Water Scarcity and International Agricultural Trade

Abstract

There is increasing interest in the water-food nexus, and the potential implications of future water scarcity for food production. However, little is known about the macro-economic implications of future water scarcity, and the potential impacts on global trade and economic welfare. In this paper, we utilize a recently developed model, GTAP-Irrigation, in order to study the global economic effects of projected water scarcity for 126 river basins, globally in the year 2030. Projected irrigation shortfalls are obtained from the IMPACT-WATER model, and these are imposed upon the present day economy. We find that regional production impacts are quite heterogeneous, depending on the size of the shortfall, the irrigation intensity of crop production, as well as the global commodity price effects. Projected 2030 scarcity leads to significant output declines in China, South Asian, Middle East and North Africa, with increases in crop production sub-Sahara Africa. We find that projected irrigation shortfalls significantly alter the geography of international trade. The global welfare loss amounts to $3.7 billion (2001 prices) both due to the reduction in irrigation availability, as well as due to interactions with domestic support for agriculture.