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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.
Arjen Hoekstra — Professor in Multidisciplinary Water Management at the
University of Twente and Scientific Director of the Water Footprint
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This is a working paper, and hence
it represents research in progress. This paper represents the opinions of
the author, and is the product of professional research. It is not meant
to represent the position or opinions of the WTO or its Members, nor the
official position of any staff members. Any errors are the fault of the
author. Copies of working papers can be requested from the divisional
secretariat by writing to: Economic Research and Statistics Division,
World Trade Organization, Rue de Lausanne 154, CH 1211 Geneva 21,
Switzerland. Please request papers by number and title.
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