Water Scarcity and Food Security: A Role for Free Trade? | LinkedIn

August 14, 2013

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Virtual water flows by region, 1997-2001 average.

As I have written about previously on this site, the use of water, one of our basic human needs, has been growing vastly in the last century. It is predicted that over the next 20 years, the world’s thirst for water will grow by 50%. By 2030, water withdrawals will exceed natural renewals by 60%. Up to now, water overuse was at the expense of the environment. But as the gap increases rapidly, this water shortage risks having an immediate impact on agricultural production, given the fact that 90% of fresh water used globally is for irrigation to grow the food we eat. With the current trends in population and economic growth affecting water needs for all kind of activities, this could result in global shortfalls of up to 30% in cereal production by 2025. There is no doubt that we are facing a great challenge to feed the world’s population in the near future.

Under certain conditions, free trade in agricultural products, i.e., the trade of embedded water across borders, can make a difference. At one point, the OECD estimated that better allocation of agricultural production in an open market for farm products and a focus on the water used per unit of value could save up to 10% of the water withdrawn by agriculture today.

At a regional level, strategies for improving agricultural water use efficiency have been proposed and (in some cases) implemented, such as establishing an effective water management system, including water pricing based on tradability, through collaboration between local government, private sector and farmers. Some examples are Oman (already in existence for more than 4000 years), South Alberta and Murray-Darling in South Australia. The free trade of farm products within these regions and beyond was (and is) a precondition for this to work.

At a global level, the importance of food trade as a means not only for securing food supply, but also for combating water scarcity, has emerged. The concept of “virtual water” was introduced by Tony Allan in the early 1990s and refers to the water that is required for the production of agricultural commodities, or in other words the water “embedded” in agricultural products. Thus, international food trade can be seen as “virtual water trade” which implies that the corresponding amount of “virtual water” is transferred from the export country to the import country through international food trade.

In practice, a country both imports and exports “virtual water”. Even water scarce countries must be allowed to export embedded water, i.e. products with a high value per drop which then allows them to import staple food (an example being dates from Oman).

Often, because of extreme low or even zero price of water for agriculture, agricultural products and the virtual water embedded within cannot be evaluated correctly on their costs (Gawel and Bernsen, 2011). There is no doubt that the efficient allocation of freshwater through international “virtual water trade” requires the establishment of a proper market price for water as a prerequisite, or at least a proper understanding of the value of water.

The global net “virtual water” flows diagram at the top of this article includes both exports and imports, and is from the study of a fellow member of the Alberta University Water Initiative Advisory Board, Alexander J. B. Zehnder. It shows that North America, South America and Oceania are major net virtual water exporters, whereas Europe, Asia and Africa are net virtual water importers. The results of comparing the countries’ net “virtual water” flows with their domestic irrigation ratios reveal the trend that net “virtual water” flows from rain-fed irrigation dominant areas to non-rain-fed irrigation areas. This tendency clearly shows that global food trade is also a cost effective and environmentally friendly measure for global water balancing, to address the global water scarcity challenge.

It should not be forgotten that international food trades are affected by the political and economic environment as well. In many cases, low income countries contradictorily have much lower participation in the global food trade, even though they have unused freshwater resources for farming (e.g. some countries in Sub-Saharan Africa). Their potential to help overcome future food shortage remains, for the time being, un-used; and no advice is given to local farmers to invest in order to be able to respond to the challenge in coming years.

Water is and remains local; solutions must be found in individual watersheds. But the concept of free “virtual water trade” helping with better allocation of water use in a sustainable and cost effective way may help policy-makers to re-think water scarcity as a challenge beyond regional level. I welcome your thoughts on this concept.

Featured on:Big Ideas & Innovation

Posted by:Peter Brabeck-Letmathe

via Water Scarcity and Food Security: A Role for Free Trade? | LinkedIn.