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What is wrong with virtual water trading?

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  • Gawel, Erik
  • Bernsen, Kristina
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    Abstract

    So-called virtual water, the water embedded in internationally traded goods, has come under discussion. The amount of quantitative studies which attempt to estimate volumes and flows of virtual water in relation to agricultural trade is rising rapidly, while the concept has been recognized by large firms and international institutions. From the viewpoint of economic trade theory, the endowment with abundant water resources gives countries a comparative advantage in the export of waterintensive goods, while water scarce countries gain the option to alleviate stress on domestic water resources by substituting the production of water-intensive goods by imports. However, fairness implications are seen to arise in the reallocation of water resources through the means of mostly agricultural trade. In this perspective, moral problems can be attached to both imports and exports, and even to a country's own consumption of virtual water. Global institutional arrangements are therefore suggested, to regulate virtual water flows in a "fair" and "efficient" manner. This paper will give a short overview of the concept's history and findings, and subsequently analyse it from the perspective of economic trade and resource theory. The contribution of this paper will be to examine the concept of virtual water in terms of the problems it evokes, its informative value and the policy suggestions which are made in this context. It must be concluded that the concept is unspecific and inconsistent, implying governance schemes which will neither improve efficiency nor sustainability in today's trade patterns. --

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    Bibliographic Info

    Paper provided by Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS) in its series UFZ Discussion Papers with number 1/2011.

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    Date of creation: 2011
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    Handle: RePEc:zbw:ufzdps:12011

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    Keywords: virtual water; water footprint; international trade; global water governance;

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    1. Carl-Erik Schulz, 1996. "Trade policy and ecology," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 8(1), pages 15-38, July.
    2. Anderson, Kym, 2004. "The challenge of reducing subsidies and trade barriers," Policy Research Working Paper Series 3415, The World Bank.
    3. de Fraiture, Charlotte & Cai, X & Amarasinghe, Upali & Rosegrant, M. & Molden, David, 2004. "Does international cereal trade save water?: the impact of virtual water trade on global water use," IWMI Research Reports H035342, International Water Management Institute.
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    6. Kumar, M. Dinesh & Singh, Om Prakash, . "Virtual water in global food and water policy making: is there a need for rethinking?," Papers published in Journals (Open Access) h036595, International Water Management Institute.
    7. Dik Roth & Jeroen Warner, 2008. "Virtual water: Virtuous impact? The unsteady state of virtual water," Agriculture and Human Values, Springer, vol. 25(2), pages 257-270, June.
    8. Siebert, Horst, 1996. "Trade policy and environmental protection," Kiel Working Papers 730, Kiel Institute for the World Economy.
    9. van den Bergh, Jeroen C. J. M. & Verbruggen, Harmen, 1999. "Spatial sustainability, trade and indicators: an evaluation of the 'ecological footprint'," Ecological Economics, Elsevier, vol. 29(1), pages 61-72, April.
    10. A. Hoekstra & A. Chapagain, 2007. "Water footprints of nations: Water use by people as a function of their consumption pattern," Water Resources Management, Springer, vol. 21(1), pages 35-48, January.
    11. Wichelns, Dennis, 2004. "The policy relevance of virtual water can be enhanced by considering comparative advantages," Agricultural Water Management, Elsevier, vol. 66(1), pages 49-63, April.
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