Trade rules create barriers to high quality municipal services

June 3, 2002

At the just-finished annual meeting in Hamilton of the Federation of Canadian Municipalities (FCM) delegates were undoubtedly talking about municipal strategies for water protection in the wake of the findings of the Walkerton Inquiry.

They should be aware that in seeking to implement the recommendations of Mr. Justice O'Connor to protect drinking water and agricultural lands, municipalities may encounter barriers arising from Canada's approach to international trade negotiations. The possible impacts of the WTO's General Agreement on Trade in Services (GATS) on municipal services, particularly water, sewage, waste management, and transit, give major cause for concern.

The GATS may also adversely affect the forward-looking policies of the FCM on environmental services, transportation, and infrastructure needs. Unless Ottawa changes its approach to the current GATS negotiations, real problems for municipal services are likely to ensue.

Negotiated in 1994, the GATS covers all measures (laws, regulations, policies, practices) "affecting services." Their purpose is to "liberalize services," that is, open up markets to foreign service companies and privatize public services. The Agreement contains both general obligations as well as specific obligations that apply only to countries like Canada whose governments agreed to be bound by them. Another round of GATS negotiations is now underway.

Canada made so many commitments to open up services to foreign companies that foreign engineering, construction, waste management and water companies can now use the GATS to challenge local (as well as national and provincial) water and land use regulations and public ownership.

Although the GATS contains an exemption for services supplied by governments, it is vague, weak, and unlikely to shield these services from GATS-based challenges.

In the current negotiations, Ottawa is supporting rules that would allow foreign companies to challenge regulations on services as being "more burdensome than necessary. " This could affect Canadian standards (local, provincial, or national) for:

  • water quality,
  • water testing and monitoring,
  • water and sewage system construction standards,
  • water managers' training requirements,
  • land protection standards for any environmental purpose including for water source protection, as recommended by the Walkerton Inquiry,
  • land use planning to curb urban sprawl, and
  • regulations regarding the number and location of waste dumps.

Although there are few privately-operated water systems in Canada as yet, major international water corporations based in Europe have signalled through European trade officials that they want Canada to further open water services to private companies in the current GATS negotiations.

Municipal land use planning affects the location and delivery of all other services. It is the basic tool for designing cities and protecting rural lands. Good planning is essential to solving the most urgent urban problems. Conflicts over planning decisions among city planners, citizens' groups and developers are already daily occurrences in Canada.

These conflicts may multiply, however, if land use controls prevent foreign businesses from locating on a particular piece of land, since the companies may argue that their "market access" has been denied, contrary to the GATS. This could apply even if the purpose of the controls is to protect water sources, to prevent sprawl, to protect environmentally sensitive lands, to stop "big box stores" that the community rejects, or to regulate the location of waste dumps.

Transportation policies to encourage public transit rather than car use may also face GATS barriers. The FCM supports compact land use, subsidies to high-speed rail, tax-exempt transit passes, and increased federal funding to shift people out of cars and into public transit. But the GATS provides various opportunities for the auto and truck makers to challenge these policies. Companies may also argue for access to the large subsidies that are now provided to public bodies for transit.

Waste management is an important and expensive municipal responsibility in Canada, one requiring better policy development since three-quarters of solid waste is still simply dumped in landfills, rather than being reused, reduced, or recycled. Provincial regulation typically limits the number, size and location of waste facilities, and the Federation supports programs that provide a range of environmental benefits (resource conservation, progressive targets for waste reduction). However, even such essential planning and regulatory tools as environmental assessment for waste management may be targets for foreign companies using the GATS.

To reduce these risks, municipalities, urbanists, and concerned Canadians need to pressure our blinkered federal government not to support new trade rules that would threaten Canadian safety regulations or invite more private foreign involvement in these essential services. Ottawa should also be pressured to reverse some of its past GATS commitments.

Michelle is counsel and director of international programs at the Canadian Environmental Law Association.