Virtual Water Trade and Economic Integration: The Role of Trade Agreements in Global Water Redistribution

ABSTRACT This paper examines the impact of economic integration agreements (EIAs) on virtual water trade (VWT) using a three‐way gravity model and a novel dataset integrating international and intra‐national water flows. We find that EIAs increase VWT by 18.2%, with deeper integration having a greater impact. Agreements containing water management provisions expand VWT by 42.8%, compared to 16.4% for those without. These provisions facilitate virtual water exports from water‐abundant regions while curbing them from water‐scarce regions. While limitations remain in how current trade policies address water allocation imbalances, our results suggest the potential for embedding targeted environmental clauses in EIAs to align trade flows with water availability and support more sustainable patterns of global resource use.