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Measuring trade creation effects of free trade agreements: Evidence from wine trade in East Asia

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  • Harada, Kimie
  • Nishitateno, Shuhei

Abstract

East Asia has experienced an unprecedented expansion in its wine market over the past two decades. This paper examines the extent to which import tariff reductions through bilateral free trade agreements (FTAs) have contributed to an increase in wine imports to Japan, China, and South Korea. Our empirical method involves estimating an augmented version of the gravity equation by the Poisson pseudo-maximum likelihood (PPML) technique. Analyzing a panel dataset for 1990–2016 covering 27 exporters, we find that overall a 1 percentage point reduction in tariff among FTA member countries is associated with an increase in the wine import volumes by 0.042%, which is seven times higher than a similar reduction in tariff on an MFN basis. The strongest trade creation effects are founded for bottle wine. The results are robust to various specifications.

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  • Harada, Kimie & Nishitateno, Shuhei, 2021. "Measuring trade creation effects of free trade agreements: Evidence from wine trade in East Asia," Journal of Asian Economics, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:asieco:v:74:y:2021:i:c:s1049007821000373
    DOI: 10.1016/j.asieco.2021.101308
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    8. Mariani, A. & Napoletano, F. & Pomarici, E. & Vecchio, R., 2014. "Tariff and Non-Tariff Barriers to Wine Exports and Initiatives to Reduce their Effects," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 15(1), pages 1-20.
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    2. Ficarra, Giovanni Maria & Millemaci, Emanuele, 2024. "CETA, an ex post analysis," MPRA Paper 119696, University Library of Munich, Germany.
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    4. Adhikari, Shweta & Poudel, Dikshit & Munisamy, Gopinath, 2023. "Policy Effects on Global Palm Oil Trade: A Gravity Model Approach," 2023 Annual Meeting, July 23-25, Washington D.C. 335475, Agricultural and Applied Economics Association.
    5. Bangchu Qiu & Gang Tian & Daoming Wang, 2022. "Empirical Analysis of Sustainable Trade Effects of FTAs Based on Augmented Gravity Model: A Case Study of China," Sustainability, MDPI, vol. 15(1), pages 1-12, December.

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    More about this item

    Keywords

    Tariff reductions; Wine; International trade; Non-tariff barriers; Gravity equation; Poisson pseudo-maximum likelihood estimator;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F69 - International Economics - - Economic Impacts of Globalization - - - Other
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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