On tap at the WTO: Private water

The focus of the Hong Kong round for rich western nations is to squeeze every drop of money they can by privatising public services. When it comes to water systems, that can be deadly.

Submitted by libcom on December 19, 2005

Hong Kong – Activists gathered here say that no issue highlights the tension between the human values they advocate and the economic logic of the legion of corporate globalizers that have descended on this city more clearly than water.

Water is viewed as one of the last “profit centers” by the international financial institutions and trade can impact whether it becomes a commodity or stays in public hands – 90 percent of the world’s water supplies remain in the public trust. Most notably water’s on the table with the privatization of municipal water systems being aggressively pushed under the General Agreement on Trade in Services (GATS), a wide-ranging treaty that covers a host of services, both public and private.

Vandana Shiva, the scientist and global justice activist, argued this week that “we need to recognize that 90 percent of humanity lives on water as commons today.” She lambasted a recent World Bank report urging poor countries to privatize their water systems, saying, “It actually talks about one major threat to water markets being community rights to water, and says these must be dismantled. As if there’s something wrong with the commons, as if it’s a primitive stage of human existence.”

According to the United Nations, 1. 3 billion people in the world lack access to clean water and worldwide demand is doubling every 20 years – twice the rate of population growth. By the year 2025, demand for fresh water is expected to outstrip global supply by 56 percent. The issue gets scant attention, but analysts say that while the advanced nations are likely to wean themselves of their addiction to oil, water is the finite resource that will drive this century’s wars just as fossil fuels did the last century’s.

Maude Barlowe is the Director of the Council of Canadians, an NGO deep in the fight. She told me the water privatizers are driven not only by profit, but also by a deeper ideology. “There are those of us who believe that water is a public good and should be protected in legislation at all levels as something that must be kept out of the market system. And there are those who’ve gone to the other side, and that would include the World Bank, the regional development banks, the International Monetary Fund, the WTO and most of the big first world countries. And they say that the only way to avoid the global shortage of water that’s already here for some places but coming for the whole world is to privatize water, commodify it, put it on the open market for sale to the highest bidder and have it guided by the same rules that govern the trade in running shoes.”

Pushing the agenda here in Hong Kong are a small number of multinationals that dominate the growing water market. Two French titans, Vivendi Universal and Suez, dominate the group. According to a report by the Canadian NGO Polaris Institute in conjunction with Barlowe’s Council of Canadians, the two – often called the General Motors and Ford of the global water industry – control over 70 percent of the existing world market in water services.

RWE, a German electricity and waste management company, may soon challenge their market share. After purchasing two key water companies, RWE has positioned itself to expand. The U. S. construction giant Bechtel, now notorious for its no-bid reconstruction contracts in Iraq, is also a growing player.

Under the GATS treaty being pushed in Hong Kong, any government in the WTO would be required to give foreign investors like these mammoth water corporations equal treatment with domestic investors like local government-owned utilities. Governments would have to prove that any legislation or regulation related to public water service is “necessary” and “the least trade restrictive of all possible measures.”

According to the NGOs, “in effect, government regulations requiring high water quality standards for safety, accessible rates for poor communities, or specific improvements in pipe infrastructure could be declared ‘unnecessary’ by a WTO tribunal.”

Through the WTO’s “coherence agreement” with the World Bank and International Monetary Fund, the water behemoths get an additional wedge: they’re able to secure loans and grants to finance much of their operations in the developing world. These institutions use water privatization as a “conditionality” for development aid. A 2000 review of IMF loans in 40 countries found that 12 had loan conditions requiring some form of water privatization. The NGOs point out that “in general, it is African countries – the smallest, poorest, and most debt ridden countries – that experience these conditions. Tragically, more than five million people die each year in Africa from poor water access.”

The big water corporations are active supporters of networks of water policy think tanks and “lobby groups that prime the pump for privatization.” The network includes the Global Water Partnership, the World Water Council and the World Commission on Water. All three have working relationships with international finance institutions, the major corporate players in the water industry and the governments of the big service economies.

A track record from hell
Wenonah Hauter, who heads the NGO Food and Water watch, says, “Privatization is being touted as the most efficient, it’s supposed to lead to much better services than public water.” But the track record of the private water companies is “really terrible around the world, in the developing countries and in the developed world.”

The largest privatization in the U. S. was in Atlanta and Hauter describes it as “a complete failure. The way that the company achieved its efficiency – and this is true whether its Atlanta or Jakarta – is that they fire staff. Roughly half in Atlanta. At that point they are no longer able to really maintain the pipes and provide potable water, so you had a relatively wealthy city like Atlanta having brown water days – people having to boil their water and not being able to do laundry.”

Maude Barlowe explains: “They pollute, they don’t conserve water – you cannot make money conserving the product you sell, obviously, so it’s not in their interest to reclaim water, to set up good infrastructure. In the end companies have to cut corners somewhere in order to make enough money for investors – there’s just no other way. The public sector doesn’t have to turn a profit and the private sector does. So in the end, somewhere, something’s got to give, either the quality of the product or the safety of the water coming into people’s homes or the ability of poor people to access it or all three.”

According to the NGOs’ report, the big three – Suez, Vivendi and RWE – and their subsidiaries have been charged and fined for dozens of environmental violations. A few examples they give:

In 1999, the Suez subsidiary Northumbrian Water was declared by the Drinking Water Inspectorate in the U. K. to be the second worst company in terms of operational performance in England and Wales. The main reason was poor water quality: high levels of iron and manganese were found in the water Northumbrian was delivering. Elsewhere, in Potsdam, Germany, city officials terminated a contract with Suez when, after discovering that water consumption levels were lower than predicted, the company demanded that higher water rates be levied. Apparently, water revenues were more important than water conservation. In 1994, Vivendi’s main water subsidiary, Générale des Eaux, was prosecuted for supplying poor quality water to the inhabitants of Tregeux, France. Due to excessive use of nitrates and pesticides, Générale was charged with supplying water unfit for consumption on 476 days between 1990 and 1993. In Puerto Rico, the EPA fined Vivendi’s subsidiary, Compañía de Aguas, $6. 2 million dollars for environmental violations between 1995 and 2000. In the U. K., water corporations have been among the country’s worst environmental violators. Between 1989 and 1997, five water companies were successfully prosecuted 128 times. In 1998, the U. K. environmental agency ranked Wessex Water Co. the country’s fourth worst polluter, while Anglian Water was ranked the sixth worst polluter in 1999. In Durban, South Africa, one privatization project turned deadly. South Africa initiated one of five water privatization programs in 1999. According to the Center for Public Integrity (CPI), the plan was “the brainchild of private water companies and World Bank economists.”

As many as 10 million South Africans had their water cut off at one time or another since 1994, forcing thousands of poor Africans to seek water from polluted rivers and lakes. Drinking contaminated water led to South Africa’s worst outbreak of cholera. Thousands of people got the disease and 300 died.

David Hemson of South Africa’s Human Sciences Research Council told CPI the privatization plan “was the direct cause of the cholera epidemic, there is no doubt about that.”

In Bolivia, in perhaps the most infamous of the ongoing “water wars,” Aquas del Tunari, a consortium of multinationals including Bechtel, was awarded a $200 million dollar water project with an initial direct investment of $15, 635. The 40-year concession gave them a monopoly on all water in the poverty-stricken community of Cochabamba. In order to achieve its guaranteed 15 percent return on investment, the company insisted that privately drilled wells – in the poorest part of the poorest country in the Americas – be metered and the community cooperatives that relied on them be charged.

The new water company dismissed concerns about rising costs, estimating that fees would be hiked by no more than 40 percent. But prices for many rose 300 percent. When struggling Cochabambans received water bills equaling 30 percent of their salaries, they rioted. During the fighting that ensued, the government cut power to local media outlets and used live ammunition against the protesters, killing five.

The militarized response, instead of quelling the disturbance, brought even more Bolivians into the mobilization. After weeks of intense protests, Aguas del Tunari announced it would pull out of Bolivia, leaving its water system (and $35 million in debt) to the government. Bechtel then turned around and sued Bolivia for $25 million dollars in “lost profits” under the International Center for the Settlement of Investment Disputes, a closed-door tribunal run by the World Bank.

But free-market ideologues still to insist that the private firms can do a better job than municipal governments. According to the World bank’s website: “Effective water management requires that water be treated as an economic good... private participation in water and wastewater utilities has generally resulted in sharp efficiency gains, improved service, and faster investment in expanding service.”

The companies have also been caught up in bribery scandals. According to Food and Water Watch’s Hauter, “These contracts are usually awarded not through competition but through some kind of shady dealings. In the case of Atlanta, Suez, through it’s U. S. subsidiary, gave campaign contributions to the mayor’s brother in South Carolina, even though they didn’t have any operations there. It’s legalised bribery.”

Battle lines in Hong Kong
In the background in Hong Kong a quid-pro-quo has developed – wealthy countries want access to services in exchange for reductions in agricultural tariffs. The Council of Canadians’ Barlowe told me, “The Northern countries are saying that they’ll make deep cuts in agricultural subsidies, which I think is going to happen – I think they’ll abandon their own farmers to get a deal, not maybe their big corporations, but they’ll abandon their family farmers in exchange for services because that’s what they did in my country.”

The major transition to the GATS being pushed here is the process by which countries can leverage open others’ services. But the powerful countries are frustrated by how slowly the developing countries have moved on the deal.

“Developing countries do not want this – they’ve already had it with the IMF’s structural adjustment and they don’t want it,” says Barlowe. “So they’re upping the ante and trying to cluster the areas together – they’re trying to use the services negotiation as a peg for agricultural subsidies. Now, they’re going to bring countries into this green room outside the WTO process where they’ll be pushed to accept privatization on a whole range of issues. Technically, of course, they could say no. On paper, they’re all equal. But of course these poor countries are in terrible debt to the wealthy countries that run the WTO, that run the World Bank, and if you say no you’re screwed.”

Lauter added, “The countries from the Global South have their arms twisted around all aspects of these trade agreements but especially in services. I think if people understood what’s being negotiated here with the GATS, they’d be up in arms.”

When it comes to “free trade,” the devil is in the details. When those details include water – and essential resources – the trade debate can quickly become a struggle between life and death.

Report by Joshua Holland, AlterNet