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

Author

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  • Kimie Harada
  • Shuhei Nishitateno

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..

Suggested Citation

  • Kimie Harada & Shuhei Nishitateno, 2021. "Measuring trade creation effects of free trade agreements: Evidence from wine trade in East Asia," Departmental Working Papers 2021-13, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2021-13
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    File URL: https://crawford.anu.edu.au/sites/default/files/2025-02/acde_td_harada_nishitateno_2021_13.pdf
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    Cited by:

    1. 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.
    2. Nie, Fei & Etienne, Xiaoli & Li, Jian & Hu, Hualu, 2025. "Trade liberalization and manufacturing robot adoption: Evidence from Chinese free trade agreements," China Economic Review, Elsevier, vol. 94(PA).
    3. Ficarra, Giovanni Maria & Millemaci, Emanuele, 2024. "CETA, an ex post analysis," MPRA Paper 119696, University Library of Munich, Germany.
    4. Adhikari, Shweta & Poudel, Dikshit & Gopinath, Munisamy, . "Is Policy Greasing the Wheels of Global Palm Oil Trade?," Research on World Agricultural Economy, Nan Yang Academy of Sciences Pte Ltd (NASS), vol. 4(2).
    5. repec:ags:aaea22:335475 is not listed on IDEAS
    6. Shuhei Nishitateno & Hayato Umetani, 2023. "Heterogeneous effects of Aid‐for‐Trade on donor exports: Why is Japan different?," Review of International Economics, Wiley Blackwell, vol. 31(3), pages 1117-1145, August.
    7. Arisara Romyen & Chonrada Nunti & Paramin Neranon, 2023. "Trade efficiency under FTA for Thailand’s agricultural exports: copula-based gravity stochastic frontier model," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 12(1), pages 1-17, December.
    8. 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.

    More about this item

    Keywords

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    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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