International trade and groundwater depletion: an econometric analysis

Abstract We contribute to the debate on trade and the environment by investigating the relationship between countries’ international trade and their groundwater use. We go beyond the virtual water literature that calculates the virtual water content of trade to assess how water use relates to international trade. We develop a suite of econometric regressions to account for the impact of trade liberalizations in a framework that includes standard determinants of countries’ water supply and demand. We focus on the agricultural sector and on the contribution of regional trade agreements (RTAs) to capture the impact of trade liberalizations. We find that more openness to trade due to an increasing number of RTAs may actually reduce total groundwater abstractions, which is qualified by countries’ comparative advantage. We do not find a statistically significant impact of trade on groundwater depletion, which also depends on the recharge rate of aquifers. Our analysis calls for assessing water use in a global world and in a framework that accounts for all the drivers of water use on the demand and supply side, including those behind international trade.