Market integration directs resources toward higher-value uses, but the resulting spatial reallocation of economic activity can generate local spillovers. Communities may anticipate these spillovers and exert protectionist local control, limiting gains from trade. We exploit differential exposure to the integration of the world's largest water market to document local impacts that generate incentives for protectionism and quantify how much communities value retaining irrigation. We find that a 10% decrease in local irrigation reduces household incomes by 3%, agricultural employment by 6%, and population by 4%. We use a dynamic residential choice model to recover a distribution of household willingness to pay to retain the broader local benefits of irrigation. Aggregating household valuations by location, median willingness to pay for irrigation is AUD $119/ML, with 13.5% of locations valuing water above the average market price of $235/ML. We combine these valuations with estimates of agricultural productivity to quantify how community veto rights would limit trade. Under asymmetric information, where transacting farmers must compensate communities for their privately known value of water, only 49% of trades remain feasible. Compared with community veto rights, uniform compensation requires larger payments to preserve comparable levels of trade while failing to fully compensate many communities for their losses. Information, targeting, and the surplus available for compensation all shape the extent to which local control limits trade.