Water-Trading Deals Are the New Normal. Trade Law Isn’t Keeping Up

Water-Trading Deals Are the New Normal. Trade Law Isn’t Keeping Up
The Theewaterskloof Dam is shown at low levels, outside Cape Town, South Africa, April 16, 2017 (AP photo by Halden Krog).

Five years ago, in April 2018, headlines around the world called attention to South Africa’s impending “Day Zero”—the day when water levels in the dams supplying Cape Town were projected to fall below the minimum capacity required to keep water running across the city. The hydraulic apocalypse never arrived, due largely to extreme municipal water restrictions, but the threat of Day Zero continues to loom over much of South Africa. The episode also highlighted how, from Bangalore to Bakersfield, water scarcity is already a problem for parched populations that are growing thirstier.

Acute water stress around the world has galvanized efforts to find new approaches and innovative solutions to access and maintain increasingly scarce water supplies. In November 2022, Israel and Jordan announced plans to negotiate a water-for-electricity deal, in which Jordan would provide solar energy to Israel in exchange for desalinated water. In December, officials in the U.S. state of Arizona—which faced its worst drought in more than a thousand years—announced that they were considering purchasing and piping desalinated water from Mexico’s Sea of Cortez. Arizona and Mexico had previously discussed proposals in which the U.S. state would fund the construction of a desalination plant across the U.S. border with Mexico in exchange for Mexico’s water allotment from the Colorado River.

The idea of transporting water from one location to another is in itself nothing new. Humans have moved, diverted, transferred and redirected water domestically and across international borders for centuries and even millennia. Indeed, this constant manipulation of water is a root cause of current global shortages. But some more modern proposals to move water across borders, like those mentioned above as well as previous efforts by countries like Spain, involve an additional wrinkle: The water intended for transport is in fact being traded—that is, it is appraised and exchanged in transactions involving some kind of payment, whether in the form of legal tender or barter.

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