Being a student, I wrote my article as a student's point

of view and mainly for students like me. My article is

primarily focused on the positive role played by the
WTO and international trade in solving the problem of
"water crisis". As i have seen in many other articles,
people do have a misunderstanding regarding it. People
often blame the WTO for playing a negative role in
natural resource management including water.

Global water crisis: The role of International Trade in

getting a way out.
Sub
mitted by,
Asth
a Kaushik
Facu
lty of Economics,
Berli
n School of
Econ
omics and Law

Falsely, many people believe that there is an infinitive supply of water on earth. However, due to
the increasing global consumption of water and factors like deforestation, urbanization, industrial
farming etc, the problem of water crisis is intensified . According to a 2006 United Nations
report :"There is enough water for everyone". It also claimed that water insufficiency is often due
to mismanagement, corruption, lack of appropriate institutions, bureaucratic inertia and a
shortage of investment in both human capacity and physical infrastructure.(1).Another report by
World Water Vision states that there is a water crisis today, but this crisis is about managing the
available water resources, certainly not about the availability of too little water to satisfy human
needs(2). My research examines the role WTO can play in order to get a way out of this crisis.

As the resource is getting scarce, water related conflicts are happening all around the globe
intensifying the tension among different users. Governments are forced to think of a radical
solution in order to solve this global problem. On the one hand, due to the rising population, there
is an increase in the need of fresh water, and on the other hand there is an intense competition
among users in agriculture, industry and domestic sector pushing the ground water level even
deeper. To deal with this crisis, many experts suggest that tradable water would lead to the
efficient use of water and its resources. In fact, water is highly under priced due to government
regulation and subsidies in this sector, resulting in high consumption.Most governments subsidies
water supply on a huge scale by investing in infrastructure like dams, canals, water purification,
distribution systems and wastewater treatment making the economic value of water highly
insubstantial. Consumers are hardly aware of the fact that manufacturing 1 kg of beef requires
approximately 16000lts of water.(3).

A few years ago hardly anyone knew about the privatization of water services. Acknowledging
water as a human right, most of the world's water supplies remain in the public trust, but
according to some free market analogizes, private firms can do a better job than municipal
governments. As quoted on the World Bank website "Effective water management requires water
to be treated as an economic good, private participation in water and wastewater utilities has
generally resulted in sharp efficiency gains, improved service, and faster investment in expanding
service"(4). I guess, there is still a confusion among many people regarding the term "Water
Privatization", actually the term doesn't mean that water itself is privatized, it refers to the
privatization of water supply including services of collecting, purifying and distributing water. In
reality, if the market is not open to private investment, a water distribution system will take much
longer to be established which is certainly not favourable.

When it comes to the role played by the WTO and international trade in solving the problem of
freshwater scarcity, experts give mixed opinions and mostly WTO is inaccurately portrayed for
crafting the rules facilitating the liberalization or privatization of services such as water, health and
food. It was even claimed by some political forces that the policies of water privatization has been
imposed through the World Bank. In addition it was said that rules of trade liberalization
negotiated in the WTO under the General Agreement of Trade in Services would supposedly
usurp resources from people and put them in the hands of private corporations for making profits
through privatization of essential services*.In reality, GATS doesn't required the privatization of
any service. For all services including water distribution, it states that the following options are
open for all WTO members:
-To maintain the service as a monopoly ( public or private);
-To open the service to competing suppliers (but to restrict access to national companies);

-To open the service to national and foreign suppliers, but to make no GATS commitments on
it;
-To make GATS commitments covering the right of foreign companies to supply the service, in
addition to national suppliers.

All these policy options are fully legitimate. If any commitments are made under GATS regarding
water distribution, they will not affect the right of Governments to set levels of quality, safety, price
or any other policy objectives as we know that there are same regulations for foreign as well as
national suppliers as the WTO follows the principles of product transparency and non
discrimination.

According to Ricardo's theory, nations can gain from trade if they specialize in the production of
goods and services for which they have a comparative advantage, while importing goods and
services for which they have a comparative disadvantage. Similarly, if we evaluate the economic
insufficiency of trade in a water-intensive commodity between two countries on the basis of
opportunity costs of producing the commodity, the nation with comparatively low opportunity cost
should export the commodity (as the water productivity in the country is comparatively high). It
makes water scarcity the driving force behind the international trade of water-intensive products
helping countries with scarce water resources in saving their water by importing water-intensive
agricultural products .For example, Egypt saves domestic water resources of around 3.6 billion
m3/yr by importing wheat, which is a water-intensive crop. Similarly, Mexico imports wheat, maize
etc from USA in order to save around 8.5 billion m3 of water per year Another example is Jordan
which covers its water shortage by exporting goods and services that requires less amount of
water and importing products that need a lot of water. Jordan imports around five to seven billion
cubic meters of water in virtual form per year(5). We can say that the global trade pattern
influences the use of water in most of the countries, either by the reduction or enhancement of
domestic water use. According to a study, international trade reduces global water use in
agriculture by 5%. As around 80% of water is used in agriculture, establishing any international
protocol it will surely contribute towards a more sustainable usage of water.

I think this is just the beginning, there are many questions yet to be answered and many steps yet
to be taken. But at first, we all need to accept that, it is indeed a global problem and it can’t be
tackled individually. It requires a global solution and different policy options are open to all WTO
members without forcing them to open there service sectors to international competition.

Footnotes:
1.Water, a shared responsibility. : The United Nations World Water Development
Report 2 (2006 ) Chapter 1
2. http://www.worldwatercouncil.org/index.php?id=25
3. http://www.waterfootprint.org/?page=files/Publications
4. http://www.thirdworldtraveler.com/Water/Privatization_TidalWave.html , Article
name : Privatization Tidal Wave.
5. The relation between International trade and freshwater scarcity , Arjen Y. Hoekstra ,
Jan 2010

*There was even an information sheet titled "Don’t let WTO get hold of our water" about the
implications of GATS negotiations for water distribution services saying that it means privatization
of public services.. (http://www.wto.org/english/tratop_e/serv_e/gats_factfiction8_e.htm)