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Miraculously, and above all silently, Middle East governments have been able to avoid
the apparently inevitable consequences of their inherited water deficits, despite the fact that this
is a life-and-death economic issue for them and their peoples. How these countries can continue
to avoid such conflicts while fulfilling their needs is an important issue for the region.
indigenous hydrological systems and thus international agencies such as the World
been able to avoid troublesome domestic Bank who believe that many countries
and regional frictions. Miraculously and underestimate the importance of trying to
above all silently governments have been influence global trade in staple foods. This
able to avoid the apparently inevitable author has been urging for some years that
consequences of their local water deficits. Middle East importers should act together as
The global trade in food staples has the pivotal force in the global grain trade, an
been particularly accessible for the past 50 ability made possible by their large-scale
years, even to poor economies, because purchases since the region is, and will
competition by the generators of the global remain for the foreseeable future, the major
grain surplus -- the United States and the grain importing region of the world.
European Community -- brought down the The second water policy priority as
global price of grain until the beginning of seen from outside is the allocative efficiency
1995. The past quarter-century, when of water use. In water-short circumstances,
Middle Eastern water conflicts have been according to basic economic principles,
most insistently predicted, was a period water should be allocated to uses which
when grain importers enjoyed heavily bring the best return to water supplies. In
subsidized virtual water. During the 1980s, agriculture, water should be allocated to
grain was being traded at about US$100 a crops which bring a sound return to water as
ton, despite costing about US$200 a ton to well as sound economic returns to the
produce. The year 1995, however, witnessed economy. This means that high-value
a dramatic change in the grain market. vegetables are more useful than livestock, at
Prices rose rapidly and by the spring of 1996 least livestock raised on locally grown
wheat was being traded at US$250 a ton. fodder. At sector level, industrial use is
Since then, prices have fallen back to more efficient than agricultural use. This
US$140 a ton, but there seems no likelihood policy is commonly referred to as demand
that in the World Trade Organization management.
(WTO) regime they will ever return to their The third water policy priority is
lower late 1980s' levels. productive efficiency, which means
The wheat price fluctuations of the achieving better returns to existing water
mid-1990s emphasize the strategic uses. Investment and changes in
importance of virtual water. Access to management and technology are means by
virtual water is achieved by developing which improvements in productive
economies strong enough to provide the efficiency can be achieved.
purchasing power to trade on international Middle Eastern governments
markets. Intelligence on the status of the prioritize water policy in exactly the reverse
global capacity to meet future virtual water order despite the fact that productive
needs at affordable prices is an enormously efficiency requires investment but far less
important economic issue for Middle political risk. Allocative efficiency on the
Eastern governments. contrary, especially at the sector level, can
Such water policy priorities are easy only be very politically stressful. It involves
to identify for outsiders but can become shifting a crucial input -- water -- from an
entangled in the political realities of a region agricultural sector which brings a poor
where governments have very different economic return to industry or services,
perspectives and priorities. Great is the where it brings a higher return.
consequent frustration for the staffs of Governments have proved very reluctant to