The relation between international trade and freshwater scarcity, working paper ERSD-2010-05

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imports about 5 to 7 billion m3 of virtual water per year, which is in sharp contrast with the 1 billion m3 of water withdrawn annually from domestic water sources.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?