The consequences of trade for agricultural water use: evidence from subnational trade flows

Abstract We investigate the subnational impact of trade on water use in the contiguous United States (CONUS). We develop an econometric model employing the instrumental variable (IV) approach to understand the causal impact of previous-year trade on current-year water use. Specifically, our analysis focuses on irrigated area and irrigation water use by water source (surface, groundwater, and total) across states in the CONUS for 2012–13, 2017–18, and 2022–23. We find that at the subnational scale, trade openness reduces groundwater withdrawals during droughts; a unit increase in previous-year trade openness results in a 2%–2.5% and 1.4%–2% reduction in groundwater irrigation withdrawals during 2012–13 and 2022–2023, respectively. This effect is identified as being driven by reductions in irrigated area and shifts towards advanced irrigation technologies. These findings enhance our understanding of how trade influences water use at the subnational scale and may provide helpful insights to policymakers.