NCPA - National Center for Policy Analysis

Parched in the West but Shipping Water to China, Bale by Bale

October 22, 2012

In attempts to improve its citizens' diets, the Chinese government has been expanding its dairy industry. Milk consumption has tripled in the past decade and is projected to increase another 50 percent by 2015. So to deliver on this demand, it means million more cows on the mainland, and millions more tons of cattle feed. China has a vast landmass, but its pasturage is scarce, thus, the Chinese are buying alfalfa from the United States, say Peter Culp, a partner in the law firm of Squire Sanders in Phoenix, and Robert Glennon, professor of law and public policy at the University of Arizona law school.

  • Chinese demand has prompted alfalfa prices to double in the past two years.
  • Farmers and investors alike are rushing to convert lands to the crop, and the U.S. Department of Agriculture is promoting the development of this new export market.
  • Ninety-nine percent of the exported alfalfa is grown in a handful of Western states, especially California.

However, the most curious fallout of this market transaction involves water. Alfalfa is a water-guzzling crop, and the amount that was exported to China in 2012 is enough to supply the annual consumption of around 500,000 American families.

Parts of America struggle with chronic water shortages. Las Vegas' need, for example, is so dire that the Southern Nevada Water Authority is committing $3.2 billion to import water from hundreds of miles away. This dilemma underscores the structural flaws in the current water policy framework.

  • Most water rights operate within a legal system called "prior appropriation."
  • Prior appropriation grants the first user of water the privilege to continue using it. And so, the historic users (the agricultural district) have more clout than the growing cities and industries that followed later.
  • Therefore, transfer of water rights from historic senior users can require the consent of multiple parties, making the movement of water rights to serve changing demands costly and legally complex.

Even when a transfer is possible, complicated regulatory procedures mean that final approvals can take years. Yet U.S. trade policy fosters the international export of those same water resources embedded in high-water-use crops such as alfalfa. Instead of exporting alfalfa grown in the water-starved West, the United States could capture more of the economic benefit of the embedded water by feeding it to cows here, supporting the growth of the dairy and milk-processing industries. Trade policies should encourage development of such value-added activities, particularly where essential natural resources are concerned.

Source: Peter Culp and Robert Glennon, "Parched in the West but Shipping Water to China, Bale by Bale," Wall Street Journal, October 5, 2012.


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