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Water as a good - bulk water, bottled water

Water in its natural state
The General Agreement on Tariffs and Trade is the centerpiece of the WTO system.  It covers trade in goods.  There's been a vigorous debate whether water in its "natural state" -- lakes, streams, aquifers -- constitutes a good or "product" and is therefore covered under the GATT.  Water is included within the tariff classification system used by the WTO.

By contrast, the governments negotiating NAFTA asserted that

water in its natural state in lakes, rivers, reservoirs, aquifers, water basins and the like is not a good or product, it is not traded, and therefore is not and never has been subject to the terms of any trade agreement.

Water enters the stream of commerce 
Once water has been separated from its natural state, it is a product subject to the GATT.  Bottled water is clearly recognized as a tradeable 'good'.  So are bulk water transfers.  There are growing concerns that competition for limited supplies of fresh water could lead to the use of WTO rules against governments that ban out-of-basin transfers, or other attempts to regulate the trade in water.

Article XI of the GATT forbids export bans
Several provisions of this WTO agreement could be used to challenge government attempts to regulate trade in water.  Under the Great Lakes Compact, for example, new diversions of water outside the Great Lakes basin would be banned (subject to certain exceptions).  The ban is intended both to protect the environment in the basin and to allow for future economic growth and development.  The U.S. states and Canadian provinces bordering the Great Lakes are attempting to protect this strategic resource. 

But some commentators have suggested that the Compact could violate Article XI of the GATT, which generally forbids "prohibitions or restrictions" on the import or export of products.  Interestingly, although bulk transfers are banned by the Compact, transfers of water out of the basin in containers of 5.7 gallons or less are allowed.   Could the Compact rules be challenged by a WTO member seeking to overturn the prohibition on bulk transfers?  

Article XX of GATT -- exceptions "related to conservation"
Restrictions on trade in water could be permissible under one of the GATS general exceptions.  Article XX(g) permits public-policy decisions "related to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption."

Restrictions on trade in water would likely be found to be "related to the conservation of exhaustible natural resources."  Whether such restrictions would also satisfy the WTO requirement that they be made "in conjunction with restrictions on domestic production or consumption" is a different story, and would be evaluated on a case-by-case basis.  

In addition, to fit within the WTO exception, the restriction must also satisfy the introductory paragraph of Article XX which states that the law must not be a disguised form of protection or applied in a discriminatory way.  The WTO's Appellate Body has interpreted this requirement in many different ways.  At a minimum, countries are expected to negotiate with trading partners before imposing a ban or restrictive measure.  No big WTO case related to water and the conservation exception has been brought yet.   

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