International Trade and the National Water Balance - An Egyptian Case Study

Birgitte Gersfelt

No 331661, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: One of the general determinants for a country’s participation in international trade is the country’s relative factor endowment. CGE analyses of international trade have traditionally accounted for the production factors land, labor, and capital. However, irrigation water is also highly important for agricultural production in many countries. Egypt is one of the countries, which is highly dependent on irrigation water for agricultural production, and water scarcity is likely to materialize in the near future in Egypt due to the growing population and the government’s plans to reclaim large amounts of desert land for agricultural cultivation. The present paper will analyze the implications for Egyptian international trade of accounting for the national water constraint. The analysis is based on a modified version of the ORANI-G CGE model and the IFPRI disaggregated 1997 SAM for Egypt. The model and database have been extended to cover the use of water in agriculture, and the national water constraint has been specified to take account of the recycling of water from irrigation activities. The analysis features two scenarios in which the Egyptian agricultural land area is expanded. The first scenario takes account of the Egyptian national water constraint and places a tax on water diversions to ensure that Egyptian water use does not exceed Egypt’s current allotment of fresh water. The expansion of the agricultural area results in the national water constraint becoming binding in this scenario. In the second land-expansion scenario, on the other hand, the national water constraint has been relaxed. The results show that the highly tradeexposed agricultural sectors tend to dominate the agricultural supply response following the expansion of the agricultural land area. Furthermore, the analysis demonstrates how accounting for the water constraint is particularly important in the case of the highly tradeexposed and water-intensive rice sector.

Keywords: International Relations/Trade; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Pages: 41
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:331661

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