IDEAS home Printed from https://ideas.repec.org/a/eee/jfpoli/v109y2022ics030691922200032x.html
   My bibliography  Save this article

Wine: The punching bag in trade retaliation

Author

Listed:
  • Ridley, William
  • Luckstead, Jeff
  • Devadoss, Stephen

Abstract

Wine is an extensively traded product that is a common target for retaliation in trade disputes. We analyze the impact of tariffs and tariff retaliation by estimating a structural gravity model of global wine trade. We then simulate the effects of tariffs and tariff retaliation, as well as the effects of trade liberalization, on trade and welfare in the international market for wine. We show that recent trade disputes threaten to reduce wine trade by nearly $340 million annually and significantly reduce consumer welfare, while complete trade liberalization would expand trade by roughly $76 million.

Suggested Citation

  • Ridley, William & Luckstead, Jeff & Devadoss, Stephen, 2022. "Wine: The punching bag in trade retaliation," Food Policy, Elsevier, vol. 109(C).
    • Handle: RePEc:eee:jfpoli:v:109:y:2022:i:c:s030691922200032x
    DOI: 10.1016/j.foodpol.2022.102250
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S030691922200032X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.foodpol.2022.102250?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    2. Valentina Raimondi & Alessandro Olper, 2011. "Trade Elasticity, Gravity and Trade Liberalisation: Evidence from the Food Industry," Journal of Agricultural Economics, Wiley Blackwell, vol. 62(3), pages 525-550, September.
    3. Simonovska, Ina & Waugh, Michael E., 2014. "The elasticity of trade: Estimates and evidence," Journal of International Economics, Elsevier, vol. 92(1), pages 34-50.
    4. Fabio Gaetano Santeramo & Emilia Lamonaca, 2019. "The Effects of Non‐tariff Measures on Agri‐food Trade: A Review and Meta‐analysis of Empirical Evidence," Journal of Agricultural Economics, Wiley Blackwell, vol. 70(3), pages 595-617, September.
    5. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
    6. Charlotte Emlinger & Viola Lamani, 2020. "International trade, quality sorting and trade costs: the case of Cognac," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(3), pages 579-609, August.
    7. Jeffrey J. Reimer & Man Li, 2010. "Trade Costs and the Gains from Trade in Crop Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(4), pages 1024-1039.
    8. Anne-Célia Disdier & Frank van Tongeren, 2010. "Non-Tariff Measures in Agri-Food Trade: What Do the Data Tell Us? Evidence from a Cluster Analysis on OECD Imports," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(3), pages 436-455.
    9. Kym Anderson & Glyn Wittwer, 2019. "Cumulative Effects of Brexit and Other UK and EU-27 Bilateral Free-Trade Agreements on the World’s Wine Markets," World Scientific Book Chapters, in: Kym Anderson (ed.), The International Economics of Wine, chapter 7, pages 147-166, World Scientific Publishing Co. Pte. Ltd..
    10. Trefler, Daniel, 1993. "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 138-160, February.
    11. James E. Anderson & Yoto V. Yotov, 2010. "The Changing Incidence of Geography," American Economic Review, American Economic Association, vol. 100(5), pages 2157-2186, December.
    12. Kym Anderson & Glyn Wittwer, 2019. "Modeling Global Wine Markets to 2018: Exchange Rates, Taste Changes, and China’s Import Growth," World Scientific Book Chapters, in: Kym Anderson (ed.), The International Economics of Wine, chapter 3, pages 51-90, World Scientific Publishing Co. Pte. Ltd..
    13. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September.
    14. Greear, Emily K. & Muhammad, Andrew, 2021. "Tariff Elimination and the Competitiveness of Wine-Exporting Countries in Japan," Agricultural and Resource Economics Review, Cambridge University Press, vol. 50(1), pages 76-98, April.
    15. Margherita Scoppola & Valentina Raimondi & Alessandro Olper, 2018. "The impact of EU trade preferences on the extensive and intensive margins of agricultural and food products," Agricultural Economics, International Association of Agricultural Economists, vol. 49(2), pages 251-263, March.
    16. Redding, Stephen & Venables, Anthony J., 2004. "Economic geography and international inequality," Journal of International Economics, Elsevier, vol. 62(1), pages 53-82, January.
    17. Egger, Peter H. & Nigai, Sergey, 2015. "Structural gravity with dummies only: Constrained ANOVA-type estimation of gravity models," Journal of International Economics, Elsevier, vol. 97(1), pages 86-99.
    18. Baier, Scott L. & Yotov, Yoto V. & Zylkin, Thomas, 2019. "On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration," Journal of International Economics, Elsevier, vol. 116(C), pages 206-226.
    19. Fally, Thibault, 2015. "Structural gravity and fixed effects," Journal of International Economics, Elsevier, vol. 97(1), pages 76-85.
    20. George Philippidis & Helena Resano-Ezcaray & Ana I. Sanjuán-López, 2013. "Capturing zero-trade values in gravity equations of trade: an analysis of protectionism in agro-food sectors," Agricultural Economics, International Association of Agricultural Economists, vol. 44(2), pages 141-159, March.
    21. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
    22. J. Sebastián Castillo & Emiliano C. Villanueva & M. Carmen García‐Cortijo, 2016. "The International Wine Trade and Its New Export Dynamics (1988–2012): A Gravity Model Approach," Agribusiness, John Wiley & Sons, Ltd., vol. 32(4), pages 466-481, November.
    23. Fabio Gaetano Santeramo, 2019. "Agri-food trade and non-tariff measures," Agrekon, Taylor & Francis Journals, vol. 58(4), pages 387-388, October.
    24. Fontagné, Lionel & Guimbard, Houssein & Orefice, Gianluca, 2022. "Tariff-based product-level trade elasticities," Journal of International Economics, Elsevier, vol. 137(C).
    25. Anne-Célia Disdier & Frank van Togeren, 2010. "Non-Tariff Measures in Agri-Food Trade: What Do the Data Tell Us? Evidence from a Cluster Analysis on OECD Imports," PSE-Ecole d'économie de Paris (Postprint) halshs-00825279, HAL.
    26. Maria Cipollina & Luca Salvatici, 2020. "On the effects of EU trade policy: agricultural tariffs still matter," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 47(4), pages 1367-1401.
    27. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    28. Curzi, Daniele & Pacca, Lucia, 2015. "Price, quality and trade costs in the food sector," Food Policy, Elsevier, vol. 55(C), pages 147-158.
    29. Egger, Peter & Nigai, Sergey, 2015. "Structural Gravity with Dummies Only," CEPR Discussion Papers 10427, C.E.P.R. Discussion Papers.
    30. María Pía Olivero & Yoto V. Yotov, 2012. "Dynamic gravity: endogenous country size and asset accumulation," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 64-92, February.
    31. Alessandro Olper & Valentina Raimondi, 2008. "Explaining National Border Effects in the QUAD Food Trade," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(3), pages 436-462, September.
    32. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
    33. Pablo D Fajgelbaum & Pinelopi K Goldberg & Patrick J Kennedy & Amit K Khandelwal, 2020. "The Return to Protectionism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(1), pages 1-55.
    34. Piermartini, Roberta & Yotov, Yoto V., 2016. "Estimating trade policy effects with structural gravity," WTO Staff Working Papers ERSD-2016-10, World Trade Organization (WTO), Economic Research and Statistics Division.
    35. James E. Anderson & Mario Larch & Yoto V. Yotov, 2018. "GEPPML: General equilibrium analysis with PPML," The World Economy, Wiley Blackwell, vol. 41(10), pages 2750-2782, October.
    36. Cusmano, Lucia & Morrison, Andrea & Rabellotti, Roberta, 2010. "Catching up Trajectories in the Wine Sector: A Comparative Study of Chile, Italy, and South Africa," World Development, Elsevier, vol. 38(11), pages 1588-1602, November.
    37. Bergstrand, Jeffrey H. & Larch, Mario & Yotov, Yoto V., 2015. "Economic integration agreements, border effects, and distance elasticities in the gravity equation," European Economic Review, Elsevier, vol. 78(C), pages 307-327.
    38. Lin Sun & Michael R. Reed, 2010. "Impacts of Free Trade Agreements on Agricultural Trade Creation and Trade Diversion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(5), pages 1351-1363.
    39. Ingo Borchert & Mario Larch & Serge Shikher & Yoto V. Yotov, 2021. "The International Trade and Production Database for Estimation (ITPD-E)," International Economics, CEPII research center, issue 166, pages 140-166.
    40. Hejazi, Mina & Grant, Jason H. & Peterson, Everett, 2017. "Tariff Changes and the Margins of Trade: A Case Study of U.S. Agri-Food Imports," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 42(1), pages 1-22, January.
    41. Michael Clemens, 2011. "Economics and Emigration: Trillion-Dollar Bills on the Sidewalk? - Working Paper 264," Working Papers 264, Center for Global Development.
    42. David Lambert & Shahera McKoy, 2009. "Trade Creation and Diversion Effects of Preferential Trade Associations on Agricultural and Food Trade," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(1), pages 17-39, February.
    43. Andrea Dal Bianco & Vasco Ladislao Boatto & Francesco Caracciolo & Fabio Gaetano Santeramo, 2016. "Tariffs and non-tariff frictions in the world wine trade," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 43(1), pages 31-57.
    44. Michael A. Clemens, 2011. "Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?," Journal of Economic Perspectives, American Economic Association, vol. 25(3), pages 83-106, Summer.
    45. Zhang, Lisha & Onel, Gulcan & Seale, James L., 2021. "Aircraft Dispute, Wine, and the US–EU Trade War: Implications for US Consumers and Wine Suppliers," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 53(3), pages 301-321, August.
    46. Bradley J. Rickard & Olivier Gergaud & Shuay-Tsyr Ho & Florine Livat, 2018. "Trade liberalization in the presence of domestic regulations: public policies applied to EU and U.S. wine markets," Applied Economics, Taylor & Francis Journals, vol. 50(18), pages 2028-2047, April.
    47. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Magdana Kondaridze & Jeff Luckstead, 2023. "Determinants of dairy‐product trade: Do subsidies matter?," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(3), pages 857-873, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ridley, William & Luckstead, Jeff & Devadoss, Stephen, 2022. "Wine: The punching bag in trade retaliation," Food Policy, Elsevier, vol. 109(C).
    2. Larch, Mario & Luckstead, Jeff & Yotov, Yoto, 2021. "Economic Sanctions and Agricultural Trade," School of Economics Working Paper Series 2021-16, LeBow College of Business, Drexel University.
    3. Scott L. Baier & Amanda Kerr & Yoto V. Yotov, 2018. "Gravity, distance, and international trade," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 2, pages 15-78, Edward Elgar Publishing.
    4. Silviano Esteve-Pérez & Salvador Gil-Pareja & Rafael Llorca-Vivero & Jordi Paniagua, 2021. "Has the Euro paid off? A study of the trade-induced welfare effects of the EMU," Working Papers 2103, Department of Applied Economics II, Universidad de Valencia.
    5. Dimitrios Dadakas & Stavroula Tatsi, 2021. "Global agricultural trade impact of the 2011 triple disaster in Japan: A gravity approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(4), pages 937-972, October.
    6. Mario Larch & Serge Shikher & Constantinos Syropoulos & Yoto V. Yotov, 2022. "Quantifying the impact of economic sanctions on international trade in the energy and mining sectors," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1038-1063, July.
    7. Adu, Raymond & Litsios, Ioannis & Baimbridge, Mark, 2022. "ECOWAS single currency: Prospective effects on trade," Journal of International Money and Finance, Elsevier, vol. 126(C).
    8. Fabio Gaetano Santeramo & Emilia Lamonaca, 2022. "On the trade effects of bilateral SPS measures in developed and developing countries," The World Economy, Wiley Blackwell, vol. 45(10), pages 3109-3145, October.
    9. Mario Larch & Jeff Luckstead & Yoto V. Yotov, 2021. "Economic Sanctions and Agricultural Trade," CESifo Working Paper Series 9410, CESifo.
    10. Anderson, James E. & Yotov, Yoto V., 2020. "Short run gravity," Journal of International Economics, Elsevier, vol. 126(C).
    11. Anderson, James E. & Borchert, Ingo & Mattoo, Aaditya & Yotov, Yoto V., 2018. "Dark costs, missing data: Shedding some light on services trade," European Economic Review, Elsevier, vol. 105(C), pages 193-214.
    12. Julia Spornberger, 2022. "EU integration and structural gravity: A comprehensive quantification of the border effect on trade," Review of International Economics, Wiley Blackwell, vol. 30(4), pages 915-938, September.
    13. Mario Larch & Yoto V. Yotov, 2016. "General Equilibrium Trade Policy Analysis with Structural Gravity," CESifo Working Paper Series 6020, CESifo.
    14. Baier, Scott L. & Yotov, Yoto V. & Zylkin, Thomas, 2019. "On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration," Journal of International Economics, Elsevier, vol. 116(C), pages 206-226.
    15. Mulabdic, Alen & Rotunno, Lorenzo, 2022. "Trade barriers in government procurement," European Economic Review, Elsevier, vol. 148(C).
    16. Piermartini, Roberta & Yotov, Yoto V., 2016. "Estimating trade policy effects with structural gravity," WTO Staff Working Papers ERSD-2016-10, World Trade Organization (WTO), Economic Research and Statistics Division.
    17. Rindler, Michael, 2021. "Changing Language Skills and Trade in Europe," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242449, Verein für Socialpolitik / German Economic Association.
    18. Zongo, Amara, 2021. "The impact of services trade restrictiveness on food trade," International Economics, Elsevier, vol. 166(C), pages 71-94.
    19. Fabio Gaetano Santeramo & Emilia Lamonaca, 2022. "Standards and regulatory cooperation in regional trade agreements: What the effects on trade?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(4), pages 1682-1701, December.
    20. Kere, Safilidin & Zongo, Amara, 2023. "Digital technologies and intra-African trade," International Economics, Elsevier, vol. 173(C), pages 359-383.

    More about this item

    Keywords

    Wine trade; Collateral tariffs; Retaliation; Gravity;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jfpoli:v:109:y:2022:i:c:s030691922200032x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/foodpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.