The Impact of the WTO on Virtual Water Trade and Global Water Redistribution

This paper examines how GATT/WTO membership has influenced agricultural virtual water trade (VWT), a crucial channel for reallocating global water resources through trade. Using a newly constructed dataset and a theory consistent gravity framework, we find that while GATT/WTO membership initially appears to increase VWT flows by 67.2 percent, this estimate falls to 22.8 percent once globalization effects are accounted for, with WTO-era membership driving the majority of the growth. Although multilateral liberalization has facilitated the redistribution of water from water-abundant to more water-scarce regions, it has also intensified sustainability concerns. VWT outflows from medium-scarcity exporters have surged by 81.6 percent, and unfair flows—those moving from water-scarce to water-abundant regions—have increased by 68.4 percent. General equilibrium simulations further reveal that institutional trade preferences have disproportionately supported unfair VWT flows, reinforcing environmental inequities embedded in global trade patterns. These findings highlight the dual role of multilateral trade institutions and underscore the importance of integrating enforceable environmental provisions into future agreements to promote sustainable and equitable water governance.