UK Water Pollution and Trade (UKWATER)

          CASE NUMBER:             
          CASE NAME:          UK Water Pollution and Trade

1.   The Issue
     In recent times, water pollution within the United Kingdom has led to serious concerns
for the region.  Past events such as the Shetland Oil Spill, have reiterated the need to control
water pollution in the United Kingdom.  New tougher standards initiated by the EC and UK
itself has also focused attention on the problem.  Unfortunately, high levels of lead contaminants
still remain throughout the UK water supply.  Although the water pollution problems of the UK
stay within the boarder, their consequences can have long term regional effects in regards to acid
rain, and the effect the pollution has on the oceans.  While most of the consequences of water
pollution remain negative, one positive outcome of the problem in the UK is the role US
exporters will play in helping to repair the highly damaged system.  The demand for US products
that help resolve the water pollution problems has led to a large market opening in the region, as
well as a prime investment opportunity for US firms.  Unlike most case studies that deal with the
destructive aspects of trade and the environment, the situation in the UK illustrates an example
of how an environmental issue can spur trade, thus creating benefits for all parties involved,
including the environment.

2.   Description
     Within the last decade problems with pollution have raised questions regarding the
cleanliness of water in the United Kingdom.  The 1993 Shetland oil spill served as an
unfortunate and tragic reminder of how fragile ecological systems can be. see SHETLAND case
The spill also made it clear to the UK and the rest of the world, that the freshwater
supply within Great Britain was not ample and far from safe.  With the water pollution situation
at near crisis level in the UK, a significant opportunity for US products and services has opened
up.  Not only has the potential for US investors increased significantly, the rest of the world also
has access to a market in demand of much needed technologies and products.  Demands of safe
drinking water for public consumption, as well as tougher EC safety regulations have
highlighted the need for better purification as well as prevention of further pollution.
     As stated earlier, water pollution in the United Kingdom is far from a recent
phenomenon.  Even in the 19th century pollution from major cities would be let out into the
extensive river systems and eventually find its way to the sea.  In modern times the problem can
be traced to several factors.  High concentrations of fertilizers in crops has led to a huge growth
of toxic algae, depleting the water supply.  Sewage pumped into lakes and streams also heavily
contributes to the pollution.  Along with acid rain, eutrophication threatens to wipe out more
than 15 percent of key wild areas in England. (New Scientist, October 8, 1994).
     Another more recent concern of water pollution for the region has to do with flooded
mines.  Abandoned copper mines owned by British Coal, have stained several rivers orange. 
This in turn has led to heavier purification costs.  British Coal spends 6 million pounds a year
pumping 45,000 cubic meters of clean water from the Durham coal field. (New Scientist,
February 19, 1994).  The mine is pumped at three different points, and without the pumps it
would fill up and overflow into local rivers, including the already fragile Wear.  The National
Rivers Authority has put pressure on British Coal to continue the pumping process, but tougher
economic times have shifted concerns towards profit rather than environmental hazards.  As
stated earlier, the process is quite expensive, and industry is more concerned with profit and
survival than clean water.  However, the latest regulations have forced industries to comply with
the higher water standards and subsequently profits have fallen.
     Lead contamination is also of great concern in the UK.  Recent tests have found unsafe
levels of lead in several houses.  Fortunately, some of the contaminants can be traced to old
decaying lead pipes, while in other regions the problem is more complicated.  In northwest
England high levels of lead are found naturally in the water supply.  Acid rain also causes higher
levels of lead contaminants because the water pipes are vulnerable to high levels of acidity
found in such rain.  Replacement of lead pipes has led to a reduction in levels of contaminants,
but has not all together solved the problem.  It is estimated that 20 percent of the UK still
exceeds the World Health Organization lead standard of 10 micrograms per liter of water. 
(McLaughlin, 9). 
     Water quality standards are set from both UK legislation as well as EC directives.  In
1989 the UK Water Act stated that companies are obliged to supply  wholesome  water for
domestic uses such as drinking, cooking or washing.  It is the EC Drinking Water Directive that
defines wholesomeness, setting 55 parameters that include clarity and color, along with levels of
bacteria, natural minerals and man made chemicals.  Even though tough standards for drinking
water have been set, unsafe levels of pollutants still exist.  Despite the passage of legislation,
some criticize the government for not doing enough to ensure that drinking water is safe in the
UK.  In a January 1994 article, Vicky Hutchings criticized the government for attempting "to
make various 'costly' European water directives go away - by a combination of pressure and
lobbying in Europe, and stirring up consumers with the threat of huge increases in their water
bills at home" (New Statesman & Society, 31). 
     UK legislation has recently taken a more strict approach in dealing with polluters.  The
UK Environmental White Paper,  This Common Inheritance,  has made clear its goal of cleaner
water.  These goals include the establishment of an urban waste water directive and the possible
use of incentive charging for water polluting discharges and fines.  The National Rivers
Authority recently fined Shell $1.5 million for polluting the Mersey River.  Former water
authorities are among those who are also being fined and investigated.  This restrictions coincide
with EU laws regarding penalties imposed on polluters, and they have been found effective
when enforced by members of the EC. 
     In 1990, the UK water industry switched from public to private ownership.  The transfer
had an immediate impact on both water goods and services as the private sector took over.  Free
from government intervention and financing constraints, the private water companies have
already began to improve water quality and service.  The industry has taken the fist steps in a
$45 billion capital investment program that includes spending on a range of related equipment
and services, including water treatment systems, monitoring instrumentation, pumping stations,
sewage treatment, flood prevention and relaying of water mains. (McLaughlin 9)  It is from these
industry specific demands that US companies can most likely profit.
     An unnamed source at the International Trade Administration in the US Department of
Commerce estimates the number of US water related service exports to double in the UK.  The
trend has already seen a large amount of activity involving US firms trading in the UK, with
growth expected to continue in the immediate and short term future.  Another aspect, or benefit
from restructuring the water system in the UK, is the long term impact it will have, not only on
the environment, but the infrastructure itself.  Not only will clean water benefit the consumer
and environment, but it will also make direct investment easier and less risky.  
     The water problems in the UK are immense and have an enormous impact on trade as
well as the environment.  The impact on the environment is quite apparent as acid rain,
dangerous nitrates, high levels of lead and oil spills all damage the fragile ecosystem in the
region.  The UK is finally taking steps to fix its long term problems with water pollution by
enforcing restrictions already established by the EC.  As an economic recovery finally seems to
have reached the UK, it is likely that industries can take the steps necessary for cleaner water,
without risking a loss in profit.  The enforcement of laws against polluters also has had a
positive effect in the region.  The UK has become more dependent on the import of US water
treatment services and equipment.  This is because the American products are more
technologically advanced and efficient at dealing with the wide range of water problems found
in the UK.  If standards continue to be enforced, cleaner water in the UK is likely, along with a
large amount of trade with US corporations specializing in water treatment and management.

3.   Related Cases
     Keyword Clusters    
     (1): Trade Product            = WATER
     (2): Bio-geography            = TEMP
     (3): Environmental Problem    = Pollution/Water/Land [POLL]

4.   Draft Author: Richard Weir

B.   LEGAL Clusters
5.   Discourse and Status:    AGRee and INPROGress       
6.   Forum and Scope: United Kingdom and UNILATeral
7.   Decision Breadth:  1 (UK)
8.   Legal Standing:  LAW

C.   GEOGRAPHIC Clusters
9.   Geographic Locations
     a.   Geographic Domain : Europe
     b.   Geographic Site   : Western Europe 
     c.   Geographic Impact : United Kingdom
10.  Sub-National Factors:  NO
11.  Type of Habitat: TEMP

D.   TRADE Clusters
12.  Type of Measure:  Regulatory Standard [REGSTD]
     The standards exist in order to protect UK citizens from dangerous or contaminated
water.  Although most of the standards are set by the UK itself, others set by the EC overlap.

13.  Direct vs. Indirect Impacts: DIRect
     The water pollution problems in the UK have a direct relation to US trade in the region. 
Without the problems the need for US products would not be nearly as great.  It should be noted
that the UK, historically, has had several problems with water pollution since the industrial
revolution.  This is because of the geographical characteristics of the island that rely on an
immense system of streams and rivers for irrigation as well as sewage.  Because the government
of the UK is finally doing something to help fix the water problems, trade with the US is
expected to grow.

14.  Relation of Measure to Environmental Impact
     a.  Directly Related     : NO
     b.  Indirectly Related   : YES MANUFACTURING
     c.  Not Related          : NO
     d.  Process Related      : YES WATER

15.  Trade Product Identification: Water Purification Systems

16.  Economic Data
     As clean water becomes a great concern within the UK, some officials project that $42
billion will be spent by the year 2000 on technology and equipment for clean water.  In 1992, it
is estimated by the ITA that UK industrial firms spent $677 million for equipment to control
water pollution.  The short term projection for water pollution control equipment is calculated to
grow 10 percent per year in real terms.  The amount of total purchases for such equipment was
$1.4 billion in 1992.  Of this amount, 39 percent was spent directly on imports with 11 percent
of the entire market coming directly from the U.S. (McLaughlin 11).   

17.  Impact of Measure on Trade Competitiveness:  
     As indicated earlier, the water pollution problems along with the heavy safety regulations
have greatly increased the demand for US water products.  While there exist other markets
capable of aiding the UK, the US industries remain the most technologically advanced in the
water pollution control industry.
Those importing into the UK face very few trade barriers.  The US continues to export several
related services and equipment with specialties in monitors, analyzers and other computerized
instrumentation.  Germany mainly exports instrumentation, softeners, supplies and pumps; while
the Netherlands and France specialize in process instrumentation, ion exchangers, filters,
geotextiles, and recycling systems (US Dept. of Commerce, NTDB). 

18.  Industry Sector: DOTH
     Water pollution controlling devices may cover a wide range of industries, but most
products used are durable manufactured goods.

19.  Exporter and Importer:  USA and UK
In 1992, the U.S. controlled 11 percent of the entire water pollution control market in the UK,
and this number is expected to grow.

20.  Environmental Problem Type: Pollution Land-Freshwater[POLL]
     It should be noted that freshwater pollution problems sort of fall in between both land
and sea.  Because of the system of streams and rivers which all lead to the ocean, the cold
Atlantic waters surrounding the island remain vulnerable to internal water pollution.

21.  Name, Type, and Diversity of Species 
          Name:          Many
          Type:          Many
          Diversity:     UK
22.  Impact and Effect: HIGH and PRODuct

23.  Urgency and Lifetime:    NA
     While this category is specifically geared towards species loss, it should not overshadow
the serious nature of the water pollution problems within the UK.  The problem is urgent as far
as parties involved must seek a remedy to prevent further human and ecological damage.  

24.  Substitutes: CONSV
     Conservation is the key to helping control water pollution.  While efforts may be made to
keep the contaminants out of the water, conservation of safe, treatable water is the best means to
keep the resource flowing and abundant.

VI.  OTHER Factors
25.  Culture: NO
26.  Trans-Border: Possibly
     Future water pollution problems, most certainly ecological disasters such as the Shetland
oil spill, almost always involve the rest of the aquatic environment regardless of the political

27.  Rights:  NO

28.  Relevant Literature

Bowman, John.   Improving the Quality of Our Water: The Role of  Regulation by the
National Rivers Authority, Public Administration, Winter 1992.

Hutchings, Vicky.  "Green Gauge:  Lies, Statistics and Water," New Statesman & Society,
January 14, 1994. 

McLaughlin, Robert.   Shetland Oil Spill Highlights Water Concerns in United
Kingdom,  Business America, February 8, 1993.

---   , Business America, May 7, 1990

---  Hard Rain,  New Scientist, October 8, 1994.

---  A Paler Shade of Green,  New Scientist, September 28, 1991.

---  Rivers at Risk from Flooded Mines,  New Scientist, February 19, 1994.

---  United Kingdom - Water Pollution Project,  USDOC/ITA Market Research Report,
National Trade Data Bank. September 1,1995.

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