Peter Brabeck-Letmathe, Chairman of Nestlé looks at the issue of virtual water trading and the importance of food trade as a means of both securing food supply and combating water scarcity.

The use of water, one of our basic human needs, has been growing vastly in the last century. It is predicted that over the next 20 years, the world’s thirst for water will grow by 50%. By 2030, water withdrawals will exceed natural renewals by 60%. Water overuse and scarcity are becoming critical issues in the new millennium at both global and regional levels.

Up to now, water overuse was at the expense of the environment. But as the gap increases rapidly, water shortage risks having an immediate impact on agricultural production, given the fact that 90% of fresh water used globally is for irrigation to grow the food we eat. With the current trends in population and economic growth affecting water needs for all kind of activities, this could result in global shortfalls of up to 30% in cereal production by 2025. There is no doubt that we are facing a great challenge as to how we will be able to feed the world’s population in the near future.

As many of us have noticed, the challenges of water scarcity and food security interact and are interdependent at both regional and global levels. Any improvements regarding these challenges require efforts at both levels. At regional level, strategies for improving agricultural water use efficiency have been discussed and proposed, and in some cases even implemented, such as establishing an effective water management system, including a water pricing for commercial usage based on tradability, with collaboration between local government, private sector and farmers. Examples are Oman (already in existence for more than 4000 years), South Alberta and Murray-Darling in South Australia.

Food trade - securing food supply and combating water scarcity

At global level, by realising how much water is consumed for growing crops, the importance of food trade has emerged as a means not only for securing food supply, but also for combating water scarcity. The concept of “virtual water” was introduced by Tony Allan in the early 1990s and refers to the water that is required for the production of agricultural commodities, or in other words the water “embedded” in agricultural products. Thus, international food trade can be seen as virtual water trade, which implies that the corresponding amount of virtual water is transferred from the export country to the import country through international food trade.

In practice, a country both imports and exports virtual water. Even water scarce countries must be allowed to export such embedded water, i.e., products with a high value per drop, which then allows them to import staple food.

In recent decades, studies into virtual water trade suggest that regional water scarcity in many regions can, to a certain degree, be relieved through actual international food trade. A study of virtual water flows of the Nile Basin shows that between 1998 and 2004, 14,000 Mm3/y virtual water was exported outside of the basin annually and roughly 41,000 Mm3/y was imported. The imports are seen to “have played a key role in filling the freshwater deficits of Egypt and Sudan, and represent a third of the flow of the Nile River itself” (Zeitoun et al., 2009).

Virtual water trading requires establishment of market price for water

The results from another study of virtual water flows in the yellow river basin in China also suggest that virtual water trading can help sustain the economic growth of the regions within the basin and ease the pressure from water shortage (Feng et al., 2012).

Holistically speaking, virtual water trade could help save water on a global scale as well, due to the fact that 2-3 times more water is required to grow the same amount of grain in an arid country, where the climatic conditions are less favourable (high temperature, high evapotranspiration), than in a country under rain-fed and favourable climatic conditions (Chapagain and Hoekstra, 2003).

In reality, often because of extreme low or even zero price of water for agriculture, agricultural products and the virtual water embedded within cannot be evaluated correctly on their costs (Gawel and Bernsen, 2011). There is no doubt that the efficient allocation of freshwater through international virtual water trade requires the establishment of a proper market price for water as a prerequisite, or at least a proper understanding of the value of water.

Global food trade - an efective means for global water balancing

A global net virtual water flows diagram, including both exporting and importing, from the study of Alexander J. B. Zehnder, former president of the ETH Board, shows that North America, South America and Oceania are major net virtual water exporters, whereas Europe, Asia and Africa are net virtual water importers. The results of comparing the countries’ net virtual water flows with their domestic irrigation ratios reveal the trend that net virtual water flows from rain-fed irrigation dominant areas to non-rain-fed irrigation areas. This tendency clearly shows that global food trade is also a cost effective and environmentally sustainable measure for global water balancing, to address the global water scarcity challenge.

It should not be forgotten that international food trades are affected by the political and economic environment as well. In many cases, low income countries contradictorily have much lower participation in the global food trade, even though they have severe water shortage problems in their domestic regions. The significance of global water saving from international food trade is somehow limited.

With the increased pressure of global and regional water scarcity, the concept of virtual water trade, helping global water balance in a sustainable and cost effective way, may urge policy-makers to re-think water scarcity as a challenge beyond regional level, and consider the issue of water scarcity and food security within broader political, environmental, social and economic forces.

This article was published on 19^th July in Peter Brabeck-Letmathe’s Water Challenge blog which aims to create discussion about the issue of water availability around the world. Click here to comment.