Comment on the CFS/HLPE Report: WATER AND FOOD SECURITY (DRAFT V0-OCT 1, 2014)
By Aziz Elbehri, Trade and Market Division, FAO
My comment will be restricted to the question of trade which the draft report has not adequately addressed in my opinion. There are scattered references to trade in the report, but these do not amount to a coherent treatment given the potential role of trade in correcting national imbalances of water. The following are further elaborations on trade-related themes for consideration into the future version of the report:
1. “Virtual water” is a concept developed to examine the role that trade could play to correct for water imbalances across countries and to contribute, in part, to solving the projected negative impacts on food security. Virtual water allows countries to assess the value of producing a specific crop locally versus importing it. Given different water endowments across countries, it is proposed that water-abundant countries produce water-intensive products and export to water deficit regions. However, this is not as easy as it looks, as they are several difficult policy trade-offs to consider, not mention to the political feasibility of such an approach.
2. The main issue is that trade is closely tied with policy (including related farm and energy policy more broadly). It can be fairly assumed that improvements in agricultural water productivity through investments in improved rainfall and irrigation systems, through better demand management (including through improved water pricing and water trading) as well as better governance of water management, distribution and use, can go long way in alleviating much of the water shortage problems, while the rest can be filled by trade. However, overreliance on imports could increase country vulnerability to global market volatility, sudden food market shortages, or even political decisions (export bans or sanctions). Local food production has also other socio-economic and developmental benefits to rural areas. A more reasonable strategy would be to combine investments in rainfed and irrigated agriculture with strategic complementary trade policies both of which can contribute to reducing the amount of additional water required to meet food demands. Moreover, trade policies need to be closely aligned and harmonized with farm subsidies, energy subsidies, competition policies so as to avoid unintended detrimental consequences on water supply and demand, and hence on the country’s food security. Finally, as water is becoming a global concern, this has implications for multilateral trade rules and arrangements. One issue to ponder here is whether the existing WTO rules are flexible enough and with sufficient safeguards to allow water-deficit countries to source their food requirements through trade or are new multilateral mechanisms and safeguards required.
3. Beside trade there is also the question of investments. Promoting open trade to facilitate imports of water-intensive commodities may also open the door to inflows of foreign investments which can be “a double edged sword”. Investments may bring in capital and technology but could also create risk of diverting water resources away from much needed food security uses. A typical example is the investment in land for biofuel feedstocks (which would also require huge amounts of water resources, especially under intensive production systems). A particular concern in developing countries. Appropriate investment policies and safeguards that could balance between protecting investors rights and those of the local communities, are very much needed for water as much as for land investments.
4. Climate change is expected to exacerbate water scarcity and induce future irrigation shortages in many parts of the world. This brings to the fore the role of trade as a potential correcting mechanism. Again potential is underlined since trade and or climate policy could direct the trade impacts in a positive or negative way. While an open trading system has the potential to correct part for the water variability and increased scarcity problem, there are many unanswered issues that need further investigation. Among these is the search for the correct balance between investing in improving water & food productivity versus relying on imports and between promoting foreign investments versus protecting communities’ interests and right to food and water.
In conclusion, the above considerations call for more analysis on the role trade can play in correcting the emergence water imbalances and their implications for food security. International organizations, such as FAO, WB and others along with water specialized research centers need to partner to develop the technical and economic knowledge base required to support developing countries and to assist the formulation of appropriate national water policies as well as engage in global policy dialog on water and food security issues.
Aziz Elbehri