Water Conflicts and International Water Markets

Israel and the Palestinian Authority (PA) exist in a semi-arid region where the overwhelming use of water is for agriculture. The water deficit that faces each can be closed either by importing food, importing water, achieving higher productivity per unit of water input, or manufacturing water by techniques such as desalination. The problem arises because of autarky in the production of water and the absence of an international trading market for water. Each country can only use the water within its borders or the water it can pilfer from its neighbor if it is an upper riparian. It is as if every country was confined to the energy it could produce within its own borders and did not have access to imported energy on an international market. Obviously, no one would countenance this policy condition for a moment - very few countries could survive in this regime - and the immediate answer would be to trade energy through an international market. But this is precisely what is not done with water. Absent an international trading market, water flowing down its natural course can create national security conflicts and sometimes wars among neighboring countries that share a common water resource, whether it be fresh water above ground in a river or below ground in an aquifer. In the context of water issues between Israel and the PA, this paper will explore problems of water pricing, the relationship between food and water security, the feasibility of an international trading market for water in the 21

st

century, and how such an arrangement compares in price and efficiency with the principal alternative, desalination.