|Water and Global Economics|
Globalization demands coordinated policies for developing and implementing solutions to water stress. Water can really no longer be managed only at the local level – water policies in any given place affect individuals, companies, and countries throughout the world. The trans-national nature of the water cycle and of the issues leading to water stress, make the integration of water policies critical. Globalization can be a positive force for water management, as the world comes to have a common stake in its success.
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Moving goods around in a globalized trading system requires water. This was true centuries ago when civilizations first began to trade with each other, and it is still true today. Even with technological innovations in aviation, trucking, and rail commerce, most goods today still travel by ship. This puts countries with plentiful domestic waterways and access to international waters at a great advantage.
Economic giants such as the United States spend enormous resources protecting and maintaining international shipping corridors far from their borders to ensure that commercial trade is unimpeded. This requires a strong naval presence in those areas in which local politics threatens shipping; for instance, the Gulf of Hormuz off the coast of Iran and the Gulf of Aden off the coast of Somalia are both essential shipping lanes for oil coming out of the Persian Gulf and are both heavily guarded. See the Water, Politics, and Conflict section for more information.
Economists often speak of virtual water, an interesting concept that is increasingly entering the conversation about how countries can meet their water needs in a globalized context.
Virtual water is the water required to produce a product, usually an agricultural product. In this context, it refers to the amount of freshwater required to irrigate and process crops for export. Virtual water matters because, through global trade, water-scarce countries can avoid using their own internal water to grow crops if they can import those crops grown somewhere else using someone else’s water. The water it would have taken to produce that imported crop or manufactured product, the product’s virtual water, can represent a water savings for the importing country.
Different products have different virtual water values. Below are some examples from Hoekstra and Chapagin:
The importance of virtual water flows becomes readily apparent when you consider the variable figures above. In a perfect free trade world, water-scarce countries should import water-intensive crops and goods. Water-rich countries should grow, produce, and export water-intensive crops and goods. This would maximize the efficiency of the world’s water resources.
For example, wheat is a water-intensive crop. It takes about 1300 liters of water to grow 1 kilogram of wheat, a common food staple. If you don’t have that kind of water, you must import it from somewhere else. Consider that one kilogram of wheat is much easier to ship to a water-scarce country than 1300 liters of water. In a world where water stress and shipping capacity are both growing, this will become increasingly economically attractive.
The World Economic Forum reports that, in 2008, the Kingdom of Saudi Arabia made the choice to stop seeking self-sufficiency in wheat production. Rather, they set up an investment fund to buy land in more water-rich countries for the purpose of farming wheat for export back to the Kingdom. Other countries in South Asia and the Arabian Gulf area are pursuing similar programs. As water stress increases, some countries will out of necessity choose to reserve their valuable land for crops they can grow easily without tapping unsustainable or prohibitively expensive scarce water resources.
It is estimated that by 2030, 55% of the world’s countries will depend on food imports because of water scarcity. The trade policies of nations will impact their water policies and vice-versa as water moves around the globe in the form of traded goods.