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The Trade In Virtual Water

Every crop that is grown anywhere in the world takes up some water to grow. Some crops take more than others. Rice, cotton and sugarcane are among the world’s most water-intensive crops and take a longer time to grow than, for example, subtropical fruits or vegetables. Most of these water-intensive crops are grown in parts of the world that already have problems with water scarcity.

Think about it like this: a Pakistani cotton farmer exports his cotton sheets to an Italian design company which then exports cotton T-shirts to the USA where they can be bought for $5 each. The cost of this chain of international trade does not take in to account the fact that the water contained within the product has shifted dramatically from one place to another. This is called the trade in “virtual water” and hides the cost of that trade in water terms.

A World Trade Organisation paper from 2010 found that cotton farming in Pakistan has contributed to the drying up of the Aral Sea and intensive use and pollution of the Indus River. So in our example, an economic activity in a country that has depleted water resources is depleting it even further in order to make short term profit.

As a second example, let’s take the country of Jordan, which exports annually 1 billion cubic metres of water in goods, but which imports 5 to 7 billion cubic metres of water in others. This may be surprising, but Jordan is essentially improving its water health by importing more water than it exports.

The trade in virtual water depends upon a number of things including how open the market is to a supplier switching its goods from one long-standing product to another. Water is generally grossly underpriced in making these decisions.

The authors of the WTO paper in 2010 argued for a mechanism of labelling which would ensure transparency at the consumer end of buying a product as to its water usage history, as well as an International Water Pricing Protocol and an International Water Permit System. None of these have yet come about and it’s not clear if or when they will.

 

Image credit: “water drops” by fox_kiyo is licensed with CC BY-SA 2.0. To view a copy of this license, visit https://creativecommons.org/licenses/by-sa/2.0/

3 Comments

  • Bill Griffin February 19, 2021 - 12:11am

    Isn’t this exactly parallel to practice in the USA — depleting western aquifers to provide out-of-season produce to consumers in the east.

    Reply

  • erotik March 2, 2021 - 7:26am

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