1 Introduction

Regional economic and water resource policy are becoming more interrelated as the world economy globalizes and as water resources become a strategic advantage [Hoekstra and Chapagain, 2011; Vörösmarty et al., 2010]. The concept of the “Blue Economy” is gaining popularity in the Great Lakes basin, where the region is portrayed as having water in such abundance that its water resources can provide for long‐term population and economic growth, including future increases in population and in water‐using industries and agriculture [Austin, 2010; Marbek Consultants, 2010]. However, water resources in the basin are stressed in localized areas, especially with respect to groundwater withdrawals. The virtual water trade framework has not been applied to analyze water use in the Great Lakes basin, except for one limited study that considered only agricultural water withdrawals and did not provide spatially distributed values of virtual water trade within the region [Scanlan and Kehl, 2014].

For this reason, a water‐rich region like the Great Lakes is well served by developing a data‐driven understanding of its water economy, including consideration of the following questions. What are the impacts of economic production and trade on the region's fresh water resources, especially the depletion of ecologically sensitive surface water flows? Where is the unused capacity for water uses, and are water uses currently distributed advantageously with respect to the abundance of regional water resources? Is the region making the most of its abundant water resources in trade with external parties? Is the region a net importer or net exporter of virtual water in water‐intensive sectors of the economy?

Virtual water is the water consumed throughout the production of a good or service. Virtual water trade is a means of transferring water resources between regions via the trading of goods and services containing embedded water. According to Hoekstra and Mekonnen [2012], 2320 Gm3 of virtual water was traded annually on a global basis over the period 1996–2005. The scale of virtual water trade is expected to increase as globalization intensifies trade between nations [Hoekstra and Hung, 2005; Carr et al., 2012]. The study and management of virtual water transfers has been suggested to encourage efficiency by promoting exchanges of virtual water from highly productive countries to less productive countries [Allan, 2003].

The original work by Allan [1998] on virtual water trade has spurred a substantial body of work on the topic. Recent work has focused on improving methodologies for calculating virtual water trade [Antonelli et al., 2012; D'Odorico et al., 2012; Yang et al., 2012; Deng et al., 2015] and on the evolution of virtual water trade with time [Zhang et al., 2011; Carr et al., 2012; Dalin et al., 2012], where it has been found that virtual water trade has intensified globally and regionally over the last few decades. Interestingly, Konar et al. [2013] find that future climate change is likely to result in decreased virtual water trade, because of expected decreases in crop trade because of higher crop prices.

Most regional, national, or global studies of virtual water trade have focused on the agricultural sector, since this sector is thought as the most intensive in terms of consumptive use and trade between regions [Montesinos et al., 2011; Carr et al., 2012; Dalin et al., 2012; D'Odorico et al., 2012; Konar and Caylor, 2013; Konar et al., 2013; Scanlan and Kehl, 2014]. Only a few studies have considered all economically important water use sectors [Feng et al., 2011; Zhang et al., 2011; Hoekstra and Mekonnen, 2012; Mubako et al., 2013a; Deng et al., 2015], where it is noted that direction of virtual water trade (net importers vs. net exporters) differs substantially across water use sectors, the virtual water trade per currency of trade (value intensity) varies over orders of magnitude, and that virtual water and footprint calculations are particularly sensitive to consumptive use coefficients. Feng et al. [2011] point that virtual water imports, and associated water footprints, to urban areas can be substantial, because of household consumption of water‐intensive goods and services. In addition to noting the importance of cross‐sector analyses, Antonelli et al. [2012] stress the importance of distinguishing between sources of water embedded in virtual water trade in order to improve virtual water trade as a tool for informing water resource management policy.

The assessment of virtual water flows and water footprint studies is generally carried out at the national level, thus, concealing the spatial variability within regions [Liu et al., 2009; Mubako et al., 2013b; Fulton et al., 2014]. Fulton et al. [2014] suggest that national level averages of water footprints may ignore important scale differences associated with “(a) the phenomenon of interest, that is the connections between consumption patterns and global water resource concerns… and (b) the decision making and ability to enact relevant policy.” A finer spatial resolution may reveal where there is local diminishment associated with water use (local water footprint is greater than local water resources availability) or there is local capacity for water use (local water resources availability exceeds the local water footprint). Scale issues in the governance of water resources must also be recognized, because management may take place at several overlapping scales, most of which do not harmonize with watershed boundaries or are at scales that are irrelevant to decision‐making [Brown et al., 2009; Montesinos et al., 2011; Zhang and Anadon, 2014]. Smaller scale calculations of virtual water trade and water footprints are especially critical when comparing these quantities to water availability and the potential ecological consequences of consumptive use.

In this work, we explore several important dimensions—variation across water use sectors, distinguishing between water sources, and availability of water from various sources—of virtual water trade and water footprints in US portion of the Great Lakes basin (see Figure 1). The population of the region in 2011, the study year, was 26 million [United States Census Bureau, 2016] and total trade exports and imports for the US portion of the Great Lakes basin were $505 billion and $921 billion, respectively [Implan, 2011]. Total water withdrawals over all sources were 32,400 Mm3/year in 2011. The calculation framework and analysis of results in this work could be applied to any other region, but we have chosen to focus on the Great Lakes because of its economic importance, the apparent abundance of water in the basin, and recent policy developments that touch on economic and ecological impacts of water use.

The 2008 Great Lakes Compact [Great Lakes‐St. Lawrence River Basin Water Resources Council, 2008] stresses that consumptive use in the basin should not cause adverse ecological impacts and mandates that states and provinces develop processes for evaluating impacts of new withdrawals. Michigan's obligations under the Compact have motivated the creation of a legal definition of tributary surface water (TSW) depletion thresholds through the Michigan Water Withdrawal Assessment Process [MI WWAP; Steinman et al., 2011]. Other states in the basin are considering similar restrictions. While the Compact focuses primarily on protecting the Great Lakes themselves, it does address the importance of avoiding adverse impacts to terrestrial water resources, i.e., TSW and groundwater. Moreover, state‐level policy developments, such as the MI WWAP, have focused on protection of TSW against low flows that could harm aquatic ecosystems. These policy developments also recognize that groundwater extractions from shallow aquifers that are hydraulically connected to streams can reduce streamflow to levels that result in impairing aquatic ecosystems. Here, we include TSW depletions associated with groundwater extractions in our virtual water trade and water footprint calculations. We also close the water balance on TSW depletions by accounting for return flows routed to TSW but originating from groundwater withdrawals.

We use input–output (IO) analysis to calculate virtual water trade and footprints by county and use sector. The IO framework defines inter‐sector relationships within an economy, showing how output from one sector may become an input to another sector [Leontief, 1986]. Here, inter‐sector trade data in the form of transactions in US dollars [Implan, 2011] are used to represent these economic relationships at spatial scales ranging from county‐level to international. County‐wide withdrawals are based on aggregating a data set of point withdrawals in the region, available in the same sectors as the trade data and categorized by water source—Great Lakes water (GLW), TSW, shallow groundwater (SGW), and deep groundwater (DGW). The IO framework couples the trade and withdrawal data. Virtual water trade and footprints are calculated for all water sources in the region, but the emphasis is on consumptive use of TSW, which is compared to surface water availability. Surface water consumptive use not only originates from surface water withdrawals but also from withdrawals from SGW. We explore the sensitivity of calculations to critical parameters and assumptions in the framework, including uncertainty in consumptive use coefficients and methods to rout return flows. Results are presented in aggregate for the study region and distributed by county. These water footprint and virtual water results are presented from the regional point of view [Ruddell et al., 2014], considering the basin's watershed as the local system boundary.

Our focus here is primarily on spatial variability. However, the drivers of virtual water trade and water footprints, such as inter‐sectoral trade patterns, inter‐sectoral water demand, and climate, are expected to vary over a range of time scales. The time scales for aquatic ecosystem response to changes in storages and fluxes also will vary substantially. For example, at relatively short (intra‐annual) scales, warmer months may have higher consumptive use, lower water availability (greater imbalances between precipitation and evapotranspiration), and greater ecosystem vulnerability to changes in fluxes and storages. At longer time scales, Orlowsky et al. [2014] assessed the impacts of future climate change on global water availability and the corresponding ability of nations to export virtual water, finding that reduced water availability under a range of climate change scenarios will tend to reduce virtual water exports. While we do not explicitly consider temporal variability in virtual water trade and footprints here, the framework we develop can easily accommodate temporal variations, as long as the necessary information (trade, demand, climate, and ecosystem response) is available at the relevant time scale(s).