This Water Policy Briefing is based on the CA Research Report 4: Does International Cereal Trade Save Water? The Impact of Virtual Water Trade on Global Water Use (CA Research Report 4) by Charlotte de Fraiture, Ximing Cai, Upali Amarasinghe, Mark Rosegrant and David Molden; and on Investing in Water for Food, Ecosystems and Livelihoods (BLUE PAPER, Stockholm 2004, Discussion Draft) by David Molden and Charlotte de Fraiture; and on Is Virtual Water Trade a Solution for Water Scarce Countries? by Charlotte de Fraiture and David Molden, Bridges 2004. By the year 2050 there will be an additional 3 billion people to feed. Food production may need to increase by 70-90 percent from levels in 2000 to meet this global food demand. Without improvements in the efficiency and productivity of agricultural water use, crop water consumption would have to grow by the same order of magnitude. A big challenge in water management is to grow sufficient food for a growing and more affluent population while meeting the many other demands on limited water resources—household needs, industrial requirements and environmental functions. Already, an estimated 20% of the global population lives in river basins that are characterized by physical water scarcity. International food trade can have significant impacts on national water demand. The term ‘virtual water’, first introduced by Allan (1998), refers to the volume of water used to produce traded crops. By importing food a country ‘saves’ the amount of water it would have required to produce it on its own soil. Thus, international food trade can have important mpacts on how and where water is used. Food trade reduces water use at two levels. At a national level, a country reduces water use by importing food rather than producing it. At a global level, trade reduces water use because, at present, production in exporting countries is more water efficient than in importing countries. Moreover, four of the five major grain exporters produce under highly productive rainfed conditions while importing countries would have relied more on irrigation. In fact, without cereal trade, global irrigation water demand would have been higher by 11%. Some researchers have suggested that international food trade can and should be used as an active policy instrument to mitigate local and regional water scarcity. They contend that, instead of striving for food self-sufficiency, water short countries should import food from water abundant countries. Indeed, food trade has a large potential to alleviate water scarcity, but in practice there are many reasons why this is unlikely to happen in the near future.