Virtual Water Trading Study Finds Few Nations Dominate Global Exchange

Employees at Hillside Green in Kenya work in the pack house certifying fresh vegetables for export. USDA Photo: Ayub Otieno.

New research finds that the majority of the global trade in food and water is controlled by a few nations, leaving smaller regions out of the trade.

Although fresh water is not shipped across borders, economists use food or agricultural products as a proxy for water to more properly account for how water flows between nations.

“In general, we have more trade going on, and more and more countries are now connected,” said Joel Carr, an ecohydrologist with the University of Virginia in Charlottesville, one of the study’s authors. “But these increases in trade and connections are not equally spread among countries.”

The researchers discovered that there are only five key nations — Brazil, Argentina, United States, Canada, and Australia — in virtual water trading. These nations are responsible for most of the world’s export of the resource.

“There are very few countries that supply the virtual water for the world,” Carr said, noting that about 56% of the water trade is exported by countries that make up 8% or 9% of the world’s population. “A very small percent of the global population is supporting the food resources of the rest, which has political implications.”

The research was published in Geophysical Research Letters, a journal of the American Geophysical Union.

Professor John Anthony Allan from King’s College London and the School of Oriental and African Studies devised the virtual water concept in 1993 to more accurately measure water in the production and trade of food and consumer products. He was awarded the 2008 Stockholm Water Prize.

Allan stated in 2005 that:

The concept of virtual water helps us realize how much water is needed to produce different goods and services. In semi-arid and arid areas, knowing the virtual water value of a good or service can be useful towards determining how best to use the scarce water available.

Each cup of coffee consumed, for example, requires 140 litres of water used to grow, produce, package and ship the beans. This is the same amount of water used daily by the average English resident for drinking and household needs. A single hamburger: about 2,400 litres of water. Americans consume around 6,800 litres of virtual water every day, per capita.

According to the Stockholm International Water Institute:

Virtual water has major impacts on global trade policy and research, especially in water-scarce regions, and has redefined discourse in water policy and management. By explaining how and why nations such as the US, Argentina and Brazil ‘export’ billions of litres of water each year, while others like Japan, Egypt and Italy ‘import’ billions, the virtual water concept has opened the door to more productive water use. National, regional and global water and food security, for example, can be enhanced when water intensive commodities are traded from places where they are economically viable to produce to places where they are not. While studying water scarcity in the Middle East, Professor Allan developed the theory of using virtual water import, via food, as an alternative water ‘source’ to reduce pressure on the scarcely available domestic water resources there and in other water-short regions.

In terms of actual water required for producing agricultural or industrial items, IHE Delft researcher AY Hoekstra (link is PDF) stated in 2002 that “producing a kilogram of grain, grown under rain-fed and favourable climatic conditions, we need about one to two cubic metres of water, that is 1000 to 2000 kg of water. For the same amount of grain, but growing in an arid country, where the climatic conditions are not favourable (high temperature, high evapotranspiration) we need up to 3000 to 5000 kg of water.”

“Trade of real water between water-rich and water-poor regions is generally impossible due to the large distances and associated costs, but trade in water-intensive products (virtual water trade) is realistic. Virtual water trade between nations and even continents could thus be used as an instrument to improve global water use efficiency and to achieve water security in water-poor regions of the world,” he stated.

He also said:

The tension in the debate relates to the fact that the game of global competition is played with rules that many see as unfair. Knowing that economically sound water pricing is poorly developed in many regions of the world, this means that many products are put on the world market at a price that does not properly include the cost of the water contained in the product. This leads to situations in which some regions in fact subsidise export of scarce water.

This new study examined variations in how much virtual water was being traded and the nations involved between 1986 and 2008. In 1986, 205 countries were trading with each other; there were roughly 8,200 trade links between them. In 2008, the number of participating nations increased to 232, and the number of links had almost doubled to about 15,800 links.

Some of the increase was the result of geopolitical factors — including the break-up of the USSR — but the researchers attribute it to globalization. Still, Carr contends, “The network itself is extremely dynamic, there are very few permanent links.”

Samir Suweis, a physicist and environmental engineer at the University of Padua in Italy, who has studied the virtual water network, but who was not a part of this research, said he was surprised to find that the network was dynamic, with few permanent links. “The links disappear and reappear, highlighting how countries change trading partners a lot. […] The challenge will be understanding what drives this rewiring,” he said.

“One of the points the study highlights is we can see that a lot of trading is not driven by water need or food need, it’s driven by economics,” said Suweis. In other words, notes the American Geophysical Union in its announcement regarding the study, “the probability of trading among two countries is proportional to their gross domestic product, regardless of their water need.”

It will be important for policymakers worldwide to become more aware of these virtual water trading patterns and consider policies to protect and encourage both local and global water balances, concluded Suweis.

Images by USDAgov (US Department of Agriculture), used under its Creative Commons license.