International trade alleviating national water scarcity

An obvious effect of international trade in water-intensive commodities is that it generates water savings in the countries that import those commodities. This effect has been discussed since the mid-1990s (Allan, 2001b; Hoekstra, 2003; Oki and Kanae, 2004; De Fraiture et al., 2004; Chapagain et al., 2006; Yang et al., 2006). The national water saving associated with import can be estimated by multiplying the imported product volume by the volume of water that would have been required to produce the product domestically.

In many countries international trade in agricultural products effectively reduces domestic water demand (Table 1). These countries import commodities that are relatively water-intensive while they export commodities that are less water-intensive. In the period 1997-2001, Japan, the largest (net) importer of water-intensive goods in the world, annually saved 94 billion cubic meters from its domestic water resources. This volume of water would have been required, in addition to its current water use, if Japan had produced all imported products domestically. In a similar way, Mexico annually saved 65 billion cubic meters, Italy 59 billion cubic meters, China 56 billion cubic meters, and Algeria 45 billion cubic meters (Chapagain et al., 2006).

One of the water-scarce countries that most heavily depend on imports of water-intensive commodities is Jordan. It imports 5 to 7 billion cubic meters of water in virtual form per year, which is in sharp contrast with the 1 billion cubic meters of water withdrawn annually from domestic water sources (Haddadin, 2003; Hoekstra and Chapagain, 2007, 2008). People in Jordan thus survive owing to the fact that their 'water footprint' has largely been externalized to other parts of the world, for example the USA. Intelligent trade largely covers up Jordan's water shortage: export of goods and services that require little water and import of products that need a lot of water. The good side of Jordan's trade balance is that it preserves the scarce domestic water resources; the downside is that the people are heavily water dependent.

For countries that depend on the import of water-intensive products, it is important to know whether the water thus saved has higher marginal benefits than the additional cost involved in importing these products. Let us consider the example of Egypt, a country with a very low rainfall - the mean rainfall is only 18 mm/year - and with most of its agriculture being irrigated. The import of wheat in Egypt implies a saving of their domestic water resources of 3.6 billion cubic meters per year, which is about 7% of the total volume of water Egypt is entitled to according to the 1959 agreement on the use of the Nile River. The national saving is made with the investment of foreign exchange of US$593 million per year (ITC,

2004), so that the cost of the virtual water is 0.16 US$/m3 at most. In fact, the cost will be much lower, because the costs of the imported wheat cover not only the cost of water, but also the costs of other input factors such as land, fertilizer, and labour. In Egypt, fertile land is also a major scarce resource. The import of wheat not only releases the pressure on the disputed Nile water, but also reduces pressure to increase the area of land under agriculture. Greenaway et al. (1994) and Wichelns (2001) have shown that in the international context Egypt has a comparative disadvantage in the production of wheat, so that the import of wheat into Egypt implies not only physical water saving, but also an economic saving.

TABLE 1. Examples of nations with net water saving as a result of international trade in agricultural products. Period 1997-2001

Country

TABLE 1. Examples of nations with net water saving as a result of international trade in agricultural products. Period 1997-2001

China

Mexico

Morocco

Italy

Algeria

Japan

Total use of

Water saving

Water loss as a

Net water

Ratio of

domestic water

as a result of

result of export

saving due to

water

resources in

import of

of agricultural

trade in

saving to

agricultural

agricultural

productsb (109

agricultural

water use

sectora (109

productsb (109

m3/year)

productsb (109

m3/year)

m3/year)

m3/year)

733

79

23

56

8%

94

83

18

65

69%

37

29

1.6

27

73%

60

87

28

59

98%

23

46

0.5

45

196%

21

96

1.9

94

448%

aHoekstra and Chapagain (2008).

bChapagain et al. (2006a). Agricultural products include both crop and livestock products.

China

Mexico

Morocco

Italy

Algeria

Japan

aHoekstra and Chapagain (2008).

bChapagain et al. (2006a). Agricultural products include both crop and livestock products.

Continue reading here: How international trade can enhance national water dependency

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