Virtual solution

OECD Observer

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Should water-scarce countries import water-intensive products and cultivate less water-intensive ones? After all, since all goods contain a certain amount of water in their production, exporting farm produce is rather like exporting water, albeit in virtual form. A thousand litres of water may be needed to produce a kilo of wheat, but five to ten times more is needed for a kilo of meat.

According to Lester Brown, president of the Earth Policy Institute, the overall water required in the farm products imported into the Middle East and North Africa is equivalent to the annual flow of the river Nile upstream at Aswan. Some countries are adopting policies to reduce stress on water resources, with Israel and Jordan cutting back exports of less lucrative water-intensive crops, for instance.

Overall, however, world trade in water-intensive produce reflects the global market, rather than any deliberate evaluation of water scarcity. For this reason, any effective policy to encourage efficient use of scarce water resources must be based on pricing. If irrigators in water-scarce countries are charged for their true water use, some crops might become uncompetitive. Those countries would then import water intensive produce from water-rich countries, which would increase output of water-intensive exports. However, a key question is whether the market can guarantee water security for poorer countries, particularly as long as global trade, which is dominated by water-abundant countries anyway, remains distorted by farm support.

©OECD Observer No 254, March 2006

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