As the Nestle / Ice Mountain issue continues to enfold (see my prior posts here and here) I wanted to take a look at the issue of whether water is subject to international trade agreements, such as the North American Free Trade Agreement (NAFTA) and the World Trade Organization’s agreements (WTO). That is, once the water has been put in a bottle, can that bottle be restricted for sale within the Great Lakes Basin?
Michigan’s Governor Granholm issued an executive order in 2005 that said, in part:
With regard to the pending permit relating to the agreement between the city of Evart and Nestle Waters North America, the Department of Environmental has indicated that it will be requiring that any water bottled under the agreement only be delivered or sold within the Great Lakes Basin
Does this mean anything? After doing a little research, I’ve come to the conclussion that it does not — once it’s in the bottle it becomes a commodity subject to all the rules of NAFTA.
Here’s what I found:
The NAFTA and the WTO generally prohibit restrictions on the exportation of goods. Therefore, it is necessary to determine whether and when water would be considered a “good” and subject to these trade agreements.
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 the trade agreements. The International Joint Commission stated in its August 1999 report on bulk water removal from the Great Lakes that:
… it would appear unlikely that water in its natural state (e.g., in a lake, river, or aquifer) is included within the scope of any of these trade agreements since it is not a product or good …
Water does not become a good until it is removed from its natural state and enters into commerce as a saleable commodity, such as in bottles or in bulk containers.
Chapter 11 of NAFTA is the investment chapter. Once governments allow water to be withdrawn from its natural state water would be subject to the services provisions of the NAFTA. This means that once water is transformed into a commidity (bottled) it cannot be restricted for sale — a water bottler operating in Michigan would have the same rights to supply bottled water to U.S. consumers as well as Mexican and Canadians consumers.
Furthermore, the United States Supreme Court has ruled that water is an article of interstate commerce. In all states of the United States, when a permit has been issued for the capture of water, and water has been captured, its export cannot be prevented.