Virtual water trade in Iran: An input-output analysis

The problem of water shortage has caused countries to pay attention to the water used in the production of products and their other advantages in the production of goods and services. This has to do with the water consumed in the production of imported or exported products. Although most of this water generally remains in the producer country, it is required in production processes. This paper seeks to calculate the amount of direct and indirect water consumed in the exported goods and service production in Iran. In addition, the amount of water saved on the imported products for intermediate and final uses is calculated.

An input-output model is developed to measure the direct and indirect virtual water that is required for exported and imported products. The latest survey based on the input-output table of Iran for the year 2016 is employed as the database of the research. The rest of the data are obtained from the statistical yearbook of the country for the year 2016.

The symmetrical input-output table of Iran for the year 2016 has been prepared for 89 activities. This table was the basis for the research calculations. According to the results, the total imported commodities of the country were over 2662.56 trillion Rials, whereas the total export of the country in 2016 was 3008.85 trillion Rials. Thus, the trade balance of the country was 366.29 trillion Rials. About half of the imported goods and services were consumed as intermediate demand, and the other half were final demand. The majority of the imports consisted of the products used for the production of machinery and equipment not classified elsewhere in the amount of 254.5 trillion, which was 9.6% of the country's total imports in the year 2016. In contrast, the extraction of crude oil and natural gas was in thefirst place with the value of 1280.05 trillion Rials, which constituted 42.54% of the country's exports in this year.In addition, according to the results, the virtual water export of the country in 2016 was 8514.59 million cubic meters, compared to the country's virtual water import of 15062.83 million cubic meters in the year. So, the country's trade balance of virtual water in this year was -6548.24 cubic meters, which leads the country to be a net importer of virtual water.It is notable that, in contrast to the positive trade balance, the balance of the virtual water trade was negative. To investigate this circumstance, one should note that the production of 353.4 thousand Rials worth of exported products needed one cubic meter of water. However, the country was exempted from one cubic meter of water for 176.8 thousand Rials worth of imported products. On the other hand, the country attempted to import products that need more water in contrast to export products that need less one. So, the imported products of the country were about two times more water-intensive than the exported ones. Based on the calculations, due to the high correlation between the direct water coefficient of the activities and their water multipliers, the correlation coefficient of these two indicators was 0.95. Meanwhile, the activity of agricultural and garden crops, with the highest direct coefficient of water intensity, had the highest multipliers of water intensity as well. Thus, despite the export not achieving the first rank, the import and trade balance ranked first by a long distance among 89 production activities in 2016.The correlation coefficient of the virtual water multipliers of the sectors with the value of their exports and imports were -0.05 and 0.12, respectively. Thus, in the sectors where the multipliers of water are higher, there was relatively less export, whereas the products of these sectors were relatively more imported. The lower multipliers indicate that other factors have also been involved to determine the amount of exports and imports.

According to the findings of the research, the water intensity of products was relatively considered in the foreign trade of Iran. So, the imported products need two times more virtual water compared to the exported ones. As a result, in contrast to the positive trade balance of the country, there was a negative virtual water balance. However, due to the attention paid to other factors in the foreign trade, the correlation coefficient between the virtual water multipliers of the sectors with the value of their exports and imports is small. In addition, some activities deal with water in nature. As a result, they have high water multipliers. According to this characteristic, along with the promotion of water efficiency in production processes, it is necessary to avoid exporting products with high water multipliers as well as importing these products.