Tag Archives: trade

Mapping global flows of virtual green and blue water

Green and blue virtual-water ‘flows’ related to wheat trade by major exporting and importing nations (km3/year). The size of each pie is determined by the amount of virtual water ‘traded’. Countries with virtual-water ‘exports’ are depicted in green and countries with virtual-water ‘import’ in red;<br /> the colour shade depends on the quantity of virtual water ‘traded’. Period 2000–2004.
Green and blue virtual-water ‘flows’ related to wheat trade by major exporting and importing nations (km3/year).
The size of each pie is determined by the amount of virtual water ‘traded’.
Countries with virtual-water ‘exports’ are depicted in green and countries with virtual-water ‘import’ in red; the colour shade depends on the quantity of virtual water ‘traded’. Period 2000–2004.

M.M. Aldaya, J.A. Allan and A.Y. Hoekstra in their paper Strategic importance of green water in international crop trade (Ecological Economics 2009) doi:10.1016/j.ecolecon.2009.11.001 map global flows of virtual water in the wheat trade.

In their paper they explain their figure:

The map presented in Fig. 6 shows the virtual-water ‘flows’ to the five major importing countries for wheat for the period 2000–2004.

By ‘importing’ virtual water embodied in agricultural commodities, a nation “saves” the amount of water it would have required to produce those commodities domestically.

Though from an importing country perspective it is not relevant whether products have been produced using green or blue water in the country of origin, from a global point of view it has important implications (Chapagain et al., 2006a). For instance, Egypt is the largest importer of wheat, with the USA providing about 45% of the country’s imports. Wheat from Egypt has an average virtual-water content of 930 m3/ton of which 100% is blue water (Chapagain et al., 2006a), while the USA has a virtual-water content for wheat of 1707 m3/ton of which 39.8% is blue water (Table 3).

By importing wheat, Egypt saves 930 m3 of water per ton of wheat. Globally, when imported from the USA, there is not a total water saving because wheat production in the USA requires more water than in Egypt. Exports to Egypt from this country result in a considerable net global water loss of 777 m3 per ton. However, if we just look at blue water only, importing wheat from the USA to Egypt saves 251 m3/ton (since USA production requires 679 m3/ton of blue water and wheat production in Egypt 930 m3/ton).

Along these lines, Egypt, as some other water-scarce importing countries, has formulated policies to import low value but high water consuming food like cereals (Van Hofwegen, 2005). Nevertheless, even if the potential of trade to “save” water at national level is substantial, most international food trade occurs for reasons not related to water resources (CAWMA, 2007).


chinaphotoIn a New Yorker article – the promised landEvan Osnos about African merchants living in China. He also narrates an Audio Slide Show about the economic, social, and religious life of African migrants in Guangzhou.  On his blog he writes:

Prof. Adams Bodomo is a Ghanaian linguist at the University of Hong Kong and one of the first scholars to write in English about the African community in Hong Kong and Guangzhou.

… As Bodomo and other scholars see it, immigration, like other byproducts of prosperity, is an unfamiliar issue in China. For most of its history, China was so poor that hardly anyone but missionaries or marauders wanted to stay. China’s posture toward foreigners was erratic; it oscillated between the xenophobia that produced the Great Wall to the zealous overture of the Beijing Olympics. But China is still ambivalent about people settling down permanently, and Bodomo sees that as a the big question about whether these communities survive.

There is also a podcast interview with Osnos.

Agricultural trade and poverty

A recent Economist article poses the question Does freer farm trade help poor people? Given the ideological slant of the Economist, it is unsurprising that the article concludes yes. The interesting aspect of the article discusses two World Bank research papers that indicate that the way in which agricultural trade is regulated has major consequences.

The links between trade, food prices and poverty reduction are more subtle. Different types of reform have diverse effects on prices. When countries cut their tariffs on farm goods, their consumers pay lower prices. In contrast, when farm subsidies are slashed, world food prices rise. The lavishness of farm subsidies means that the net effect of fully freeing trade would be to raise prices, by an average of 5.5% for primary farm products and 1.3% for processed goods, according to the World Bank.

These effects are still much smaller than recent food-price spikes, but would they, on balance, help or hurt the poor? In crude terms, food-exporting countries gain in the short term whereas net importers lose. Farmers are better off; those who buy their food fare worse. Although most of the world’s poor live in rural areas, they are not, by and large, net food sellers. A forthcoming study* of nine poor countries by M. Ataman Aksoy and Aylin Isik-Dikmelik, two economists at the World Bank, shows that even in very rural countries, such as Bangladesh and Zambia, only one-fifth of households sell more food than they buy. That suggests the losers may outnumber winners.

But things are not so simple. The authors point out that net food buyers tend to be richer than net sellers, so high food prices, on average, transfer income from richer to poorer households. And prices are not the only route through which poverty is affected. Higher farm income boosts demand for rural labour, increasing wages for landless peasants and others who buy rather than grow their food. Several studies show this income effect can outweigh the initial price effect. Finally, the farm sector itself can grow. Decades of underinvestment in agriculture have left many poor countries reliant on imports: over time that can change.

The World Bank has often argued that the balance of all these factors is likely to be positive. Although freer farm trade—and higher prices—may raise poverty rates in some countries, it will reduce them in more. One much-cited piece of evidence is a study† by Thomas Hertel, Roman Keeney, Maros Ivanic and Alan Winters. This analysis simulated the effect of getting rid of all subsidies and barriers on global prices and trade volumes. It then mapped these results on to detailed household statistics in 15 countries, which between them covered 1 billion people. Fully free trade in farm goods would reduce poverty in 13 countries while raising it in two.

But lately the bank seems to be taking a different line. Robert Zoellick, the bank’s president, claims that the food-price crisis will throw 100m people below the poverty line, undoing seven years of progress. His figure comes from extrapolating the results of a different study** by Mr Ivanic and Will Martin, another World Bank economist. This study analyses the effects of more expensive staple foods on poverty by examining household surveys in nine countries. In seven cases, higher food prices meant more poverty. (Dani Rodrik, a blogging Harvard economist, was one of the first to highlight the tension between these studies.)

In fact, the bank’s results are not as contradictory as they seem. The two studies are based on different sets of countries: only Peru, Zambia and Vietnam appear in both. And the gloomy analysis measures only the effect of pricier staple foods, whereas the other examines freer trade in all farm goods. Such trade brings broader benefits: even if higher prices for staples exacerbate poverty in some countries, at least in the short term, the effect may be outweighed by increased demand for other farm exports, such as processed goods, as rich countries cut tariffs.

These subtleties suggest two conclusions. First, the bank, and others, should beware sweeping generalisations about the impact of food prices on the poor. Second, the nature of trade reform matters. Removing rich-country subsidies on staple goods, the focus of much debate in the Doha round, may be less useful in the fight against poverty than cutting tariffs would be. The food-price crisis has not hurt the case for freer farm trade. But it has shown how important it is to get it right.

These papers only assess trade rather than agricultural practices. I would add that the ecological fit of agriculture to the place in which it is practiced will also have substantial impacts on the potential for a regions ability to escape from poverty. Increases in agricultural production that damages other ecosystem services that are important for local people’s livelihood, such a fisheries, fuelwood, flood regulation, or water quality, can do more damage than good.

Social Implications of Arctic Melting

An article Arctic Meltdown in Foreign Affairs by Scott G. Borgerson discusses the political and economics consequences on a ice-free summer Arctic:

The shipping shortcuts of the Northern Sea Route (over Eurasia) and the Northwest Passage (over North America) would cut existing oceanic transit times by days, saving shipping companies — not to mention navies and smugglers — thousands of miles in travel. … Taking into account canal fees, fuel costs, and other variables that determine freight rates, these shortcuts could cut the cost of a single voyage by a large container ship by as much as 20 percent — from approximately $17.5 million to $14 million — saving the shipping industry billions of dollars a year. The savings would be even greater for the megaships that are unable to fit through the Panama and Suez Canals and so currently sail around the Cape of Good Hope and Cape Horn. Moreover, these Arctic routes would also allow commercial and military vessels to avoid sailing through politically unstable Middle Eastern waters and the pirate-infested South China Sea. An Iranian provocation in the Strait of Hormuz, such as the one that occurred in January, would be considered far less of a threat in an age of trans-Arctic shipping.

Arctic shipping could also dramatically affect global trade patterns. … As soon as marine insurers recalculate the risks involved in these voyages, trans-Arctic shipping will become commercially viable and begin on a large scale. In an age of just-in-time delivery, and with increasing fuel costs eating into the profits of shipping companies, reducing long-haul sailing distances by as much as 40 percent could usher in a new phase of globalization. Arctic routes would force further competition between the Panama and Suez Canals, thereby reducing current canal tolls; shipping chokepoints such as the Strait of Malacca would no longer dictate global shipping patterns; and Arctic seaways would allow for greater international economic integration. When the ice recedes enough, likely within this decade, a marine highway directly over the North Pole will materialize. Such a route, which would most likely run between Iceland and Alaska’s Dutch Harbor, would connect shipping megaports in the North Atlantic with those in the North Pacific and radiate outward to other ports in a hub-and-spoke system. A fast lane is now under development between the Arctic port of Murmansk, in Russia, and the Hudson Bay port of Churchill, in Canada, which is connected to the North American rail network.

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