Pressure on Canada to Export Water Will Be Immense

It is time to get worried, very worried, about water.

A global water crisis will leave half of the world’s food production at risk in the next 25 years, according to a report from the Global Commission on the Economics of Water published just this month. The planet’s water systems are under “unprecedented stress.”

The commission was set up by the Netherlands in 2022, and its 194-page report is the largest global study of all aspects of the water crisis, including its relation to global warming. The climate crisis “manifests itself first and foremost in droughts and floods.” Every 1 C increase in global temperature adds another seven per cent of moisture to the atmosphere, which in turn “powers up” the hydrological cycle.

The commission’s October report is far from the first warning of what is happening to the resource that makes life on Earth possible. On the eve of a landmark United Nations water summit in March 2023, experts predicted that the global demand for fresh water will outstrip supply by 40 per cent by the end of the decade.

This is what Johan Rockström, a lead author of a report on the imminent water crisis, told the Guardian: “The scientific evidence is that we have a water crisis. We are misusing water, polluting water, and changing the whole global hydrological cycle, through what we are doing to the climate. It is a triple crisis.”

How bad is it? Bad enough that we don't have to wait years to see if the scientists are right.

Take Mexico City. Last March, the 22 million residents of that city saw their taps run dry. Extreme heat has severely diminished reservoirs, and local officials say that if conservation efforts are not dramatically escalated, the city could face a total collapse of its water system — what in Mexico City they refer to as “Day Zero.”

Canadians have been lulled into a false sense of water security, and with good reason. This country has been blessed with 20 per cent of the world’s total freshwater resources. But what is less well known is that half of that resource is non-renewable. And approximately 60 per cent of Canada’s fresh water actually flows north towards the Arctic Ocean and Hudson Bay, away from the southern border of the country where 85 per cent of our water-loving population lives.

The bottom line? With all the fresh water Canada has, the country still has 32 drinking water advisories on First Nations reserves, while the rest of the country faces increasing threats from algae blooms, plastics and toxic chemical pollution.

Canadians aren’t the only ones who tend to overestimate their freshwater resources. Facing a water crisis in their own country, American politicians look to Canada as a quick fix. Presidential candidate Donald Trump announced he had a plan to alleviate severe water shortages in California. He said British Columbia had “essentially a very large faucet.” You would have millions of gallons of water pouring down from the north. “And you turn the faucet and it takes one day to turn it. It’s massive.”

The need for a national debate

Canada solving U.S. water problems is an idea that has been around since the 1950s. At that time, the United States Army Corps of Engineers suggested Canadian rivers could be diverted to the United States. The proposed project would feed the headwaters of the Colorado River, a major source of water for the southwestern United States. It was believed it would also help stabilize the Ogallala Aquifer, which supplies water to farmers on the Great Plains.

This wasn’t the only grand plan for exporting Canada’s fresh water from north to south. Thomas Kierans, a young Newfoundland engineer, marvelled at the quantity of fresh water flowing into James Bay when he was prospecting in the region.

Decades later, Kierans began advocating for a “Grand Canal” created by damming the relatively shallow waters of James Bay to create a freshwater lake. This recycled water would then be pumped south down the 533-kilometre Harricana River. Then, through a series of canals, it would be sent south to the United States, as well as to the Great Lakes and aquifers in southern Canada.

In the mid-1980s Kieran’s idea was supported by former Quebec premier Robert Bourassa and various engineering firms. Canada’s chief free-trade negotiator of the day, Simon Reisman, was also reputedly a supporter of the idea.

In touting his “big faucet” theory of saving California with Canadian water, Trump must have forgotten that B.C. already has a water treaty with the United States. It is called the Columbia River Treaty, and it regulates how much water flows across the border and how it is used. The fact is, there is no superabundance of water that B.C. can spare to send to the States. As of October 2024, approximately 35 per cent of B.C. is experiencing drought conditions, and 35 per cent is abnormally dry.

The monumental decision about diverting or selling water needs to be the subject of a vigorous national debate. As things stand, water jurisdiction in Canada is a split proposition. The provinces control natural resources. But the federal government has the authority to regulate trade and commerce, including trade agreements. A water export plan could only come about with the support of both levels of government.

Since 1987, the federal government has had a policy of officially opposing the large-scale export of water. The Canadian government insists that the original free-trade deal did not apply to water in its natural state. Nor could the North American Free Trade Agreement force Canada to export water.

But the impact of the 2018 renegotiation of NAFTA, now known as the Canada-United States-Mexico Agreement, or CUSMA, has yet to be seen. If Donald Trump should win the presidency on Nov. 5, what would that mean for CUSMA, which is due for review on June 30, 2026? No doubt Trump will be putting things back on the table that weren’t settled during the NAFTA renegotiations of 2017-18. Like Canadian water.

A side letter to CUSMA states that water is not covered by the agreement unless it has entered into commerce by becoming a good or a product (for example bottled water). What happens if bulk water is determined to be a good or a product?

The pressure on Canada to export its water will be immense. Water has joined gold and oil as a traded commodity on Wall Street. Farmers, hedge funds and municipalities are now able to hedge their bets on future water availability.

This is possibly in response to scarcity issues as a result of overuse and climate change. In 2021 Nestlé sold its bottled water business in Canada to the private equity firm One Rock Capital Partners and Metropoulos & Co. That transaction was part of a deal worth US$4.3 billion for the Wall Street company.

Lift the ban?

What will Canadian political leaders ultimately decide on the economic and emotional issue of exporting water? So far, Ottawa and most provinces have banned bulk water exports. In 2013 Parliament passed the Transboundary Waters Protection Act, which banned bulk removal of water from waterways shared with the United States, “including by pipeline, canal, tunnel, aqueduct or channel.”

But there has periodically been a push to re-examine this in business circles. The argument is made that water is a valuable commodity as a renewable resource.

The University of Calgary school of public policy published a policy paper almost a decade ago suggesting Canada should “commoditize” its water resources. Author Rhett Larson, a professor of water law and an environmental law expert at Arizona State University, argued that Canada should treat water as it treats gold or oil. Larson acknowledges that water is unique among natural resources “because of its esthetic, cultural and ecological significance, as well as being essential to all life on earth.”

But he had a question. He asked: “What is the difference between the water embedded in Canada’s industrial and agricultural exports and raw water exported in bulk tankers and pipelines?”

Larson says: “Allowing the world to access Canada’s vast water supplies in a way that is sustainable, responsible, and even profitable for Canada may be part of solving the global water crisis.”

Given the widespread withdrawal of bulk water for industrial use in Canada, he suggests, “trading partners could make a case that banning exports is an illegal trade barrier because foreign buyers are treated differently.” Could that leave Canada open to a challenge under the World Trade Organization that could eventually force us to make bulk exports?

And the issue has a moral component. Access to clean, safe drinking water was recognized as a human right by the UN General Assembly in 2010. Then Canadian PM Stephen Harper signed on to Resolution 64/292. As ecosystems reach tipping points, and the climate crisis becomes more dire, will others pressure Canada’s political leaders to fulfil the country’s moral obligation to share our water resources?

You can count on it. What you can’t count on is Canadian political leaders standing behind the prudent policy of forbidding bulk exports of water. After all, water is now on Wall Street, an item on the commodities market.

Count on this, as well: Any country that turns water into a commodity and peddles it like lumber or soybeans is not merely selling a resource. It is selling its future.