IDEAS home Printed from https://ideas.repec.org/p/ags/aaea25/361029.html
   My bibliography  Save this paper

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

Author

Listed:
  • Kim, Dongin
  • Steinbach, Sandro

Abstract

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.

Suggested Citation

  • Kim, Dongin & Steinbach, Sandro, 2025. "The Impact of the WTO on Virtual Water Trade and Global Water Redistribution," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361029, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea25:361029
    DOI: 10.22004/ag.econ.361029
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/361029/files/75281_104352_105300_VWT_cover-merged.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.361029?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Richard Baldwin, 2016. "The World Trade Organization and the Future of Multilateralism," Journal of Economic Perspectives, American Economic Association, vol. 30(1), pages 95-116, Winter.
    2. repec:boc:pcon20:13 is not listed on IDEAS
    3. Mario Larch & Jeff Luckstead & Yoto V. Yotov, 2024. "Economic sanctions and agricultural trade," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(4), pages 1477-1517, August.
    4. Gabriel Felbermayr & Mario Larch & Erdal Yalcin & Yoto V. Yotov, 2024. "On the heterogeneous trade and welfare effects of GATT/WTO membership," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(3), pages 983-1008, August.
    5. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    6. Peter H. Egger & Mario Larch & Yoto V. Yotov, 2022. "Gravity Estimations with Interval Data: Revisiting the Impact of Free Trade Agreements," Economica, London School of Economics and Political Science, vol. 89(353), pages 44-61, January.
    7. Martijn Huysmans, 2022. "On Feta and Fetta: Protecting EU geographical indications in Australia," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 598-613, June.
    8. Fabio Gaetano Santeramo & Emilia Lamonaca, 2022. "On the trade effects of bilateral SPS measures in developed and developing countries," The World Economy, Wiley Blackwell, vol. 45(10), pages 3109-3145, October.
    9. Dorninger, Christian & Hornborg, Alf & Abson, David J. & von Wehrden, Henrik & Schaffartzik, Anke & Giljum, Stefan & Engler, John-Oliver & Feller, Robert L. & Hubacek, Klaus & Wieland, Hanspeter, 2021. "Global patterns of ecologically unequal exchange: Implications for sustainability in the 21st century," Ecological Economics, Elsevier, vol. 179(C).
    10. Anderson, Kym, 2022. "Trade-related food policies in a more volatile climate and trade environment," Food Policy, Elsevier, vol. 109(C).
    11. Neal T. Graham & Mohamad I. Hejazi & Son H. Kim & Evan G. R. Davies & James A. Edmonds & Fernando Miralles-Wilhelm, 2020. "Future changes in the trading of virtual water," Nature Communications, Nature, vol. 11(1), pages 1-7, December.
    12. Kastner, Thomas & Kastner, Michael & Nonhebel, Sanderine, 2011. "Tracing distant environmental impacts of agricultural products from a consumer perspective," Ecological Economics, Elsevier, vol. 70(6), pages 1032-1040, April.
    13. Baier, Scott L. & Yotov, Yoto V. & Zylkin, Thomas, 2019. "On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration," Journal of International Economics, Elsevier, vol. 116(C), pages 206-226.
    14. Song, Jianfeng & Yin, Yali & Xu, Hang & Wang, Yubao & Wu, Pute & Sun, Shikun, 2020. "Drivers of domestic grain virtual water flow: A study for China," Agricultural Water Management, Elsevier, vol. 239(C).
    15. Chen, Rui & Adu, Derick T. & Li, Wenying & Wilson, Norbert L.W., 2024. "Virtual water trade: Does bilateral tariff matter?," Ecological Economics, Elsevier, vol. 222(C).
    16. Daniele Curzi & Martijn Huysmans, 2022. "The Impact of Protecting EU Geographical Indications in Trade Agreements," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 364-384, January.
    17. Fally, Thibault, 2015. "Structural gravity and fixed effects," Journal of International Economics, Elsevier, vol. 97(1), pages 76-85.
    18. Miina Porkka & Matti Kummu & Stefan Siebert & Martina Flörke, 2012. "The Role of Virtual Water Flows in Physical Water Scarcity: The Case of Central Asia," International Journal of Water Resources Development, Taylor & Francis Journals, vol. 28(3), pages 453-474.
    19. Louai SOUKAR, 2019. "Natural Resources Endowment and WTO," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 34(3), pages 546-589.
    20. Sergio Correia & Paulo Guimarães & Tom Zylkin, 2020. "Fast Poisson estimation with high-dimensional fixed effects," Stata Journal, StataCorp LLC, vol. 20(1), pages 95-115, March.
    21. Weidner, Martin & Zylkin, Thomas, 2021. "Bias and consistency in three-way gravity models," Journal of International Economics, Elsevier, vol. 132(C).
    22. Bergstrand, Jeffrey H. & Larch, Mario & Yotov, Yoto V., 2015. "Economic integration agreements, border effects, and distance elasticities in the gravity equation," European Economic Review, Elsevier, vol. 78(C), pages 307-327.
    23. Doyoung Park & William Ridley, 2025. "Thirsty for Trade: How Globalization Shapes Virtual Water Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(2), pages 279-338, February.
    24. Fracasso, Andrea, 2014. "A gravity model of virtual water trade," Ecological Economics, Elsevier, vol. 108(C), pages 215-228.
    25. Delbourg, Esther & Dinar, Shlomi, 2020. "The globalization of virtual water flows: Explaining trade patterns of a scarce resource," World Development, Elsevier, vol. 131(C).
    26. Jonathan R. McFadden, 2022. "International trade and standards harmonization: The case of tractors and the OECD Tractor Codes," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(4), pages 1512-1539, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yoto V. Yotov, 2024. "The evolution of structural gravity: The workhorse model of trade," Contemporary Economic Policy, Western Economic Association International, vol. 42(4), pages 578-603, October.
    2. Mario Larch & Serge Shikher & Constantinos Syropoulos & Yoto V. Yotov, 2022. "Quantifying the impact of economic sanctions on international trade in the energy and mining sectors," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1038-1063, July.
    3. Benjamin Jung, 2023. "The Trade Effects of the EU-South Korea Free Trade Agreement: Heterogeneity Across Time, Country Pairs, and Directions of Trade within Country Pairs," Open Economies Review, Springer, vol. 34(3), pages 617-656, July.
    4. Mario Larch & Yoto V. Yotov, 2024. "Estimating the effects of trade agreements: Lessons from 60 years of methods and data," The World Economy, Wiley Blackwell, vol. 47(5), pages 1771-1799, May.
    5. Weidner, Martin & Zylkin, Thomas, 2021. "Bias and consistency in three-way gravity models," Journal of International Economics, Elsevier, vol. 132(C).
    6. Beniamino Quintieri & Giovanni Stamato, 2023. "Are preferential agreements beneficial to EU trade? New evidence from the EU–South Korea treaty," The World Economy, Wiley Blackwell, vol. 46(12), pages 3511-3541, December.
    7. Mario Larch & Jeff Luckstead & Yoto V. Yotov, 2024. "Economic sanctions and agricultural trade," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(4), pages 1477-1517, August.
    8. Heid, Benedikt & Stähler, Frank, 2024. "Structural gravity and the gains from trade under imperfect competition: Quantifying the effects of the European Single Market," Economic Modelling, Elsevier, vol. 131(C).
    9. Doyoung Park & William Ridley, 2025. "Thirsty for Trade: How Globalization Shapes Virtual Water Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(2), pages 279-338, February.
    10. Arne J. Nagengast & Fernando Rios‐Avila & Yoto V. Yotov, 2026. "The European single market and intra‐EU trade: an assessment with heterogeneity‐robust difference‐in‐differences methods," Economica, London School of Economics and Political Science, vol. 93(369), pages 298-331, January.
    11. Kim, Dongin & Steinbach, Sandro & Zurita, Carlos, 2024. "Deep trade agreements and agri-food global value chain integration," Food Policy, Elsevier, vol. 127(C).
    12. Pedro Esteban Moncarz & Manuel Flores & Sebastián Villano & Marcel Vaillant, 2023. "Intra‐ and extra‐regional trade costs: A comparative approach to Latin‐American performance," The World Economy, Wiley Blackwell, vol. 46(8), pages 2248-2284, August.
    13. Silviano Esteve-Pérez & Salvador Gil-Pareja & Rafael Llorca-Vivero & Jordi Paniagua, 2021. "Has the Euro paid off? A study of the trade-induced welfare effects of the EMU," Working Papers 2103, Department of Applied Economics II, Universidad de Valencia.
    14. French, Scott & Zylkin, Tom, 2024. "The effects of free trade agreements on product-level trade," European Economic Review, Elsevier, vol. 162(C).
    15. Carril-Caccia, Federico, 2025. "The impact of economic sanctions on bilateral mergers and acquisitions," European Journal of Political Economy, Elsevier, vol. 86(C).
    16. Breinlich, Holger & Corradi, Valentina & Rocha, Nadia & Ruta, Michele & Silva, J.M.C. Santos & Zylkin, Tom, 2021. "Machine learning in international trade research - evaluating the impact of trade agreements," LSE Research Online Documents on Economics 114379, London School of Economics and Political Science, LSE Library.
    17. Frensch, Richard & Fidrmuc, Jarko & Rindler, Michael, 2023. "Topography, borders, and trade across Europe," Journal of Comparative Economics, Elsevier, vol. 51(3), pages 816-832.
    18. Franco Bedoya,Sebastian, 2022. "Trade Agreements in South Asia : Towards a Successful Story in the Developing World," Policy Research Working Paper Series 10211, The World Bank.
    19. J. M. C. Santos Silva & Silvana Tenreyro, 2022. "The Log of Gravity at 15," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 21(3), pages 423-437, September.
    20. Carter, Colin A. & Steinbach, Sandro & Zhuang, Xiting, 2022. "Global Shipping Container Disruptions and U.S. Agricultural Exports," Working Papers 320397, International Agricultural Trade Research Consortium.

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea25:361029. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.