Water International Vol. 37, No. 2, March 2012, 169–182
Virtual water hegemony: the role of agribusiness in global water governance Suvi Sojamoa* , Martin Keulertzb† , Jeroen Warnerc* and John Anthony Alland a Water and Development Research Group, Aalto University, Finland; b Department of Geography, London Water Research Group, King’s College London, UK; c Department of Social Sciences, University of Wageningen, the Netherlands; d Department of Geography, King’s College London, and School of Oriental and African Studies, University of London, UK
(Received 18 March 2011; final version received 27 January 2012) The recent global food crises have highlighted how the agro-food system tends to be subject to powerful agribusiness players, with thus far unidentified consequences for global water security. By connecting hydro-hegemony and virtual water concepts, this study illustrates the Western dominance over the virtual water embedded in international agro-food commodity trade flows. Accordingly, foreign direct investment in land by emerging Asian and Arab economies and their increased competition over the sources of global food supply chains appear as strategies to challenge the Western agribusiness “virtual water hegemony”. Keywords: global water governance; water security; virtual water; hydro-hegemony; corporate power; foreign direct investment in land
Introduction We are living in a time of crucial transitions in the global political economy of food. The years 2010 and 2011 have witnessed another round of food price spikes: wheat prices roughly doubled from June 2010 to January 2011. Food prices have been described as one trigger for the recent social unrest in the Middle East and North Africa (MENA) region (Lagi et al. 2011). While food prices are projected to remain volatile, food security and the availability of cheap food have once again been firmly put on national policy agendas as well as on those of bilateral and multilateral agencies. International prices of the main food staples have been falling for at least 200 years as a consequence of technological advances in agronomy and the non-internalization of environmental impacts. However, continuing population growth in East and South Asia, the MENA region, and Sub-Saharan Africa in the coming decades and the tendency to adopt protein-rich diets will exert increasing pressure on the global food supply. Even though demand for food commodities is rising, especially in the global south and east, a long-standing Western dominance that was reinforced during the Cold War era prevails in the global food market. The current global political economy of the trade in
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the staple agro-food commodities – wheat, corn, soya, sugar, and cotton – is largely in the hands of a few Western agribusiness conglomerates such as Archer Daniels Midland, Bunge, Cargill, and Louis Dreyfus (UNCTAD 2009, Blas and Meyer 2010, Lawrence 2011). Great power disparities in the global agro-food supply chain have created an “hourglass” market, with millions of producers at the top and millions of consumers at the bottom. The flow through the neck of the hourglass is dominated by a select group of agribusiness conglomerates and a few supermarket chains (Friedmann 1993, Murphy 2008). This dominance is constantly reinforced by their very effective global information systems and intimate and effective relationships with political and economic elites across the world. These capacities enable them to adapt to the risks of these low-margin trading activities as well as to the complex agricultural subsidies determined by the EU in Brussels and the US agencies in Washington, D.C. These alliances of private market and public elected power have evolved into a Western hegemonic system, its powerful actors becoming “the deans of world politics, the administrators, regulators and geographers of international affairs” (O’Tuathail et al. 2006, p. 82). However, the rising demand for agro-food commodities, growing natural resource scarcities, and the anticipated impacts of climatic change have created circumstances in which East Asian investors and Arab sovereign wealth funds, as well as other investors thus far not interested in agro-food commodities, are challenging the normal Western hegemony over food production and the political economy of the global trade in strategic agro-food staples. A crucial and much-misunderstood resource constraint in these trading and inward-investing activities is water. Food production requires several inputs, including soil, sunshine, and water, as well as labour, seeds, energy, fertilizers, and pesticides. However, this paper will focus on one input, water, which is already very scarce in Middle Eastern and East Asian countries. By twinning the “virtual water concept” (Allan 1993), created to provide a better understanding of the water used for food production, with the hydro-hegemony framework (Zeitoun and Warner 2006), used to analyse the unevenly distributed power in the politics of transboundary waters, this paper aims to provide a new framework for the analysis of the food-system element of the global political economy of water governance. The core questions it aims to answer in doing so are: Who “manages” virtual water, and subsequently, who impacts water security in the global political economy? We argue that what we call an aspiration to achieve “virtual water control” and possibly challenge Western “hegemony” is a key driver in the current phase of foreign direct investment in land in Africa, Latin America, and South-East Asia. Since water and food security are so intimately related, a decreased dependency on Western agribusiness conglomerates with regard to virtual water also challenges the economic power relations in global agro-food trade. The paper first provides a review of the existing literature on water security, water governance, virtual water, and hydropolitics, constructing the framework for “virtual water hegemony” in global water governance. The analysis is exemplified by a case study on the power of Western agribusiness conglomerates and their influence over the global agrofood supply chains and associated political economy networks. The recent phenomenon of foreign direct investment in land and water as a result of challenging Western agro-food power, bypassing global agricultural trade, is also reviewed. The final section discusses the changing global political economy, the relevance of the global food trade to global water governance, and the possible roles of the actors in the world food system in bringing about new forms of global water use and governance.
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Introducing a “virtual water hegemony” framework Water and food security challenges reveal the role of agribusiness in global water governance The need for water governance at the global scale results from growing concerns over, first, water security in many parts of the world, and secondly, whether the existing commodity market system can deliver security as well as the necessary stewardship of water resources (Allan 2001, Hoekstra and Chapagain 2008). However, the role of the powerful agribusiness actors of the commodity market system in water security has thus far been neglected in the literature and practice of global water governance. The concept of water security has become increasingly popular during the past decade among water scientists, professionals, and policy makers (see e.g. Grey and Sadoff 2007, Waughray 2011). While a popular definition defines water security as the capacity of a population to ensure that they continue to have access to potable water, it is notable that domestic water use constitutes a very small proportion of human water needs, especially compared with the water used in agriculture. Furthermore, agricultural production is by far the largest consumptive water use, as opposed to hydropower production and domestic and industrial uses, which are considered largely non-consumptive (World Water Assessment Programme 2009). Water security is thus bound up above all with food security in a waterfood-energy-climate-trade nexus. Despite uneven geographical distribution of the world’s water resources, global water security has been shown to be possible as a consequence of the global virtual water “flows” embedded in traded agro-food commodities (Allan 1993, 2001, 2003). However, understanding of the role of the powerful actors in the global agrofood trade system – that is, of who the “virtual water managers” are – has thus far been lacking in the water security literature. In the modern state system, meeting basic security needs is the remit of governments. Governments derive their legitimacy from protecting society against basic insecurities. Accordingly, security studies in the field of political science emphasize the geopolitical nature of water security, focusing on its national, militaristic, resource depletion, and human security dimensions (e.g. Buzan et al. 1998, Brauch 2007, Pachova et al. 2008). Yet as Krahmann (2008) and others have noted, security governance is becoming a patchwork of public, private, and civil-society responsibilities. Drawing on Beck’s Risk Society (1992, 1999), Krahmann (2008) expands his work towards the role of the private sector in the age of perceived risks. “Framed within a neo-liberal discourse of the small state and the superiority of the market, the private management of risk promises to provide security not only more effectively, but also more cost-efficiently than political and cosmopolitan bargaining” (Krahmann 2008, p. 31). What has been described as the “retreat of the state” (Strange 1996) has given rise to new risks (known and unknown) that are created, managed, and sustained in the world’s “risk society” by private businesses (Krahmann 2008). Private companies run prisons and act as hired guns in wars (as in Iraq); NGOs lend humanitarian aid and provide essential basic services where governments chronically fall short (as in Haiti). This shifts power away from states towards private and, to a lesser degree, civil-society actors without democratic accountability. Even though water governance is now a hotly debated and analysed concept in the water sector, in general the literature on global water governance suffers from the same neglect as much of the literature on global environmental governance: it lacks an appreciation of “corporate strategy or role within the broader structures of political and economic power” (Newell and Levy 2006, p. 157). An emerging literature on hydropolitics and water governance has called attention to the role of transnational water corporations in global
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water management and supply – and as sponsors of international megaconferences as the established forums of global water governance (e.g. Barlow and Clarke 2002, Finger and Allouche 2002, Gleick and Lane 2005, Conca 2006, Biswas and Tortajada 2009). The literature on “blue water wars” such as that in Cochabamba and El Alto, Bolivia (Boesen and Munk Ravnborg 2003, Warner 2004, Spronk and Crespo 2008), brings the global scramble by private water companies for the small volumes of high-quality water, and the resulting conflicts, into the frame. While this attention is very useful, it is important to note that domestic and transnational water companies only manage globally a small if important proportion of the water, compared with the unnoticed majority of water resources managed and consumed in the global agro-food supply chains dominated by the Western agribusiness conglomerates. Accordingly, a significant aspect of global water governance should be viewed in the economic power sphere of the agro-food global political economy. The water security challenge, intimately related to the food security challenge, reveals the role of agribusiness in global water governance, emphasizing the role of corporations alongside state and civil-society actors as rule makers forming coalitions and networks of governance. Virtual water hegemony – Western agribusiness power in global water governance A necessary addition to the concept of virtual water (Allan 1993, 2001, 2003) in explaining the governance of global water security is an increased understanding of the role of agribusiness and the global agro-food political economy in managing virtual water “flows”. Here the concept is enriched by bringing in theory developed in the domain of hydropolitics. First, the literature on hydropolitics will be explored, especially the hydro-hegemony approach of Zeitoun and Warner (2006), before coming back to expanding the virtual water concept with improved understanding of the power relations of the actors of food and water security in the global political economy. Hydro-hegemony approach explaining power play over water governance The literature on hydpropolitics shows that while the global water governance literature expects much from institutional coordination and reform in reducing conflict and wasteful practices, it is fairly blind to power play and asymmetries. First, the liberal-institutionalist approach has been critiqued as naïve by both “realist” and “critical” views in the global political economy literature. Sneddon and Fox (2006), for example, highlighted the importance of geopolitics and discourses, while Warner and Zeitoun (2008) showed that the absence of open conflict does not mean peace and cooperation. Rather, material and ideational power asymmetries are expressed in unequal room to manoeuvre. The global political economy of food trade and management of virtual water “flows” has features similar to those which Zeitoun and Warner (2006) have identified in their hydro-hegemony approach, looking explicitly at the connections between the local and the global in blue water as well as at the global ramifications of river basin politics. A hydrohegemon may use several mechanisms to secure compliance from others in the arena. The tactics being used include (1) display or threat of military force, covert actions, and coercion pressure, and (2) financial incentives and support (carrots and sticks), either by (a) persuasion, co-optation, and compromise, or (b) display of force. Hegemonic tactics can take form in treaties and knowledge construction and via utilizing geographic position. The most successful modality is where the power of the hegemon is accepted by the dominated as a given. Supported by a mix of coercion and persuasion, hegemonic riparian states
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arrogate a special role for themselves in deciding how water is (re)allocated between users (Zeitoun and Warner 2006). While influential, the Zeitoun and Warner article was critiqued by Selby (2007) and Naidoo et al. (2008) for its state-centricity. They argued that the analysis should be expanded to cover global elites. Warner’s multi-layer hegemony approach (2008) sought to fill this gap by linking basin politics to global hydropolitics, showing by the example of Turkish dams how states and multilateral organizations, water and construction companies, and NGOs all act as global players with a strong bearing on discourse, local power relations, and decisions. Western virtual water hegemony and its challengers The work of Allan (2001, 2003) has usefully made an explicit connection between the (non)politics of green and blue water, arguing that the global “trade” of free virtual water resources can (in economic invisibility and political silence) make up for local scarcities, and in so doing eliminate armed conflict over water at transnational and sub-national levels. However, conflict continues at lower levels of intensity. Re-ordering current trading practices and subsidies would facilitate access of water-scarce economies to cheap food and enable poor economies to trade more fairly. The world’s freshwater resources are not evenly distributed geographically or economically. While most of the Western world enjoys good access to water resources, the picture in areas with high population growth looks very different. Water stress has haunted the Middle East since the 1970s but it has also become a serious obstacle to agricultural development in China, India, and other Asian countries (Allan 2001). In the global food system, however, water surpluses are located in a small number of industrialised political economies, mainly in temperate latitudes, promoting large-scale food exports to waterscarce zones. Nevertheless, major exporters can also be major importers (see e.g. Hoekstra and Chapagain 2008, Hoekstra and Mekonnen 2012). Figure 1 illustrates the dependency of Europe, the Middle East, Central America and East Asia on virtual water “imports”. The missing information is the scale of Western direct investment, privileged trade agreements, and subsidies that explain the direction of the “flows”. The tactics of the Western virtual water hegemony include financial incentives, carrots and sticks, and the efficient utilization of geographical position on the global water map. At the Third World Water Forum in Kyoto in 2003, virtual water strategies were presented as viable solutions for water-scarce countries but dependent on persistently low international food prices and free access to markets (World Water Council 2004). The current global trend, however, tends to be in the other direction. Rather than remaining inert, newly emerging economies with a structural lack of precipitation have become much more active, especially in the case of China, making their economic and political power felt, so that the map of virtual water continues not to be a level playing field. These tendencies are evident notably in the response to the 2008 spikes in commodity prices, which made economic aspirants think again about reliance on the invisible hand of the global market. This is where the link to food and water acquisition comes in and the thus-far-prevailing Western virtual water hegemony and its challengers are revealed. While a quietly unfolding trend before 2008, the food price spike and riots of that year made several states and multinationals decide that reliance on a volatile market might be a political risk, while others benefited from their dominance over processing and transport (see e.g. Blas and Meyer 2010). A clear upsurge was notable in direct foreign investments in agricultural land in response to the 2008 price spikes, with water rights and green water tied to the
Figure 1. Gross international virtual water flows (km3 /yr). The biggest gross flows (>15km3 ) are illustrated with arrows, period 1996–2005 (modified from Mekonnen and Hoekstra 2011.
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land. An example of this would be Sudan’s contractual share of the Nile waters, 18.5 billion cubic metres, which investors have indirectly purchased through land deals in Sudan. The resulting land-lease contracts increase the rights of investing sovereign wealth funds and transnational agribusiness corporations, while reducing the sovereignty of the recipient state – bypassing the need for trade on the world market. These practices give manoeuvring room for the leasing actors to pursue their own policies. Western economies, their major corporations and investors, and their consumers have developed significant advantages, in stark contrast to their eastern and southern counterparts. Virtual water “flows” are determined by the capacities of the Western economies through the interplay of Western governments, their private-sector institutions, and their consumers. Because policies around food, and therefore virtual water, are not subject to much international scrutiny, the hegemonic conditions which characterize the global political economy of food and virtual water have been remarkably enduring. As long as the current system provides importing economies with sufficient food commodities, there is little reason for the dominated to challenge the hegemonic condition. However, when food prices are volatile for various reasons, the dominated governments may be forced to look into alternatives. As noted above, water is unevenly distributed around the globe. Hegemonic conditions in the global political economy are thus likely to be under careful scrutiny by import-dependent economies. The argument for virtual water hegemony will next be underpinned by providing two case studies with different facets: First, who dominates the market? – and second, who directly invests where? Case studies Non-evident power of the “ABCD” of transnational agribusiness corporations in global water management and governance The nature of the power relations that determine global water security will be examined here by analysing the activities of a group of major agribusiness corporations called the “ABCD” of the industry: Archer Daniels Midland, Bunge, Cargill, and Louis Dreyfus. Depending on estimates, these corporations handle 70–90% of the internationally most traded staple food commodities (see e.g. Lawrence 2011). They therefore also handle a high proportion of the virtual water flows “traded” internationally (see Tables 1 and 2). The recent grain price spikes have again brought these corporate conglomerates that underpin the world food system to the attention of media and non-governmental organizations (see e.g. Blas and Meyer 2010, GRAIN 2011, Lawrence 2011). Based on their major involvement in and leverage on the international agro-food commodity trade, these corporations could be described as virtual water hegemons, considering their geographic production locations and extensive networks of power in the global political economy. While the origins of ADM and Cargill lie on the water-abundant North American continent, Bunge and Louis Dreyfus were established first in also well-endowed Western Europe. All four have in the course of the twentieth century expanded their corporate operations across all continents, naturally investing in water-rich regions of Latin America, western Africa, and Asia. This is a legitimate business strategy. However, it has led to hegemonic conditions over global water resources, which needs to be addressed in a global water governance context. Although the corporations are aware of their dominant role in global food trade, they have until now either been unaware of their role in global water management or turned a blind eye. Besides managing global supply, the ABCD corporations are also powerful
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Table 1.
Global water consumption and international virtual water contents of trade flows.
Global water consumption km3 /yr, period 1996–2005
International virtual water flows km3 /yr, period 1996–2005
Agriculture
Total
Related to trade in agricultural products
Related to trade in crop products
Related to trade in agricultural and industrial products
8363
9087
2038
1763
2320
Share of global water consumption in agriculture %
24
21
–
Share of total water consumption %
22
19
26
Source: Mekonnen and Hoekstra (2011).
Table 2. International virtual-water flows for the nine largest crops by international trade volumes and associated virtual water contents, period 1996–2005. Crop
International virtual water flows (Mm3 /yr)
Contribution to the total international virtual water flows %
568, 830 202, 899 200, 619 86, 895 84, 911 70, 945 68, 785 68, 585 66, 523
24.5 8.7 8.6 3.7 3.7 3.1 3.0 3.0 2.9
Seed cotton Soybeans Wheat Cocoa beans Coffee, green Oil palm fruit Maize Rice, paddy Sugar cane Source: Mekonnen and Hoekstra (2011).
actors in the global agro-food supply and value chains and networks that govern global demand. Through vertical integration between different stages of the supply chain, they provide seeds and fertilizers to farmers to ensure their supply for their trading operations and their crushing, processing, and manufacturing facilities downstream in the chain. In these roles they have a major influence on the dynamics of the global agro-food chain (Hendrickson and Heffernan 2002, UNCTAD 2009). In a wider network setting, their close interaction with the national trade organizations of the countries in which they operate and the resulting lobbying power which influences national export and import policies explain how they contribute to knowledge construction on what is evident and what is not in the world agro-food system (see e.g. Magdoff et al. 2000, McMichael 2000, 2009, Kneen 2002, Murphy 2006, Clapp and Fuchs 2009). In addition, the corporations have a strong global infrastructural capacity, from sourcing, to storage and processing, to ports and transport fleets. Furthermore, they have immense experience and institutional capacity in finance and hedging (Kaufman 2011). As noted, the corporations contest their role as water managers, judging by interviews of corporate representatives and their trading partners conducted by the authors in 2010 and 2011. However, besides open contestation, resistance or accommodation to the idea of their role as water managers, non-intentional and non-evident forms of their power also matter in the hegemonic water management and governance context (Newell and Levy
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2006, Zeitoun and Warner 2006). In the case of the ABCD corporations, this strength is most evident in their remarkable shares of international virtual water “flows”. With only sparse market-share and non-location-specific aggregate operation data it is impossible to give accurate statistics on the water footprints of the ABCD corporations. However, indicative estimates of the scale and efficiency of their role as global water managers can be based on the numbers available by multiplying the associated international crop trade volumes (tonnes/year) by their associated virtual-water content (m3 /tonne) (Hoekstra and Chapagain 2008). As noted, considering that the corporations dominate 70–90% of international agro-food commodity trade (see e.g. Lawrence 2011), reportedly trading all the main crops with highest shares of associated international virtual water “flows”, they are major global water managers (Table 2). Considering that the main grain and oilseed sourcing regions of the corporations in North and South America are green water intensive and the destination regions in Europe, Middle East, North Africa, and Asia are blue water dependent (Aldaya et al. 2010), it could be suggested that the corporations also contribute to global water efficiency gains and improved water security in the importing countries. Accordingly, the resulting water losses to the exporting countries are likely to be small, along with their water security impacts. On the other hand, the majority of the corn and soybeans traded by the ABCD corporations goes to animal feed instead of directly to human food consumption. The emphasis on contributing to animal feed accounts for the large water footprints of diets and both land and water resource scarcity (Liu et al. 2008). Through their market dominance, the corporations can lower prices, with impacts on global prices, and make farming unprofitable in some parts of the world. They can also adopt restrictions to the crops they buy, affecting the security and diversity of farming livelihoods (see e.g. Magdoff et al. 2000, Hendrickson and Heffernan 2002, McMichael 2005, Clapp and Fuchs 2009). The scale of the ABCDs’ operations is such that they can operate in the financial sector. Providing their customers with “risk management and financial solutions” (Cargill 2011, Louis Dreyfus Commodities 2011), Cargill and Louis Dreyfus are active in the banking and financial markets inhabited by investment banks such as Goldman Sachs. Further investigations are needed into whether they are themselves contributing to the root causes of risks they claim to manage – like Goldman Sachs, which was recently accused of gambling with hunger in grain price speculation, affecting especially African grain markets (World Development Movement 2011, Kaufman 2011). The roots of the power of the ABCD corporations are deep in the structures of the international political economy, but this depth is still not widely understood. According to McMichael, “the focus on financialisation is timely, and possibly portends the further centralisation of the corporate food sector as the global financial crisis unfolds” (2009, p. 159). All of the transnational food corporations are located in the Western Hemisphere of the political and economic world. It is important to note that ADM and Bunge have only recently been transformed into public companies while the other two are still owned by private and influential families. We argue that by dominating the global agro-food supply chains and international trade in crops they are main actors constituting and supporting Western virtual water hegemony. Inward investment in land and water in Africa As a result of the volatility of global food prices since 2007–2008, with trends in 2011 pointing towards further volatility and record heights, future development remains an enigma. It would be an historic moment in the world’s economic history if food prices,
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after falling for a thousand years, were to trend upwards permanently. Such are the current global economic conditions and the volatility of oil prices. The linked food prices–food security question has been given a prominent role in the agendas of most Asian governments (McBeath and McBeath 2010). Thus, the rising interest in farmland across the globe can be interpreted as an attempt to challenge Western hegemony over virtual water. A country that is especially affected by water scarcity, Saudi Arabia, belongs to the biggest investors in foreign direct investments in African farmland (Deininger 2011). One of the countries targeted by Saudi investors is Ethiopia, where the government has introduced policies to incentivize (through five-year tax exemptions) investments in Ethiopia’s agricultural sector (Tamrat 2010). An Ethiopian/Saudi billionaire, Mohammed Hussein Ali Al Amoudi, who has been described by observers as a Saudi proxy in East Africa to transact strategic interests of the Saudi royal family, is one of the driving forces of agricultural investments. His company, Saudi Star, is growing rice and vegetables on 500,000 hectares in the southwestern-most region of Ethiopia, close to the Sudanese border. According to representatives of the company (interviewed in 2010), objectives include the creation of a Saudi equivalent to Western food trade giants. At a time of water scarcity on the Arabian peninsula, Saudi Star is attempting to invest in agricultural land to decrease dependency on food imports. With low land prices (US$12 per hectare) and labour costs (a farm labourer receives approximately US$0.26 per hour in Ethiopia), the privileged connections between Al Amoudi and the Ethiopian government, and relatively low investment costs in the untapped soil and its water (US$15,000 per hectare), Saudi Star intends to produce one million tons of rice per year on their land. No policy of Saudi Star stipulates that the fine rice to be grown will be solely exported to the Saudi market. On the contrary, Saudi Star intends to become a new player on the global food market. Food price development is the main trigger of the agricultural investment. At a time of water insecurity in the Middle East and global economic change, the Saudi investors do not want to be dependent on Western agribusiness power. Other investors in Sudan from the Middle East have strategic interests and aim to import meat and fodder from East Africa to secure the water-intensive meat industry on the domestic level by “importing” water. The current international political economy of food trade may improve global food security, but it cannot secure affordable food prices, nor does it steer farmers towards better stewardship of water resources or foster fair trade. Discussion The two case studies illustrate the hegemony of Western agribusiness corporations over international virtual water flows and the strategies of those economically aspiring waterinsecure countries that seek to challenge the hegemonic agro-food system. Corporate global investment strategy has naturally followed water resources but has increased the vulnerable condition of global food and water security. The resulting power asymmetries in the global food production system have been accepted by the dominated as given, as long as food prices have been low. The crucial resource of the agribusiness conglomerates’ power is water, and the concept to illustrate these power relations in the agro-food system is virtual water. The current wave of investment in land in thus far under-utilized regions such as Sub-Saharan Africa, Latin America, and Asia is a response to the hegemonic conditions. If viewed through the lens of global political economy, the rush for land and water marks a return to economic nationalism and perhaps even economic imperialism. The findings of the analysis suggest that global water governance should be developed to encompass a wider range of concerns, including the current hegemonic conditions in
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the management of international virtual water “flows”. The use of water in global supply and value chains and networks, and thus the role of the private sector and especially the agribusiness sector, is very poorly understood, although considerable progress has been made in the past five years. Corporate stakeholders are becoming increasingly engaged but are still the “elephants in the room” because they tend to be separate from the processes and not related to the institutional development of global water governance. Water resources and water security are rising higher on the agendas of transnational agro-food corporations. However, water concerns tend to be separate from the “big business” processes and unrelated to the institutional development of global water governance. Despite this deemphasis, political decisions on water security are constantly made, invisibly and silently, in market structures that shape the overlapping agro-food and water governance networks. The architecture of the (deliberately distorted) global food market strongly affects global water security. Can the market provide a governance architecture that brings both global water security and the stewardship of regional water resources? In general, international trade, and thus the liberal paradigm in global political economy, can contribute to water use efficiency and hence global water security if commodities are traded from areas of high water productivity (ton/m3 ) to areas of lower productivity, resulting in global net water savings (see e.g. de Fraiture et al. 2004, Oki and Kanae 2004, Aldaya et al. 2010). Studies of global water savings and losses as a result of international trade indicate that the net effect is savings (de Fraiture et al. 2004, Oki and Kanae 2004, Chapagain et al. 2006, Aldaya et al. 2010). Further liberalization of trade could create opportunities to increase physical water savings on the global scale (Ramirez-Vallejo and Rogers 2004, Hoekstra and Chapagain 2008). However, water security is not only made up of macroeconomic and volumetric constituents. From social and environmental points of view, trade choices can be weighed totally differently from the benefits derived from improvements in global water use efficiency (Roth and Warner 2008). Moreover, in distorted market conditions attention has to be focused on who has power over these decisions. The ongoing global power shifts from the industrialized West to the industrializing East further incite the need to reflect upon global water governance. Instead of emergence of a cosmopolitan global water governance regime under the umbrella of water insecurity risks, states and private actors have securitized water resources and water embedded in food, triggered by expected consumer demand and profit. Instead of tackling the underlying causes of water and food security, both the thus far hegemonic and the emerging counter-hegemonic system function along the rationale of treating the symptoms, not the cause, of the water and food crisis. The Western private sector benefits from sustaining the risk management discourse, but Eastern emerging economies cannot afford it in the longer term. The current global political and economic shifts pose new global challenges. Water and food security are undoubtedly global issues. The first decade of the new century has witnessed the birth pangs of a new era. A return to economic nationalism in the global political economy of food is not an option. On the contrary, this economic sector desperately requires more competition to make efficient use of the available water resources for growing populations in emerging economies. It is important to stress that these economies are not only located in East Asia and the Arab World but also in the target countries of inward investment of land and virtual water – especially in Sub-Saharan Africa. New times demand different means of policy choices. The growing water security risks will inevitably change the dynamics of the agro-food system, highlighting the importance of its chain and network structure to the overall architecture of global water governance. The ABCD corporations remain powerful bargaining actors in the global political economy, but their position is increasingly challenged in global agribusiness and agro-food supply
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chains. The current surge for global farmland illustrates the need for more virtual water supply in the global south and east. A Western world that claims to be environmentally caring cannot outsource the consequences of global change to the most vulnerable members of the global society. Conclusions This study has illustrated that virtual water is a major driver of Western agribusiness hegemony over the global agro-food trade and market system, and accordingly, also behind the surge of inward investment in land and competition over sources of the global agro-food supply chains by the water-scarce rising economies challenging the hegemony. Virtual water hegemony, the “old food trade order” deliberately or non-deliberately delegated to agribusiness, cannot be sustained if global water and food security are taken seriously. There is a growing need to review the structures that underpin the overall architecture of global water governance beyond the water sector. More research is required to analyse the role of the agribusiness corporations and their role in global water management, as well as the inward investment in land and water by foreign sovereign wealth funds and state-led enterprises. This goes hand in hand with more compliance on the corporations’ and investors’ side to provide greater transparency in terms of water resource use and accountability. To conclude, the actors of the agro-food system managing the virtual water “flows” need to be engaged in the development of global water governance if global water and food security are to be ensured. Acknowledgements The authors wish to thank the reviewers for their helpful comments, Professor Arjen Hoekstra and Dr Mesfin Mekonnen for providing the data for tables and the figure, and Dr Matti Kummu for assisting in drawing the figure.
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