By Kriti Bardhan Gupta

Abstract
The present article explores the problem of uneven distribution of fresh water and water scarcity in the Asia-Pacific region and highlights the concept of trade in virtual water through agricultural products for sustainable management of scarce water resources. It identifies agricultural and allied products that have high potential for virtual water trade. Further, it analyses the structure of trade in these products across countries to identify possibilities for managing regional water scarcity through such trade. Finally, the study points out the importance of the inclusion of virtual water accounting in water and agricultural policy analyses at the national or regional level.

Introduction
The concept of virtual water has been used extensively in the last decade as a means to achieve regional and global water security (Allan, 1997; Hoekstra, 2003). Several studies conducted during this period emphasize the fact that virtual water trade between nations can mitigate pressure on scarce water resources and contribute to overcoming global water scarcity (Allan, 2003; Hoekstra, 2006; Hoekstra and Hung, 2002; Renault, 2003). Based on the comparative advantage theory of trade, it makes more sense for a water-scarce country to import water-intensive products rather than produce them domestically, for optimum utilization of the limited volume of water available within the country. Virtual water trade between nations can be an instrument to improve the efficiency of global water use and overcome imbalances in water availability across nations (Chapagain, Hoekstra and Savenije, 2006; Yang et al., 2006).

The situation in the Asia-Pacific region with diverse agroclimatic zones is no different from the global level. Several countries in the region are rich in water resources but many others often face drought-like situations. According to a United Nations report, water availability per capita in Asia and the Pacific is the second lowest in the world due to the region's high population. Of the total available water in the region, 80 per cent is consumed by agriculture. However, water use by industry is growing. For example, in China and Viet Nam, industrial use of water has gone up by more than three times since 1992. River water-sharing conflicts among countries are not new in this region. The current debate in many countries over the pros and cons of linking major rivers within a country is driven by the need to achieve water security at national and regional level.

Can we apply the concept of virtual water trade to increase water security in the region? What are the social, economic and environmental issues involved in the trade of virtual water? A detailed literature survey was conducted to find an answer to these questions.

The value of virtual water content varies from crop to crop, and even from one country to another. For instance, it varies from 159 m3 per ton for sugarcane crop to as high as 19,678 m3 per ton for cotton.

Most studies have emphasized that virtual water trade can be an instrument to achieve water security and efficient water use. They have highlighted the usefulness of the concept of virtual water in measuring the environmental impact arising from consumption of different products as it tells which goods have maximum impact on the water system and where water savings can be achieved. Such studies have concentrated on issues related to the export of virtual water in a global context (Chapagain, Hoekstra and Savenije, 2006; Chapagain and Hoekstra, 2003a, 2003b; Hoekstra and Hung, 2005; Zimmer and Renault, 2003; Ma et al., 2006). However, the present study covers issues related to virtual water trade specifically with respect to the Asia-Pacific region.

The study addresses the following issues:

  • What agricultural and allied products have high potential for virtual water trade?
  • What is the structure of trade in such products across countries?
  • Issues involved in the export of virtual water across countries within the Asia-Pacific region and also within a country.

Research methodology
The volume of water used in crop production per unit of crop weight varies widely across countries, resulting in a variation in the virtual water content for the same crop in different countries. The volume of virtual water that can be exported for achieving regional water security through agricultural trade is dependent on the volume of virtual water contained in a crop and its tradable volume. Secondary data was used to identify agricultural products with the world's highest potential for virtual water trade. The patterns of export and import of these items were explored for the last three years for which data was available using the international trade database 'India Trades'. The pattern of international trade was compared with water scarcity levels in different Asia-Pacific countries.

Analysis and findings
A list of 25 major agricultural products1 that account for about two thirds of the total virtual water trade in the world was prepared. The average flow of water through these products was also estimated. It is interesting to note that coffee, wheat, soybean, cocoa bean, rice and cotton account for more than one third of total virtual water trade in the world. Among other products that account for a large percentage of global virtual water trade are maize, cane sugar, refined palm oil and barley.

The largest exporters of these 25 products (having a high potential for international virtual water trade) with a more than 1-per cent share each in the global export value of these products, were identified. The export values for each country in 2009, 2010 and 2011, and their averages were also estimated. These countries account for more than 81 per cent of the total value of exports of agricultural products with a high potential for virtual water trade. However, it was noted that about two thirds of these countries are from outside the Asia-Pacific region.

The corresponding list of the largest importers of these 25 products with a more than 1-per cent share each in the global import of these items was also prepared. The import values for each country in 2009, 2010 and 2011, and their averages were estimated. These countries together account for about 74 per cent of the total import value of agricultural products with a high potential for virtual water trade. More than two thirds of these countries are again from outside the Asia-Pacific region.

A comparison of major exporters and importers of agricultural products having a high virtual water trade potential indicates that Asia-Pacific countries are not participating significantly in the global trade of virtual water through agricultural products. This is despite the agriculture sector accounting for almost 80 per cent of total water use in the region, as can be seen from Figure 1.

According to the Statistical Yearbook for Asia and the Pacific 2011, this region has the world's highest annual water withdrawal due to its large size, large population and irrigation practices. However, it is neither participating adequately in the export of agricultural products with a high virtual water trade potential in order to make use of such high levels of water withdrawal, nor participating in the import of such products so as to preserve its domestic water resources.

Water security is an increasingly important development issue for this region. Water availability and water use in river basins must be balanced to promote water security. Participation in virtual water trade can help in promoting water security in the region. As noted earlier, several countries in the region face high levels of water insecurity. It makes sense for such countries to import water-intensive crops rather than grow them in the name of self-dependence. Similarly, a water-abundant country may try to export water-intensive crops.

The watersheds in several river basins in the Asia-Pacific region have been overexploited. It is quite surprising to note that overexploitation of water resources is often higher in regions that are rich in inland water resources. The continued overexploitation of inland water resources may have long-term negative consequences for the region's natural resources and environment.

Most agricultural products having high potential for virtual water trade are grown in the Asia-Pacific region. Therefore, large volumes of virtual water could be mutually traded by countries in the region. This shows the region's immense potential to overcome the problem of water deficiency without causing social, economic and environmental stress.

 

The international trade theory on comparative advantage indicates that the world economy benefits if every country concentrates on the production of those commodities where it has a comparative advantage. Comparative advantage generally lies in commodities whose production requires more of locally available, abundant and cheaper resources. The same theory may be applied for promoting water security in the Asia-Pacific region. It makes sense for a water-deficient country to concentrate on the production of less water-intensive crops rather than growing crops that have high virtual water content. These countries would be better off by importing these crops from other countries so as to minimize the pressure on scarce water resources available locally and producing those crops that have lower virtual water content.

Virtual water trade between countries can be promoted as an alternative to real, inter-basin water transfer. Virtual water transfer is a more realistic, sustainable and environment-friendly alternative to real water transfer schemes that are being seriously considered by some countries. Virtual water export from a country with relatively high water productivity to a country with relatively low water productivity implies real water saving at national and international levels. However, the export of virtual water should not be at the cost of the long-term sustainability of local resources. Water-intensive commercial crops like oilseed and cotton are mainly grown in arid areas. Knowing about the virtual water content of different crops may help in promoting a mix of crops for optimized use of available water resources, avoiding overexploitation and maintaining long-term environmental sustainability.

Among important limitations that prevent a fast shift in the crop pattern in countries are the tastes and preferences of the local farmers and consumers, which cannot be changed quickly. In a country where people prefer to eat rice, it is extremely difficult, at least in the short term, to shift production to other crops just because it will save local water resources. However, farmers should be encouraged to change the cropping pattern in view of the country's long-term interest.

For small and marginal farmers it may make sense to ensure production and availability of their preferred staple food on their own farm rather than to think on a macro level about what should be produced in order to maintain the water security of the region and country. Production of preferred food crops helps farmers in avoiding risks associated with agricultural markets which are not efficient in many countries. However, freer movement of food items from one country to another and efficient marketing support institutions may make it easier to convince farmers to adjust their production mix provided they are made aware of the economic rationale for this change. They need to be convinced about what is good for them to produce and what should be procured from the market for the long-term sustainability of local and national water resources. The concept of virtual water may be helpful in convincing not only farmers but also consumers in making the desired change. Farmers can be motivated to grow crops where the country has a higher comparative advantage derived from its water resources apart from other factors of production.

Conclusion and implications
The concept of virtual water trade has immense scope for application to overcome physical scarcities in water-deficit countries and regions in the most feasible and environment-friendly manner. Virtual water trade is not new; it is as old as food trade and its volume is steadily increasing. However, there is a somewhat conscious shift towards virtual water trade in certain countries which are importing low-value but water-intensive foods like cereals, keeping in view domestic water policies (Allan, 2003). Dependence on trade of virtual water is much more environment-friendly and does not involve large-scale social unrest typical of big projects like the linking of rivers that can displace landowners, inundate cultivable land and create uncertainty about water availability in the times to come in presently water-rich areas due to uncertain sociopolitical situations in future.

Estimates of the virtual water content that could be potentially traded across countries, highlight the importance of the concept, which can be used to promote food security and overcome water scarcities in deficit regions. Virtual water accounting may help policymakers, researchers and farmers adjust crop production patterns according to the country's comparative advantage in terms of water as well as other factors of production. At present, Asia-Pacific countries are not participating adequately in the export or import of agricultural products that have a high potential for virtual water trade. Export of virtual water can be a strategic instrument of water policy at national, regional and global levels. The consequences of a change in food trade patterns for water reasons should be examined in terms of other options, food security, food sovereignty and employment apart from the availability of water resources (Warner, 2003). Before a major decision on a long-term shift in the agricultural production pattern, it is necessary to assess available water resources in the region and understand the social and economic impact of the decision. Awareness of the virtual water content of food and commercial crops is likely to increase the water awareness of people, which may have a long-term impact on diets, consumption patterns and food marketing in the Asia-Pacific region.

(References will be made available upon request)

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1 Available on request