The water which is used in the various stages of the production of goods is called the virtual water stored in goods. World trade has caused an international virtual water flow. If water-scarce countries import water-intensive products, such as foodstuffs, they can use the water needed to produce these goods domestically in other sectors. This trade is carried out with consideration for the comparative advantage of exporting countries’ food production. As a result, a country exports food which has better circumstances than importing countries in terms of resources and production factors. Virtual water import affects the various economic and social sectors of a country and has a direct relationship with food security. Much study has been carried out in order to divert countries’ macro policies toward the development of virtual water trade. The objective behind this paper is to introduce and categorize the mentioned issues in that regard. In addition, it will take a look at the necessities and applications of this trade in Iran and introduce some of the country’s research needs in that regard.
Key terms: Virtual water, social and economic considerations, comparative advantage, food security, Iran.


1. Introduction
Water is used for the production of many goods. The water which is used in the various stages of the production of goods is called the virtual water contained in the product. For example, between one to two cubic metres of water is needed to produce grain in favourable climate conditions. However, some three to five cubic metres of water is needed to produce the same amount of grain under poor climate conditions (high temperature and humidity) [1]. World trade has created an international virtual water flow which is called virtual water trade. Simultaneous with the start of international trade, a virtual water flow is taking place between various world regions. The concept of virtual water was first introduced by J.A. Allan in 1993 [2]. After most scientists and researchers concentrated of the definition of virtual water, calculations began in that regard. According to conducted calculations, a great amount of water is transferred virtually during the trade of goods. Prior to 1993, the term “embedded water” was used to define this condition. However, it wasn’t able to attract the attention of water resource managers to itself [2].

1.1 Virtual Water Trade; Potentials and Considerations
Research conducted by Chapagain and Hoekstra (2002) show that during the years of 1995-1999, the global volume of international virtual water flows was estimated to be 1031 Km3 per year. Some 695 Km3/yr was from the trade in crops and 336 Km3/yr was from trade in livestock and livestock products. This shows that 13 % of the water used for the production of agricultural goods has entered the world trade markets virtually [1]. Considering the trade of livestock and livestock products, it can be said that the virtual water flows between various countries made up 20% of the water used for the production of crops and livestock products [3]. The term virtual water links water, food and trade together (Allan 2003). These figures bear witness of this at a global level. Arid and semi-arid countries can save the water needed for the domestic production of the water-intensive products they import and use it in various sectors. It seems impractical to transfer a high volume of actual water for a long time because of the problems and high costs of its transfer. However, the transfer of virtual water through the trade of foodstuffs can be considered as a means to regulate the unbalanced distribution of water resources.
Agriculture is the most water-intensive sector and consumes nearly 74 % of the world’s drinking water resources. [4] In order to acquire drinking water, some of the water-scarce countries ignore the natural potentials and pump subterranean water resources and purify sea water extensively. Results show that the cost of producing goods under such circumstances increases by five times [5]. By including the virtual water trade in their water policies, these countries can not only increase their access to the world’s water resources, but also they can ease the pressure on their natural resources. The import of foodstuffs to use virtual water trade resources will influence a country’s economic, social and environmental sectors and it is directly linked to a country’s food security and culture. After considering their domestic potential and needs and food security considerations, water-scarce countries can set cut-off points for their foodstuffs imports.

1.2 Blue Water and Green Water
In the hydrology cycle, water is categorized into two groups, blue water and green water. Blue water refers to the water flows in groundwater and surface water and green water refers to the fraction of water that is evapotranspirated, that is, the water supply for all non-irrigated vegetation. The source of blue and green waters is precipitation. Rain water becomes green water after infiltrating the soil and before reaching the abundant regions. Blue water consists of groundwater (abundant regions) and the floods resulting from precipitations, which reach rivers, pools and dam reservoirs.
The main source of water for rain-fed agriculture is green water which is created by rainwater. This is whilst the main source of water for water agriculture are the controlled waters which reach agricultural lands. Considering the role which these kinds of water play in the production of foodstuffs it can be said that green and blue waters are the source of virtual water. In accordance with this, virtual water can be broken down into two components: blue virtual water and green virtual water [6].
The concept of green water was first introduced by Falkenmark (1995) [7] in order to distinguish it from blue water, to easier manage water resources and to better assess the role of water in agricultural production in sub-humid and semi-arid regions.
Comparatively, green water is a significant water resource, much larger (volume-wise) than blue water and is consumed more in the production of foodstuffs. Some 65 % of precipitations transform into green water and the remainder transforms into blue water [4]. In addition, globally, 80 percent of the agricultural land is in use by rain-fed production systems, which provides 60 percent of the world food production [6]. In comparison to green water, it’s much more expensive to use blue water because water distribution and transfer networks are needed to use the latter. However, the ability to transfer and distribute blue water has made the management of this water much easier and has increased the options which exist for the (agricultural, industrial and household) application of this water. However, the only way to use green water is to produce rain-fed agricultural products. During recent years, following the elaboration of the meaning of virtual water, the understanding of the role of food trade in the distribution of water resources, and the identification of the potential of various regions for the production of goods with new quantitative indices, the management of green water has become easier and emphasis is laid on the efficient use of this water.

2. Protection of National and Global Waters
Most of the world’s arid and semi-arid countries secure part of the water they need for their domestic goods production from the import of foodstuffs. For example, in 1995 Egypt imported 7.9 million tons of grain, thereby saving some 9.9 km3 of irrigation water. Japan imported about 27 million tons of grain for which it would have needed some 37 km3 of water [8].
At the global level, reductions in global water use occur if production by the exporter is more water efficient than by the importer. For example, the USA exported the equivalent of 16.6 km3 of crop evaporation to Japan for which Japan would have needed 28.1 km3. By importing from the USA, Japan reduces global water use by 28.1 –16.6 = 11.5 km3. In case the importer is more water efficient than the exporter, trade increases water use. For example, in 1995 Indonesia imported 2.3 million tons of grain from India, for which it would have required 16.7 km3. To produce this cereal, India depleted 17.4 km3, thus increasing global water use by 0.7 km3 [8]. In principle, water resources mangers in various countries are not interested in preserving the world’s water resources. However, producing countries, which have better natural resources and technological circumstances for production, have always used the world’s water resources efficiently. Statistics show that between the years 1997-2001, the total amount of water that would have been required in the importing countries if all imported agricultural products would have been produced domestically was 1605 Km3/yr. These products were however being produced with only 1253 Km3/yr in the exporting countries, saving global water resources by 352 Km3/yr [9]. As a result, with better exploitation of resources and potentials, the virtual water trade created a drop in world water consumption.
The study of conditions governing the production of agricultural goods and various water consumption variables has resulted in the formulation of methods to calculate the amount of water used in the production of various agricultural goods in line with various global production conditions. It will be impossible to study the various aspects of virtual water trade without making quantitative calculations. As a result the virtual water content of goods produced in various parts of the world can be calculated by using these formulas and methods and FAO information and statistics [1], [3]. With the use of these methods, it’s possible to calculate the comparative advantage of the virtual water flows between various countries and regions and the amount of water saved at the national and global levels.

3. Virtual Water Trade; Economic, Social Considerations
The term virtual water is used in order to show that based on comparative advantage and the efficient use of opportunities, in addition to gaining access to the world’s water resources, it’s possible to enhance economic growth and social welfare. Based on comparative advantage theories countries become an expert and concentrate on the production of goods for which there are abundant resources inside the country. Virtual water is the amount of water stored in products, however, as far as the virtual water trade is concerned water is not the only factor which determines the amount of imports. Countries would like to enjoy all the normal trade benefits in their virtual water trade. As a result, a country conducts virtual water trade with consideration for its costs, opportunities and its comparative advantage in the production of goods.
Factors such as water and raw resources, work force and investment enable a country to make a fair assessment of its comparative advantage in the production of goods. A country which faces a shortage of a few of these factors cannot achieve the social and economic objectives of this trade by merely concentrating on the import of water-intensive products. A country which has a big workforce can maximize the benefits it gains from this trade by exporting the manpower-intensive products and importing goods for which it doesn’t have sufficient production capability. The surplus production factors in a country can be used to produce other products more cheaply or endeavours can be made to maximize economic and social benefits through making new investments in line with the regional situation.
As far as domestic virtual water trade is concerned, virtual water networks can be used to meet the food and water demands of various regions. Through this method, part of the huge investment made in the development and building of infrastructure can be spent on using opportunities efficiently and abandoned activities. Some of the benefits of this trade include the increase of domestic gross production, the efficient use of water resources, the enhancement of social welfare, and the diversion of policies toward securing the needs of future generations.
During studies, emphasis has always been laid on the role of water as one of the key factors in the production of water-intensive products. In research related to the virtual water trade, water is classed as a strategic resource for arid countries and they have to make endeavours to preserve and use this resource efficiently so that they can use it for the production of key products and investment in the economic sector. This new outlook toward water can change many water consumption models and the way in which subsidies are allocated in that regard.

4. Virtual Water Trade and Food Security
Various people and organizations have offered many definitions for food security. For example according to the World Bank food security means: “the whole of mankind having access to sufficient food at any time in order to lead a healthy and active life” [10]. The FAO defines food security as the following: “The assurance that all people have access to their main food needs both physically and economically at all times.” [10]. According to the World Food Summit, “Food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life” [11]. Countries may decide to enhance their food security in line with their domestic situation and foreign relations. Such action may be taken in the shape of attempts to reach self-sufficiency in the production of agricultural goods or a combination of domestic production and the import of foodstuffs. For example China, India, and Malaysia try to become self-sufficient in the production of agricultural goods to achieve food security. This is whilst; food markets in Europe, America and Japan are more worried about the security of their food imports [12].
The great potential which is hidden in the food trade makes it a suitable sector to get involved in diplomatic equations. The great dependence which countries’ food security has on their imports has given exporting countries an opportunity to impose their will and interfere in the internal affairs of importing countries. This is why food security plays an important role in a country’s long-term planning and has a direct relationship with the development of a country’s infrastructure and international relations. The scarcity of water resources, high population growth and the need for great financial resources for the development of infrastructures necessary for the long-term supply of food, has forced countries to seek out various methods to achieve food security.
Environmental benefits, opportunities to make economically-beneficial investments, and the spread of social welfare are some of the factors which give countries an incentive to develop their virtual water trade. On the other hand, the objective development of world trade is in need of imports security. This is why world countries are interested in using a group of domestic and international initiatives to resolve the problems facing food security and trade. Food security can be greatly improved by restricting self-sufficiency to the production of strategic products, attempting to import cheap water-intensive products, creating diversity in import resources, and signing international agreements and treaties. Other factors such as the use of international potentials like the approval of laws at the World Trade Organization to facilitate trade, to control distribution, and to stop production monopolization can be beneficial. In addition, it may be necessary to create a world food bank which will be able to offer financial assistance to enhance the food security of poor countries which are incapable of building the necessary infrastructure or importing food [5].

5. Introduction of Fields of Study
The problem of water scarcity in arid and semi-arid regions is not only a national issue for countries. On the contrary, it is a global issue whose affects, in the long run, can become a challenge for world countries. Without the all-out cooperation of importing and exporting countries it will be impossible to create a suitable model of the food trade which can ease the pressure on arid regions by helping meet their water needs and increase their social and economic indices. Without a doubt, the continuing increase in world economic growth will not be possible by ignoring the countries’ comparative advantage in the production of agricultural products for the efficient use of capabilities, resources and eradication of obstacles facing trade. A prerequisite to the development of a food trade based on comparative advantage is that governments and global organizations have to pay attention to securing the food security of importing countries.
Considering its social and economic implications, the virtual water trade of a country is in need of the mass cooperation of the various executive and decision-making bodies. In face of this, in a bid to identify potentials and study the importance of this trade and to present initiatives to facilitate and overcome the obstacles facing it, widespread studies have began on the various aspects of virtual water trade. The main objective of these initiatives is to divert the countries’ macro policies toward the development of the virtual water trade.
The following are the subject of these studies, some of which are still at the initial stages:
1) The calculation of the amount of water consumed for the production of water-intensive products in various parts of the world.
2) The plotting of the routes of the world’s virtual waters and the calculation of their capacity.
3) The determination of the relative capability of various countries and regions in producing agricultural goods with the use of international trade theories.
4) The study of the impact of various countries’ food diets on water from the virtual water aspect.
5) The efficient use of blue water and green water.
6) The calculation of the flow rate of flowing virtual water.
7) The virtual water trade and the efficient use of natural potentials.
8) Virtual water trade and the preservation of national and international waters.
9) Virtual water trade and the access of arid countries to global water resources.
10) Virtual water and water’s economic standing.
11) A study of the economic and social impacts of the import of virtual water (Employment, social welfare and economic growth)
12) Virtual water and food security (ways to increase food security)
13) The standing of virtual water trade in the management of water resources
14) The role of governments in virtual water trade
15) The virtual water trade and the resolution of international conflicts and management of joint waters.
16) Will virtual water trade lessen the chances of the outbreak of wars over water resources?

6. Virtual Water Trade and its Application in Iran
6.1 Potentials and Applications
According to predictions, by 2021, Iran’s population will reach 100 million and this will result in a drastic drop in the water per capita. Self-sufficiency in wheat production, self reliance in the production of some strategic goods, and great investment in the implementation of infrastructural water projects is needed to meet this population’s water and food demands. On the other hand, the need for industrial development, eradication of poverty, the creation of job opportunities and the construction of economic infrastructure in order to achieve the minimum economic and social indices, and a move in coordination with the world economy, has created problems as far as meeting financial demands is concerned. Issues such as high water consumption in the agricultural sector (more than 90 % of clean water) and the low output of irrigation clearly show that these two sectors have to be strengthened in the country. America, Germany and Japan invested billions of dollars during the short transition from traditional agriculture to industrial agriculture. This is whilst in practice it’s impossible for developing countries to make such a large short-term investment and in the long run it will create problems for their various economic sectors. On the other hand, regardless of the financial problems, studies and research have to be conducted on investment in the production of goods which the country has no comparative advantage and can be imported more cheaply.
Considering the mentioned issues and problems, it seems that a review and broadening of water resources management policies and the study and use of new potentials created in that sector is unavoidable. In recent years, the use of irregular waters, especially virtual water, has attracted the attention of the mangers of water resources. The great potential which exists in this sector can eradicate many water-related problems more cheaply and quicker. However, before incorporating virtual water trade into the country’s water policies, it seems necessary to carry out comprehensive studies to determine its potentials in Iran whilst considering the country’s potentials and situation.
According to statistics, during the years of 1997-2001, Iran imported various agricultural products and annually saved 37 km3 of water which it would have had to use to produce those products inside the country [9]. More precise statistics show that in 1995 Iran would have needed to use 26.5 km3 of water to produce the amount of cereal it imported. If it had done this, 8.27 km3 of this amount would have been secured through regulated water resources. This is whilst, 10.64 km3 of water would have been used in exporting countries for the production of these cereals and 4.39 km3 of this amount would have been secured from regulated waters. As a result, through this measure Iran reduced the world’s water consumption by 15.86 km3 [8].
In addition, it’s predicted that in 2025, Iran will save 47.27 km3 of its water resources by importing 11.36 tonnes of various cereals, which if produced domestically will consume 12.72 km3 of regulated water supplies [8]. During recent years Iran was one of the biggest virtual water importers and the prediction is that this trend will continue. However, Iran still doesn’t import foodstuffs with the intention of carrying out virtual water trade. This is whilst it’s possible to use new models to evaluate the country’s comparative advantage in producing agricultural goods and to change some of the food import and export policies by drawing up long and short term plans within the framework of the country’s national interest and water security principles. And invest the resulting benefits in other sectors.
The per capita of accessible water resources in Iran is not at a critical point. However, the country’s water resources are distributed very irregularly. Under such circumstances, the domestic trade of virtual water can resolve a major part of the problems facing water distribution. In China the construction of virtual water networks and the calculation of their flow rate have borne interesting results. The amount of flowing virtual water between northern and southern China is more than the amount of regular water which is transferred from the south of the country to resolve the water shortages of that country’s northern regions. This intensifies the water-scarcity problem in north China [13]. This example demonstrates the potential which this trade has even inside countries. The domestic trade of virtual water alongside the efficient use of domestic resources and potential can cause a drop in national water consumption and increase the production rate of agricultural products. Considering that population growth, industrialization, and the need for more food and water causes problems for meeting the country’s long term needs, isn’t the correct and efficient use of domestic capabilities the best way to meet these demands? Considering the growing trend of demands why is it necessary to regulate the production of goods in various parts of the country (whilst considering their comparative advantage) and what consequences will ignoring such an issue have in the long run?

6.2 Research Requirements
We can divide the research areas of this sector into three categories: National, international and joint research.

National Research:
A. Studies, carrying out of quantitative calculations, the study and clarification of the potential of the current situation from a virtual water aspect.
1) The classification of the country into a few regions based on their economic, social, and hydrological characteristics.
2) The calculation of the amount of virtual water contained in the agricultural products of various regions.
3) The calculation of the discharge rate of the country’s flowing virtual water networks in parts of the country from which agricultural products are exported.
4) A study of the amount of dependence that the country’s food security has on the production of strategic goods in various parts of the country.
5) The determination of the comparative advantage of each region in the production of various agricultural goods.
6) An analysis and study of the virtual waters’ flow rate and routes in various parts of the country.
7) A study of the Iranian people’s diets and its impact on water consumption with consideration for the volume of water needed for the production of foodstuffs.

B. The presentation of models and a study of the impacts of the objective development of domestic virtual water trade.
1) The efficient allocation of production shares to each region based on their comparative advantage.
2) A study of the economic, social and environmental impacts resulting from the production of new product in the country.
International Research:
At this stage, the results of the calculations made in part 6.2a are needed.
1) The classification and calculation of the amount of the country’s virtual water exports and imports during past years.
2) The analysis and study of food imports and exports during past years in relation to virtual water imports and exports.
3) The presentation of a general model of international food trade in order to further protect domestic water resources and enhance the country’s social and economic indices.
4) Initiatives to enhance food security with consideration for food imports.

Joint Issues:
1) A study of the social and cultural obstacles facing the change of some production models in order to achieve objective development of the virtual water trade.
2) Analysis of the current water resources policies in order to develop national and international virtual water trade
3) A study of the role of virtual water trade in general water management policies.
4) A study of the impact of virtual water trade on the efficient use of natural resources.
5) A study of the necessity of virtual water trade with consideration for the daily increase in demands.

7. Conclusion
The concept of virtual water was able to turn the attention of various world countries to the virtual water flow which is caused by the current food trade. Water-scarce countries can gain easier access to global water resources by increasing their food imports. In addition to protecting national water resources, food imports based on international trade policies and theories can increase economic growth and social` welfare. The rate of various countries’ food exports is different and depends on the extent of their water resources, agricultural lands, and other resources and their food security policies. It seems that it is necessary to review water resource management policies and incorporate the development of virtual water resources based on comparative advantage, with the cooperation of all national and international sectors. This is so in addition to facilitating this trade and improving the food security of importing countries, endeavours are made toward the formation of a sustainable system to meet the world’s water and food demands. During recent years, Iran has been one of the major importers of virtual water. Undoubtedly, the consideration of virtual water in the country’s international and national water policies is in need of economic and social studies with a consideration for food security and all of the country’s potential. The research needs in that regard have been draw up in the three national, international and joint categories.

8. References
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[2] Allan, J. A. (2003). "Virtual water – the water, food, and trade nexus useful concept or misleading metaphor?" J. Water International, 28, 106–113.
[3] Chapagain, A. K. and Hoekstra, A. Y. (2003). Virtual water flows between nations in relation to trade in livestock and livestock products. Value of Water Research Report Series No. 13, UNESCO-IHE Institute for Water Education, Delft, The Netherlands.
[4] IWMI (International Water Management Institute). (2006). Water for food, water for life. from the Comprehensive Assessment of Water Management in Agriculture. Stockholm World Water Week.
[5] Shuva, H. (1997). Concepts of water security, food security, water stress and "virtual water" for arid countries. Proceedings of the IXth World Water Congress-International Water Resources Association- Montreal, Canada.
[6] Obuobie, E., Gachanja, P. M. and Dörr, A. C. (2005). The Role of Green Water in Food Trade. Term Paper for the Interdisciplinary Course, International Doctoral Studies. Center of Development Research University of Bonn.
[7] Yang, H., Wang, L., Abbaspour, K. C. and Zehnder, A. J. B. (2006). "Virtual water highway: water use efficiency in global food trade" J. Hydrol. Earth Syst. Sci. Discuss., 3, 1–26.
[8] Fraiture, C. de, Cai, X., Amarasinghe, U., Rosegrant, M., and Molden, D. (2004). Does International Cereal Trade Save Water? The Impact of Virtual Water Trade on Global Water Use. Comprehensive Assessment Research Report 4, Colombo, Sri Lanka, Comprehensive Assessment Secretariat.
[9] Chapagain, A. K., Hoekstra, A. Y. and Savenije, H. H. G. (2006). "Water saving through international trade of agricultural products" J. Hydrol. Earth Syst. Sci., 10, 455–468.
[10] Wichelns, D., (2001). "The role of ‘virtual water’ in efforts to achieve food security and other national goals, with an example from Egypt" J. Agric. Water Manage. 49, 131–151.
[11] Earle, A. (2001). The role of virtual water in food security in Southern Africa. Occasional Paper No 33, Water Issues Study Group School of Oriental and African Studies (SOAS), University of London.
[12] WWC (World Water Council). (2004). Virtual Water Trade - Conscious Choices. In: E-Conference Synthesis. 4th World Water Forum.
[13] Ma, J., Hoekstra, A. Y., Wang, H., Chapagain, A. K. and Wang, D. (2006). "Review Virtual versus real water transfers within China" J. Phil. Trans. R. Soc. B 361, 835–842.

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