Decomposition Analysis of Virtual Water Outflows for Major Egyptian Exporting Crops to the European Union

Abstract

International trade can spur economic growth, but it can also deplete the water resources needed to produce traded goods. This is crucial for Egypt as a lower-middle income country where boosting agricultural exports is encouraged to promote the sustainable agriculture development strategy. The objective of this paper was to quantify Egypt’s virtual water flows contributing to agricultural trade with one of its main trading partners, the European Union. We considered calculating virtual water of exports since 2001 as it represents Egypt-EU’s implementation of the association agreement. We focused on the five governorates of the Nile Delta. These governorates are major producers of the five major crops exported to the European Union. This study used long-term trade trends, and changes in crop composition to analyze the implications for virtual water outflows and economic water use efficiency. By decomposing the virtual water of exports, we were able to identify the trend of virtual water outflows and the factors affecting this trend. From both an economic and water perspective, our results suggest that adopting a policy aimed at saving water resources at the national level and focusing on high-yield exports at the international level will promote the development agenda of Egypt.