Both the virtual water embedded within food and agricultural goods and the international redistribution of a significant proportion of this virtual water through global trade are enormously consequential for global water security – accounting for larger volumes of water consumption than any other sector. Due to the growth in international value chains and the globalization of diets, virtual water trade has assumed growing importance over the past 60 years. And, as climate change-related pressures mount in the coming years and decades, trade will continue to be a vital mechanism for supporting globally efficient and sustainable water use by the sector, not just in volumetric terms but also in terms of the impact on water stresses in key production areas.
Optimal social and environmental resource allocation in relation to global water use by the food sector will not be achieved, however, without policy interventions targeted at both the supply and demand sides of the economy. Even where virtual water trade results in water savings at an aggregate global level – through, for example, exporting food and agricultural products from places of more water-efficient production to places with lower water efficiency – production may nevertheless be based on unsustainable water use at a local level.
Carefully developed public sector and private sector policy interventions in and across multiple domains – trade, environment, agriculture, health – will be required to ensure that food and agriculture production and value chains are resilient to emerging water-related risks, and that they support rather than undermine sustainable water consumption by the food sector and other water users. In addressing these water-related risks, actors will need to consider the impacts on those who earn their livelihoods from the food system. They will also need to anticipate the broader environmental consequences of policy decisions.
Existing sustainability guidelines can support some such decisions, but a greater level of political attention and willingness to address some of the larger structural factors will be necessary. This includes ensuring that actions move beyond disparate interventions siloed in individual supply chains or government departments. Instead, a coordinated approach will be needed that aims for synergies between water, climate and biodiversity actions taken across government, between producer and consumer countries, and involving public sector and private sector entities.
As the Global Commission on the Economics of Water noted in its 2024 report, trade and domestic policies need to reflect the true value of water to prevent water scarcity in exporting countries being exacerbated. If trade agreements are properly designed, they can create more balanced virtual water trade, helping to achieve sustainable water use globally. However, for this to be effective, domestic pricing of water needs to reflect the true economic, environmental and social costs of its use. If the opportunity costs of water use for the production and supply of exported (and domestically traded) goods are not accounted for, then distorted subsidies and incentives will prevent appropriate price signals being made. Because of this, reforming or repurposing agricultural subsidies – whether those promoting water-intensive irrigated agricultural production in water-stressed regions, or supporting the overuse of inputs that degrade soils and contaminate waterways – should be a priority.
Importing countries can also support sustainable water use in the prior segments of supply chains outside their jurisdictions. Among other measures, this should involve more closely linking trade and environmental policies. For example, mandating water footprint disclosures and instigating due diligence requirements and standards relating to the environmental and social impacts of water use and management in the supply chain can promote trade in responsibly sourced goods. Such measures are likely to come with compliance costs, however, so streamlining due diligence and disclosure regulations and coordinating social and environmental disclosure frameworks could be necessary to reduce regulatory complexity and lessen the reporting burden on suppliers.
Importing countries should also provide support to supplier countries to ensure that trade measures for sustainability are workable. This could help to forestall potential accusations of rich-country sustainability requirements disguising protectionism. Strong dispute-settlement mechanisms, combined with enforcement of penalties for non-compliance with environmental standards, will also be key.
If it is to be successful, sustainable virtual water trade governance is likely to require a greater degree of diplomatic engagement, alongside technocratic regulation. As policy shifts to account more fully for environmental factors, the concerns of trading partners will need addressing sensitively and through diplomatic channels.
Plurilateral cooperation offers some possibilities for progress. For example, trust could be built through high-level forums such as the Trade and Environmental Sustainability Structured Discussions (TESSD) at the World Trade Organization. As a 2024 study by Weko and Lahn notes, discussions such as TESSD ‘where developing countries are leading dialogues on trade and the environment have a critical role to play in improving engagement between trade partners’. The study also argues that ‘[o]ngoing consultations can help to boost relations with partners for whom water-intensive goods make up a significant share of exports.’ TESSD aims to identify actions that members can take individually or collectively, including ways to assess whether goods and services linked to biodiversity and natural resources can contribute to environmental sustainability and sustainable development.
On the multilateral front, however, prospects for cooperation remain limited. In December 2026, only the third UN Water Conference since 1977 will be co-hosted by the United Arab Emirates and Senegal. The conference presents a rare opportunity for the international community to agree measures to accelerate implementation of Sustainable Development Goal 6, on ensuring the availability and sustainable management of water and sanitation for all. However, any commitments from member states will be voluntary and are likely to be piecemeal. In the prevailing context of weakened appetite for multilateralism, expectations for the conference should not be too high.
Nonetheless, nations seeking to raise the ceiling on what can be achieved through international cooperation, such as those that signed the Glasgow Declaration for Fair Water Footprints at the COP26 UN climate summit in 2021, should continue to engage and learn from one another in and beyond such forums to ensure their trade dependencies – food and agriculture included – better support shared water security and drive global ambition forwards.
