SUBSIDIES INTERRUPT FLOW OF ‘VIRTUAL WATER'
It has become a standard doomsayers' prediction that the civil and regional wars of the future will be over water rather than oil.
However, as this year's United Nations human development report yesterday pointed out, this does not reflect a global shortage. The planet's hydrological system transfers about 6,900 cubic metres of water to the land for every human on earth, more than four times the amount needed to support farming, industry and the environment.
Unfortunately, that water is unevenly distributed. And, while market mechanisms have sprung up to cope with imbalances, these markets are sometimes distorted by government subsidy.
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A trade in so-called “virtual water” arose as dry countries began importing commodities such as wheat and other basic grains that require a lot of water. As Arjen Hoekstra, an academic expert in water management, points out, this is a classic application of the theory of comparative advantage. Economies do what they are relatively good at. Wetter and more temperate regions, where the soil holds much more water and agriculture can rely on cheaper rainfall rather than expensive irrigation, export water to hotter, drier countries.
The World Bank estimates that 1340bn cu m in “virtual water”, a quarter of all the water used on the planet to grow food, was traded in 2000. This can mean overturning millennia-old patterns of production, even importing traditional staple foods.
In recent decades the flatbread eaten in Egypt since before the time of the pharaohs has increasingly been made from imported grain rather than wheat grown by the Nile. If Egypt grew all its own cereals, it would require one-sixth of the water in the Aswan dam reservoir.
But like any trade, the international commerce in virtual-water crops has distortions and inefficiencies. The most familiar reason
