Global water scarcity leads to food insecurity

Global water scarcity can have a severe impact on the economies of many, if not all, nations. One area that will be impacted is bilateral international trade. For those nations experiencing water scarcity they will tend to produce less agricultural goods and fewer manufactured products and will have to import greater amounts of each but at significantly higher prices (Hertel et al., 2013). In this case, these nations will be at a severe disadvantage since they will have to borrow more funds at higher interest rates thus causing financial deficits that will not improve over time. This will also cause a dangerous imbalance in the global trade market causing certain nations to go deeper into debt while others become wealthier over time. Financial projections state that huge food and agricultural trade deficits due to water stress could occur in South Asia at $1.35 billion while the Middle East and North Africa (MENA) region will have a deficit of $0.6 billion and nations such as China will see a gap of $1.08 billion and India of $0.44 billion (Hertel et al., 2013). In this case, trade occurs in the water used in the process of the good or product and is known as virtual water (Klepper, 2007). Currently, there are approximately 1,000 km3 of virtual water internationally traded every year (Klepper, 2007). Another area of economic impact is to businesses worldwide. Industries and businesses use large amounts of water in order to manufacture goods and products and in certain cases to provide services. For example, Chile’s copper production uses substantial amounts of water and its key mining area is in the northern region next to the Atacama Desert which is regarded as one of the most arid areas on the planet. This has caused water to not only become a more expensive commodity but also one that local farmers are battling for water rights (Cartwright, 2009). Many businesses are now taking into consideration the availability of water as a vital natural resource when making decisions on locations for investments or manufacturing. Water for numerous companies was taken for granted for many decades since it was abundant, cheap, and generally clean. But now due to threats of increasing water pollution and water scarcity on a global scale, many firms are paying more attention to water access than ever before. This also has a ripple effect on municipalities since the loss of firms due to water scarcity means declining tax revenues, job loss, and shrinking economies.