ISRAEL'S NEED TO IMPORT FRESHWATER

Abstract

Although Israel plans to remain self-sufficient in freshwater, that goal comes at a high cost. Both Israel and its neighbors would be better off if countries with an abundance of freshwater exported some of that resource to Israel, which would in turn share it with Palestine and Jordan. A simple 2×2×1 variant of the Heckscher-Ohlin-Samuelson model, incorporating costs of transport, illustrates the advantages of international trade in freshwater. Not only does trade foster an efficient allocation of a scarce resource across countries, but also, by establishing a highly visible market price for importing water, promotes its efficient allocation among competing uses within countries. The classic marginal conditions for efficient allocation of water across and within countries, that the present model derives, are applied to empirical data that illustrate how much more efficiently water can be utilized in the Middle East. Given the long and tragic background of strife and distrust in that part of the world, it is a hopeful development that Turkey is now shipping freshwater to Cyprus and is in talks with Israel to extend this trade to that country. There is also the potential for Egypt and Lebanon to profitably export water to Israel. Such trade will not only promote prosperity but, conceivably, can also reduce conflict and deter war in the region.