The modest welfare response, although seemingly contradictory
to the widely shared concerns about irrigation scarcity, is
actually quite sensible if we revisit the market perspective
incorporated in the general equilibrium model. Rational agents
adjust their behavior according to economic and policy incentives,
thus providing a mechanism to buffer the impacts of reduced
irrigation water availability. To assess the role of trade in
moderating welfare losses due to reduced irrigation water, we
ran a comparison experiment in which this adaptation potential of
international trade was significantly suppressed. In particular, we
reduce the size of the trade-related substitution parameters by
75%. The comparison experiment finds much larger regional
welfare losses (57–108% increase) in the most stressed regions,
mainly the Rest of South Asia, China, India, and Middle East and
North Africa. (The global welfare change remains at a similar level
since one region’s terms of trade losses are another region’s gains.)