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Privatizing Water: What the European Commission Doesn’t Want You to Know

By Daniel Politi

11 April, 2003

Leaked documents and an exchange of e-mails reveal that the European Union has asked 72 countries to open up their markets to private water companies.

The requests came after a period of intense cooperation and consultation between water companies and trade representatives of the European Commission, which is the executive body of the European Union, leading up to the most recent round of World Trade Organization negotiations in 2001.

The meetings were scheduled to discuss one of the WTO’s flagship accords: The General Agreement on Trade in Services—a set of rules covering international trade in such areas as energy, telecommunications, education, tourism, transportation and water.

The new meeting would extend the scope of the original agreement and explore ways of liberalizing trade in services around the world. The idea was straightforward: Members of the WTO would negotiate with each other to make it easier for services and the companies that provide them to move from one country to another. Members of the WTO could list services for which they guaranteed access to foreign suppliers and then request that a member open up markets for which it had not made commitments; foreign companies could then offer to supply the services. The terms of the treaty were negotiated by the governments of WTO member states.

Following the negotiations, the European Commission sent out requests for liberalizing services to 109 countries; 72 of those countries were asked to open up their water markets. The requests, which are supposed to be secret, were leaked to the Polaris Institute, a Canadian non-profit advocacy group, which promptly posted the documents online. Until then, no one from the general public had seen them.

Communication and Cooperation

A close analysis of the documents and e-mails obtained by the Center of Public Integrity’s International Consortium of Investigative Journalists from a watchdog group based in Amsterdam—the Corporate Europe Observatory —reveals that officials of the European Commission met and communicated regularly with representatives from various large water companies and that the requests put forth by the EU reflect the interests of the water companies, with little input from the community at large.

“What these documents reveal is that the [EC] clearly identifies with the interests of the corporations when it designs its GATS negotiating goals,” Olivier Hoedeman of Corporate Europe Observatory said. “[The Commission] is using GATS to pursue the market expansion interests of large EU-based water corporations and nothing else.”

The e-mail communications also illustrate the value attached to the opinion of the water companies.

“We would like to re-iterate the importance we attach to receiving input from your company on the issues we discussed,” an e-mail sent in June 2002 by Ulrike Hauer from the trade division of the European Commission to officials in Thames Water and RWE, stated. “In order to be able to integrate any input into our negotiations, it would be most helpful if we could receive any information you would be able to provide us with by the end of this month.”

Water companies Suez, Vivendi, Aqua Mundo and Thames Water, which is a subsidiary of RWE, attended a meeting on May 17, 2002, in Brussels with the European Commission and several representatives from other European companies to discuss water-related services in GATS.

Following this meeting a questionnaire was sent to each of the water companies asking them about current foreign regulations and market access to water companies. “One of the main objectives of the EU in the new round of negotiations is to achieve real and meaningful market access for European services providers for their exports of environmental services,” Hauer wrote in the questionnaire. The document also asked the companies about obstacles they faced when trying to enter new markets.

Water companies were not the only ones consulted during the process. The European Services Forum, a large industry association that protects the interests of service industries, was also an integral part in preparing the European Commission’s GATS requests.

In October, 2001, João Aguiar Machado, head of the services and e-commerce unit of the European Commission’s trade division, sent a letter to Pascal Kerneis, the managing director of ESF, asking for his help in preparing GATS requests.

“We would very much welcome industry’s input,” Machado wrote, “both in terms of finding out where the problems currently lie and in making specific requests. Without ESF input, the exercise risks becoming a purely intellectual one that may miss out on important issues.”

Although not exclusively related to water, the ESF connection is often cited as another example of the close ties between the European Commission and industry.

ESF has worked closely with the European Commission to come up with guidelines for GATS and they have been a key player, Clare Joy, of the World Development Movement in London, said.

According to European Commission officials, this relationship with the business sector is not out of the ordinary.

“In any negotiation the European Commission conducts, it’s normal practice to consult with all stakeholders,” Arancha Gonzalez, trade spokeswoman for the European Commission, said. “We do that not only with business but also with civil society.”

Water Resources or Water Distribution

How extensively “civil society” was asked for input into the negotiations early on is unclear. But a large number of civic groups, from watchdog organizations to trade unions, have expressed concern with the GATS process, fearing that it will help to dismantle public services in poor countries around the world in exchange for profits from developed nations. To allay criticism, the European Community released a document in February 2003 stating that “the EC have thus modulated its requests so as to take account of the level of development of individual countries. … EU requests do not touch on the issue of access to [water] resources.”

The EU was telling critics of the agreement the same thing: “What they have told us is that to least developed countries they make no requests for water,” Erik Wesselius from Corporate Europe Observatory said in October 2002, a few months before the leaks.

The leaked documents, however, seem to tell a different story. The list of countries who received a request for access to water runs the spectrum in size and development, from the United States and Australia to Bangladesh and Tanzania.

When asked about the discrepancy, EU officials say there is no real contradiction. “The EC is not requesting access to water resources,” Gonzalez said.

That’s because the EU makes a clear distinction between water “resources” and “distribution.” Although it is true that the EC is not asking for access to a country’s water resources, it does ask for liberalization in the water distribution sector, as well as wastewater, a sector that is often carried out by the same water companies.

“The water sector is where Europe has something to offer” that could be of benefit to different countries, Gonzalez said.

Not only does the European Union benefit from this trade in services, supporters say, but it will also help countries develop economically. The liberalization of services in developing countries could bring these countries an additional $6,000 billion in revenue by 2015, according to the European Commission.

GATS – What it could mean

The World Trade Organization has often defended GATS by stating that none of the countries have to accept any of the requests. This therefore means that all 72 countries could reject the requests to open up water markets.

Critics fear, however, that the privatization of water from these GATS requests are related to the way in which many developing countries are often forced to bring in the private sector by international financial institutions. (See Promoting Privatization)

“The GATS is functioning under a certain context and that is the context of IMF, World Bank policies where countries are forced to privatize their public services,” Wesselius said. “GATS is fixing those measures for long periods … making it very difficult for countries to retrace their steps.”

Although the WTO is quick to emphasize that restrictions can be made on how much a service is liberalized, activists against the GATS agreements say that this kind of foresight is nearly impossible in developing nations, where lack of resources make it difficult to analyze current markets. What’s more, the EU has received only 25 requests from other nations, showing that developing countries do not have a lot to ask for in service liberalization.

In addition, critics say, European Union requests do not take into account how local communities may feel about water privatization and the depth of local political opposition.

For example, the EU asks for opening up water markets in Bolivia, where in early 2000 citizens in the city of Cochabamba staged massive protests upon the arrival of International Water’s Aguas del Tunari, which increased the price of water. The protests turned violent and resulted in at least one related death from the confrontation with the police. After several months of confrontation, the company left Cochabamba.

The World Development Movement also argues that several of the countries being targeted for water liberalization, such as Honduras and Tunisia, already have successful water delivery operations.

Reneging on the liberalization could cost the country severely because there is a provision in the GATS agreements that locks a country in for three years and allows companies to seek compensation if it is deemed that they were treated unfairly by a local government, said Ruth Caplan, of the non-profit organization, Alliance for Democracy.

Another reason for the secrecy surrounding these negotiations, many observers speculate, is that these trade talks in services could be used as bargaining chips in further trade talks. The EU could, for example, offer to ease market access to agriculture in developing countries if they agree to open up their service sector, Wesselius suggested.

The same kind of bargaining could go on in developed nations. In the United States, health insurance companies want to expand abroad, particularly in Europe. Therefore, Caplan speculated, an exchange could occur between the liberalization of the health sector in Europe in exchange for opening up water markets in the United States.

There has been no official reaction from the European Commission on these leaks and, according to officials, one will not be issued.

“The documents had already been posted in our internet site,” Arancha Gonzalez, trade spokeswoman for the European Commission, said. Not the complete documents, but they were “in a very extensive summary form.”

“The EC has so far only made available a very brief summary of its requests to 109 countries,” Joy said in an E-mail message. “It is roughly 10 pages long. The documents that have been leaked run into 1000s of pages.”

At the top of each leaked request the following is written: “Member states are requested to ensure that this text is not made publicly available and is treated as a restricted document.”

The deadline for responding to the GATS requests was March 31, 2003. Several nations have missed the deadline, although this is not uncommon in trade negotiations. Two countries who have responded and made their offers public are Australia and the United States. For now, both have agreed to offer access to their wastewater sector, but not to their potable water.