ABSTRACT
The recent past has shown a growing interest from both trade and water experts in the relation between international trade and freshwater scarcity. Until today, it has not been very common for water sector specialists to look at the relation between water use in a region and import into or export from this region. Traditionally, in their view, water demand in an area is simply a function of the amount and needs of the water users in that area. At the same time, economists do not generally consider the implications of international trade for the water sector. The reason is that water inputs usually hardly contribute to the overall price of traded commodities. This seems to justify the conclusion that water cannot be a significant factor influencing production and trade patterns. The fact that water inputs are often heavily subsidized by national governments is hereby ignored. Trade specialists also tend to overlook that external effects of water use can be very significant, but are never included in the price of water, and that no country charges a scarcity rent for water inputs even though water is sometimes very scarce. When merely looking at the prices of traded commodities, one will indeed get the impression that water scarcity cannot be a driving force of or limiting factor to international trade. Water is not usually regarded as a global resource. Whereas in most countries the energy sector has an obvious international component, this is different for the water sector. The international characteristics of water are recognized in the case of trans-boundary rivers, but the relation between international trade and water management is not something that water sector officials think much about. This is probably because water itself is not traded internationally, due to its ‘bulky’ properties. Besides, there is no private ownership of water so that it cannot even be traded in a market (Savenije, 2002). Water sector specialists forget, however, that water is traded in virtual form, that is in the form of agricultural and industrial commodities (Hoekstra and Hung, 2005; Chapagain and Hoekstra, 2008). Although invisible,
the import of ‘virtual water’ can be an effective means for water-scarce countries to preserve their domestic water resources (Allan, 2003). One of the principles widely accepted in water resources management is the subsidiarity principle, according to which water issues should be settled at the lowest community level possible (GWP, 2000). When upstream water uses affect downstream uses, it has been recognized that it is necessary to take the perspective of a river basin as a whole, considering water as a river basin resource. Viewing water as a global resource is very uncommon. The Global Water Partnership writes:
In order to achieve efficient, equitable and sustainable water management […], a major institutional change will be needed. Both top-down and bottom-up participation of all stakeholders will have to be promoted – from the level of the nation down to the level of a village or a municipality or from the level of a catchment or watershed up to the level of a river basin. The principle of subsidiarity, which drives down action to the lowest appropriate level, will need to be observed.
