Chatham House explores more sustainable North-South trade in water use

26 Jun 2024 by The Water Diplomat

At a time when two billion people globally are experiencing varying degrees of water stress as a result of climate change, but also of the increasing anthropogenic pressures on water resources for food production, clothing and domestic use, researchers at the London based  Chatham House think tank have examined the issue of trade related water risks, which they argue is exacerbating water insecurity and deepening inequalities between countries in the global North and countries in the global South.

Some experts estimate that 50% of the water used to produce goods imported into the North comes from developing countries already hard hit by climate change and the challenges of development. However, these countries, which have a major need for job creation, pay less attention to environmental and social conditions in order to lower production costs and attract investment, thus creating competition in water use between the vital needs of local populations and industrialists, who effectively capture the resource in order to produce the goods they market abroad.

It is currently estimated that on average 30% of the world's freshwater withdrawals are used to manufacture goods for export, and dependence on ‘external water use’ to meet domestic consumption demand can be even higher (by 40% to 80% in some Northern countries). This export oriented industrial production also causes a great deal of pollution, in particular from industrial effluent and the release of untreated wastewater into the natural environment. China is a case in point : the world's ’largest workshop’ has faced many water pollution challenges and spends billions of dollars a year on wastewater treatment projects.

The study examines many cases of conflicts between different water uses in various sectors of the global economy.

One of these is agricultural production. Agriculture is one of the economic sectors that has the greatest negative impact on water resources. The largest footprint is accounted for by beef production, but crops such as wheat, rice, cotton, sugar cane, fodder and corn are also water-intensive.  The trade in these crops alone accounts for some 15% of the world’s water consumption. The countries most affected by unsustainable irrigation practices are Mexico, Spain, Turkmenistan, South Africa, Morocco and Australia.

Turning to another economic sector, namely textiles, the balance sheet in terms of water use is also negative, largely due to cotton cultivation, but also to the pollution caused to the resource by the chemicals used in the clothing or footwear manufacturing cycle, as is the case in Bangladesh (with a strong local impact on the health of the population and agricultural production). For example, the production of a single pair of jeans can consume  up to 8,000 litres of water, while the production of a leather bag can represent a water footprint of up to 17,000 litres

Another sector with a major impact on water is the extractive industry. The extraction and processing of minerals also has a major impact on water resources, in particular on groundwater.  Although no binding international instrument currently exists to address this issue, numerous initiatives have been launched at international level.

These include the Glasgow Declaration for Fair Water Footprints, launched at COP 26 in 2021, which focuses on the equitable use and allocation of water at the source of production (zero water pollution, sustainable and equitable abstraction and use of water, full access to drinking water, sanitation and hygiene for workers, sustaining and protecting nature, and drought and flood planning).

Another such initiative is the European Directive on Environmental Crime, which will come into force in 2026. This will make illegal depletion of water and pollution punishable by prison sentences and fines at company level. Also in Europe, the European Union’s Corporate Sustainability Reporting Directive (CSRD)  sets a process in motion whereby larger companies in the European area will have to report on the impact of their activities, particularly in overseas supply chains for food, fertilizers, textiles and green hydrogen. This directive is particularly aimed at environmental issues such as water use. Finally, in the near future, we will need to keep an eye on initiatives within the World Trade Organization, which could play an essential role in supporting, transparency and compliance, particularly with regard to environmental standards.