. The details will be included in the regulations. Consultations with the provinces on the regulations will begin concurrent with the tabling of the legislation.

A. The federal government does not have jurisdiction over all waters in Canadian territory. The Boundary Waters Treaty gives the federal government clear jurisdiction over boundary waters to the extent stipulated in the Treaty. Amending the International Boundary Waters Treaty Act was therefore the best way to achieve our objective, while respecting provincial jurisdiction.

With regard to territories, while devolution of some province-like responsibilities is underway, the federal government presently has responsibility for water in the three northern territories. Actions to prohibit removals in the North will be discussed in close consultation with the territories.

A. Over the past 90 years, the federal government and the IJC have dealt with approximately 30 applications related to projects in transboundary waters or waters flowing from boundary waters, and a similar number related to boundary waters, without any evidence of or problems with duplication or overlap. As there will be no substantive change to the existing procedure for applications and approval, we do not anticipate, under the amended Act, that there will be problems between federal and provincial areas of responsibility.

Nevertheless, should some problem arise, provision is made in the amendments that the Minister of Foreign Affairs may reach an agreement or an arrangement with a province respecting either the prohibition provision or the licencing regime.

A. Yes, extensively.

During the summer of 1998, federal officials travelled to each province and territory to discuss the various options for a federal approach to bulk water removals.

Following the announcement of the federal strategy in February 1999, there were extensive discussions with the provinces and territories on all aspects of the federal strategy, including the amendments to the Act. Some adjustments were made in response to provincial input.

As regulations to the Act are being developed, the federal government will consult closely with the provinces.

Q.24 On February 9, 1999, the House of Commons passed a motion calling on the federal government to ban the export of water. Why has the federal government not followed this advice?

A. The federal government—indeed, all Canadians—agree that measures need to be taken to protect the integrity of Canada’s water resources. The federal government’s strategy of prohibiting the bulk removal of water from all major drainage basins in Canada is the best means to achieve this goal.

Prohibiting bulk water removal from water basins is a better approach than an export ban because it is more comprehensive, environmentally sound, respects constitutional responsibilities and is consistent with Canada’s international trade obligations.

• Water is protected in its water basin, before the issue of its export arises. This is an environmental protection measure of general application, aimed at preserving the integrity of ecosystems.

• Under the Canada-wide accord, each level of government has a responsibility and each level must take action. Canadian governments have full sovereignty over the management of water in its natural state, and in exercising this sovereignty are not constrained by trade agreements.

• Water is regulated in its natural state, before it has become a commercial good or a saleable commodity. This is consistent with Canada’s international trade obligations.

An export ban may appear as a quick and simple solution. However, it does not focus on the environmental dimension, has possible constitutional limitations and may be vulnerable to a trade challenge. An export ban would only regulate the cross-border movement of water once it has become a good and would therefore be subject to international trade agreements. This contrasts sharply with the federal government’s approach.

Q.25 Would a ban on exports be contrary to the NAFTA?

A. Under the NAFTA and the GATT, Parties cannot restrict or prohibit the export of goods except in certain, narrow circumstances. This provision in the GATT dates from 1947. A blanket prohibition on the export of water as a good, as for example, in the form of bottled water or water in tankers, could be vulnerable to a WTO or NAFTA challenge.

Q.26 Is a prohibition on the bulk removal of water from water basins contrary to NAFTA?

A. No.

Preventing the removal of water from its natural state before it becomes a good is consistent with our trade obligations. This is reflected in the 1993 Joint Statement by the governments of Canada, Mexico and the United States:

"The NAFTA creates no rights to the natural water resources of any Party to the Agreement.... nothing in the NAFTA would oblige any NAFTA Party to either exploit its water for commercial use or to begin exporting water in any form. Water in its natural state in lakes, rivers, reservoirs, aquifers, water basins, and the like is not a good or product, is not traded, and therefore is not and never has been subject to the terms of any trade agreement."

A. The Joint Statement is an agreement between the governments of the NAFTA Parties on their interpretation of the treatment of water resources under international trade agreements, including the NAFTA. If a measure relating to water were to become the subject of dispute settlement or arbitration, the Statement would play an important and authoritative role as an interpretive guide as to the intent of the NAFTA Parties with respect to the relationship between water and the NAFTA rules.

All three governments of the NAFTA Parties made this statement publicly through separate press releases prior to the coming into effect of the NAFTA.

The principle that governments have full sovereignty over the management of water in its natural state was reconfirmed by the Deputy U.S. Trade Representative, in a formal submission to the International Joint Commission, where he indicated that under customary international law, non-navigational rights to a watercourse -- including the right to control or limit extraction -- belong solely to the country or countries where the watercourse lies.

A. Generally speaking, a good is an article that has entered into trade or commerce. Water in its natural state (e.g. in a lake or a river) has not entered into commerce in the sense of being transformed into a saleable commodity and is therefore not a good.

Furthermore, even if some water is extracted from its natural state to be made into a good (e.g. bottled water or water used as an ingredient in another bottled beverage), the remaining water in the source from which that water was drawn still constitutes water in its natural state, and therefore is still not a good.

In many respects, water in its natural state can be equated with other natural resources, such as trees in the forest, fish in the sea, or minerals in the ground. While all of these things can be transformed into saleable commodities through harvesting or extraction, until that crucial step is taken they remain natural resources and outside the scope of trade agreements.

This point is readily illustrated by looking at the fishing industry for a parallel example of a natural resource that can be transformed into a good. In that context, governments have a discretionary power to decide not only whether to allow fishing as a general policy, but also where and when fishing may take place, and the total quantity of fish that may be caught. From the standpoint of trade agreements, that discretion is not affected by previous decisions that allowed some fishing to take place.

A. No. This is a mistaken view of the purpose of the tariff schedule.

Tariff schedules exist to provide a system of tariff classification for tariff negotiation purposes, to allow importers and exporters to readily identify the tariff, if any, that applies to a particular article, and for a range of other technical applications such as the administration of rules of origin and customs valuation.

The tariff schedule does not define what is a good, nor does it tell us if or when water is a good. It only tells us that when water is a good, it falls under a particular tariff heading.

Q.30 Isn’t it contradictory to say that water is not covered by NAFTA, but that an export ban on water would be vulnerable to trade challenge?

A. No. You must distinguish what water you are talking about.

Export bans apply to goods or products. There are many products in which water is the major component, for example, bottled water, beer, soft drinks, fruit juices made from concentrate, as well as certain industrial products. All of these are commercial products or goods and are legitimately traded. Measures affecting trade in these products are subject to the NAFTA and WTO rules. An export ban on such products, simply because they contain water, would clearly be inappropriate, and would likely fall afoul of those rules.

In contrast, the NAFTA Joint Statement on water confirmed that water in its natural state is not a good and is not covered by trade agreements. Canada’s approach of prohibiting bulk water removal out of water basins is consistent with Canada’s international trade obligations, including the NAFTA. It protects and regulates water in its natural state, before the issue of its export arises and before it has become a commercial good or a saleable commodity, or has been incorporated in a manufactured product.

A. No.

Only water that has been extracted and commercialized in the sense of having been transformed into a saleable commodity would become a good. Examples would include water that has been or is intended to be bottled for sale, or that is to be used as an input for a manufactured product. Water remaining in its natural state would not be a good.

Furthermore, the removal of water from its natural state does not necessarily mean that it becomes a good. Whether the extraction of water for municipal, industrial or agricultural uses transforms that water into a good is a complicated question. It can really only be answered on the basis of the specific factual and legal circumstances under which that particular water is removed from its natural state.

In any event, it would not change the status of the natural source from which it was drawn. The water remaining in that source would still be in its natural state and therefore not subject to trade agreements.

A. The federal government’s responsibility to Canadians is to design an approach which protects the integrity of Canada’s water resources, is environmentally sound and holds the least risk of trade challenge. The federal government’s strategy is based on a careful analysis of all of the legal and environmental factors, and is well-grounded in policy and law. The federal government considers that an export ban would run a far greater risk of trade challenges, thereby exposing Canada’s water resources.

Canada’s views have been supported by a wide range of expert opinion.

• The International Joint Commission (IJC), which is an independent binational commission, came to similar conclusions in its final report (Protection of the Waters of the Great Lakes, February 2000) after exhaustive public hearings and submissions that included governmental and independent experts representing every point of view;

• The principle that governments have full sovereignty over the management of water in its natural state was reconfirmed by the Deputy U.S. Trade Representative, in a formal submission to the International Joint Commission, where he indicated that under customary international law, non-navigational rights to a watercourse—including the right to control or limit extraction—belong solely to the country or countries where the watercourse lies.

Canada cannot prevent other countries, or, in the case of Chapter 11 of the NAFTA, private investors, from challenging its laws and regulations before dispute settlement or arbitration panels. The important question is whether such a challenge is likely to succeed. Canada’s strategy is the most effective approach from the standpoint of achieving the policy goal of protecting the environmental integrity of Canada’s ecosystems and water basins while minimizing the risk that such a challenge would succeed.

The federal government considers that an export ban would run a far greater risk of being vulnerable to such a challenge.

Q.33 If one project for export of water is allowed, does this open the floodgates to exports of water generally? Can we "turn off the tap"?

A. There is nothing in Canada’s international trade obligations that would require that future projects for the removal of water for bulk exports be approved, simply because past projects have been approved. Canadian governments retain full sovereignty over the management of Canadian water in its natural state.

The possible impact of the approval by a province of a bulk water removal project would be limited to the province involved and, in terms of affecting similar future project applications would depend, in the first instance, on the particular regulatory regime that governs such approval processes.

The NAFTA does not require all provinces to adopt the same regulatory regime. It merely requires that each province, within its regulatory regime, not treat foreign goods or investors less favourably than it treats its own goods or investors.

Thus, if one province's legislation permitted removal of water and a project were to be approved, other provinces could still have legislation that prohibited removal of water without running afoul of national treatment requirements.

Within a province that did permit removal of water, future applications for approval to remove water would still have to be considered on its merits in the light of the legislation, (including environmental assessment requirements in the particular province), and in accordance with principles of administrative law, such as fairness and reasonableness. Such a regime would also have to be applied without discriminating between applicants on the basis of their nationality.

Q.34 Why is "water removal" being prohibited? Is this a disguised trade measure?

A. This initiative is not a trade measure, disguised or otherwise.

The prohibition fulfills Canada’s obligation under the Treaty, i.e. not to affect the level and flow of waters on the U.S. side of the boundary. The prohibition is also a non-discriminatory environmental measure of general application aimed at preserving the integrity of ecosystems within water basins. The Boundary Waters Treaty and the International Boundary Waters Treaty Act deal with water in its natural state, i.e. in the lakes and rivers along the boundary. The prohibition does not target the export of water as a good.

The prohibition recognizes that bulk removal of water out of drainage basins should be managed differently from within basin uses. Bulk removal involves the permanent loss of water to the basin. Given the dependency of ecosystems and communities within the basin on this supply of water, bulk removal is considered to represent an unsustainable use of water.

The measure is consistent with Canada’s international trade obligations as reflected in the 1993 Joint Statement by the governments of NAFTA countries (Canada, Mexico and the United States), to the effect that water in its natural state is not a tradeable good and is not subject to the terms of any trade agreement.

Canada’s approach is better than an export ban because it protects water at its source from bulk removal outside the water basin by any company, Canadian or foreign.

A. The question is not relevant. The Treaty and the Act are not trade-related in any way. They have no relation to NAFTA, nor does NAFTA govern them in any way.

The 1909 Boundary Waters Treaty and the International Boundary Waters Treaty Act are instruments which deal with water in its natural state along the Canada-U.S. border. The Preliminary Article of the Treaty defines boundary waters as "...the waters from main shore to main shore of the lakes and rivers and connecting waterways...", i.e. water is unambiguously defined in its natural state.

Q.36 Could a prohibition on bulk removal from water basins lead to a challenge by US investors in Canada under Chapter 11 of the NAFTA?

A. A prohibition on the bulk removal of water from its water basin is not aimed at regulating investment, whether by Canadian or foreign investors; it is an environmental measure intended to protect and preserve the integrity of the ecosystems dependent on that basin, as well as the integrity of the water basin itself.

In so far as such a prohibition may affect a Mexican or U.S. investor or investment, the NAFTA investment rules require only that the measure does not discriminate based on the nationality of the investor, and does not expropriate the investment of such an investor.

A. The BC Water Protection Act lists 5 licences for specific amounts of water. We are not aware of the terms and conditions of these licences, and therefore cannot comment on them.

A. The Sun Belt case has been pending since late 1999 and arbitration has not yet started. Canada takes the position that Sun Belt has not satisfied the prerequisites for triggering the arbitral process. We cannot speculate on Sun Belt’s next steps.

A. No.

There is nothing in Canada’s international trade obligations that would require future projects for the removal of water for bulk exports to be approved, just because other projects have been given approval in the past. Canadian governments have full sovereignty over the management of water in its natural state, and in exercising this sovereignty are not constrained by trade agreements.

The Sun Belt case has been pending since late 1999 and arbitration has not yet started. Canada takes the position that Sun Belt has not satisfied the prerequisites for triggering the arbitral process. We cannot speculate on Sun Belt’s next steps.