Essays on virtual water trade
Creators: name: De Angelis, Enrico
Publisher: name: IMT Alti Studi Lucca
Year: 2015
Subjects: HB Economic Theory

description: The subject of the three essays is virtual water trade. 'Virtual water' is the water used in production of the goods and virtual water import is the water used to produce imported goods. The virtual water concept has been originally proposed by Allan (1997, 1998) building on the Heckscher-Ohlin-Vanek's theory according to which commodity trade can be seen as an implicit exchange in the factors of production embedded in the commodities. The concept of 'virtual water trade' refers to the opportunity to minimize water consumption in water-short countries by increasing imports of products that require a large amount of water in their production cycle (water-intensive products) and limiting the export of water-intensive goods. Virtual water is thus a concept that links water, food, and international trade. The first essay, titled 'International legal aspects of water and virtual water trade', investigates the existing international legal framework applicable to virtual water trade, with the aim of assessing what types of trade rules would promote global water-efficiency. The analysis focuses on three aspects: water-footprint regulatory standards, water-footprint labeling schemes, and water-related agricultural subsidies. The analysis shows that - even if a tendency can be detected from plain rejection, over more nuanced statements, towards a certain 'readiness' for acceptance of environmental protection-driven trade distorting measures - current trade norms do not provide appropriate incentives for the full deployment of water savings achievable through virtual water trade. The analysis also addresses the question of whether certain recent developments in international legal theories (including the 'responsibility to protect' doctrine) may act as building blocks in the achievement of global water-efficiency. The second essay, titled 'The relation between interstate conflicts and trade, oil and food: a gravity model and network' approach', tests from an econometric point of view the relationships between interstate conflicts and control over water flows, through the lens of international trade. Making use of a novel dataset which distinguishes the direction of trade flows between country pairs and the direction of conflicts, the analysis tests the impact of countries' (bilateral and multilateral) trade openness on conflicts and the impact of countries' trade integration on conflicts; trade integration has been measured with a social networks approach and utilizing several networks metrics, such as number of ties, (un)weighted cluster coefficients, overlapping, page rank, as well as with (import) similarity indexes. Results indicate that trade openness plays the most significant role on the probability of wars between country pairs, with opposite effect of bilateral and multilateral trade. As for the strategic role of the different commodities investigated, results confirm that virtual water trade, similarly to oil trade, plays a strategic role in international relations. The third essay, titled 'The water suitcase of migrants' investigates the relation between human migrations and water resources and its role for food security and trade policy in water-scarce countries. It is commonly believed that human migrations are beneficial to the water endowments of origin countries for reducing the pressure on local resources. The analysis shows that such belief is over-simplistic, by reframing the problem by considering the international food trade and the corresponding virtual water flows, which quantify the water used for the production of traded agricultural commodities. By means of robust analytical tools, the analysis shows that migrants strengthen the commercial links between countries, triggering trade flows caused by food consumption habits persisting after migration. Thus, migrants significantly increase the virtual water flows. Finally, a comparison with the water footprint of individuals shows that where the water suitcase of migrants exceeds the water footprint of individuals, migrations turn out to be detrimental to the water endowments of origin countries, with socio-economic and environmental implications for water-scarce and food-insecure countries.