It is becoming increasingly important to put
freshwater issues in a global context. Local water depletion and pollution
are often closely tied to the structure of the global economy. With
increasing trade between nations and continents, water is more frequently
used to produce exported goods. International trade in commodities implies
long-distance transfers of water in virtual form, where virtual water is
understood as the volume of water that has been used to produce a
commodity and that is thus virtually embedded in it. Knowledge about the
virtual-water flows entering and leaving a country can cast a completely
new light on the actual water scarcity of a country. For example, Jordan
imports about 5 to 7 billion m3 of virtual water per year, which is in
sharp contrast with the 1 billion m3 of water withdrawn annually from
domestic water sources. This means that people in Jordan apparently
survive owing to the import of water-intensive commodities from elsewhere,
for example the USA.
This report reviews current knowledge with respect to four questions: What
is the effect of international trade on domestic water resources? What is
the effect of water availability on international trade? Can international
trade increase global water-use efficiency? And finally, what type of
international trade rules would promote a more wise use of water worldwide?
It is shown that import of water-intensive commodities reduces national
water demand, which is attractive for water-scarce countries like in the
Middle East and North Africa. Export of water-intensive commodities, on the
contrary, raises national water demand and thus enhances national water
scarcity. This happens for instance in the USA and Australia. Trade patterns
thus influence patterns of water use and scarcity. Reversely, spatial
differences in water scarcity do not seem to have a strong influence on
trade patterns. The reason is that water is generally grossly underpriced.
Water scarcity appears to affect trade patterns only in cases where absolute
water shortage forces water-scarce countries to import water-intensive
products, because they simply cannot be produced domestically. The report
shows that currently international trade reduces global water use in
agriculture by 5%, which is the result of the fact that water-intensive
commodities are traded, on average, from countries with high to countries
with low water productivity. Global water-use efficiency can be increased by
including water scarcity as a factor into trade decisions. However,
increased trade in water-intensive products possibly has a number of
downsides, like for instance increased water dependencies.
Currently there is an imbalance between international trade agreements and
international agreements on sustainable water use, because the former are
strong and the latter weak. Most relevant is that internationally binding
agreements on sustainable water use do actually not exist. There are no
international agreements of the type that have the strength to restrict
trade in cases where it negatively affects local water systems. It is argued
that fair international trade rules should include a provision that enables
consumers, through their government, to raise trade barriers against
products that are kept responsible for harmful effects on water systems and
indirectly on the ecosystems or communities that depend on those water
systems. The report identifies several mechanisms to better ensure that
trade and sustainable water use go hand in hand: product transparency, e.g.
through a water label, an International Water Pricing Protocol and an
International Water-Footprint Permit System.
International agreements on the liberalization of trade in agricultural
products – as being negotiated in WTO’s ongoing Doha Development Round –
should include provisions that promote sustainable water use in agriculture.
As yet it is unclear how such provisions could look like, since the WTO
explicitly refrains from making environmental agreements. An imbalance in
global regulations of trade will be created as soon as free trade agreements
are effective while sustainable-product and sustainable-water-use agreements
to constrain international trade are not yet existent. This is a serious
risk, since no international agreements on sustainable water use or
sustainable products do exist or are being prepared.
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