United Nations Radio

Addressing global water prices

PRES: Water is essential to life, but its costs are often hidden. Hydrologist Tony Allan came up with the concept of 'virtual water' to explain how its price is embedded in other goods. As he tells Hannah Stoddart, it all started when he was studying the economies of the Middle East in the 1980s and he wondered why the predictions of water wars hadn't come to pass.

Allan: I began to realize that the reason was that they could easily import food. At that stage, I was looking much more at Egypt and could see that after 1970, or '71-'72, they started to increase their wheat and flour imports and that was because they'd run out of water.

Stoddart: So essentially, your discovery suggests that as opposed to breeding conflict, often through trade, water can foster cooperation, as well. Is there a point at which that will - especially with the increasing pressures on water resources globally - is there a point at which that kind of cooperation, there might be an end to that, so to speak, that it will run its course and we may get into more difficulties?

Effects of drought in India

Allan: Well, the other idea that one spotted was that really big water problems, like Egypt's water problem, or Singapore's water problem, are solved outside the water sector. And fortunately, all of these countries entered this very serious water deficit situation at a point in history, when the foolish Americans and Europeans were putting wheat and other staple commodities on the world markets at half cost, so you had not price signals trade, you had trade which was to the advantage of any country that needed wheat. That has made this transition of the Middle East as a whole, which has 300 million people, but water only for 200 million people - they've gone into this deficit circumstance, without noticing it. And this is the danger of 'virtual water' - it is an economically invisible and a politically silent solution, which politicians and people love, because they don't notice the pain of the shortage of water, but in terms of making the right decisions about what to do next with their economy, or their water, or the whole business of trading, is very bad.

Stoddart: Okay, so you're essentially suggesting that the current situation whilst convenient is ultimately unsustainable, and so could you give a few examples of some solutions that you perceive to this essentially invisible problem at the moment?

Allan: Well, all the solutions are political. It means that people have got to sit around the table at the World Trade Organization and decide to do sensible things. Africa is the classic example. Poor farmers in countries in Africa, who the only comparative advantage they have is their farming, but if on every occasion there's a drought and the prices would go up, and they would have a chance to have a little bit of extra money, they're destroyed by this cheap food, which is around, and the government, of course, with poor people in the cities as well as the countryside, brings in, so these subsidized prices from the northern economies are lethal for the farmers of Africa, where above all they need to increase their water productivity.

PRES: Tony Allan, winner of the Stockholm water prize for 2008.

Producer: Hannah Stoddart/Bissera Kostova, United Nations Radio
Duration: 2'35"