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World Wine Market Barriers to Increasing Trade

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World Wine Market Barriers to Increasing Trade World wine market Barriers to increasing trade ABARE RESEARCH REPORT 02.6 ABARE report for the Grape and Wine Research and Development Corporation Max Foster David Spencer proudly produced for: Grape and Wine Research and Development Corporation © Commonwealth of Australia 2002 This work is copyright. The Copyright Act 1968 permits fair dealing for study, research, news reporting, criticism or review. Selected passages, tables or diagrams may be reproduced for such purposes provided acknowledgment of the source is included. Major extracts or the entire document may not be reproduced by any process without the written permission of the Executive Director, ABARE. ISSN 1037–8286 ISBN 0 642 76460 3 Foster, M. and Spencer, D. 2002, World Wine Market: Barriers to Increasing Trade, ABARE Research Report 02.6, Canberra. Australian Bureau of Agricultural and Resource Economics GPO Box 1563 Canberra 2601 Telephone +61 2 6272 2000 Facsimile +61 2 6272 2001 Internet www.abareconomics.com ABARE is a professionally independent government economic research agency. GWRDC disclaimer Any recommendations, suggestions or opinions contained in this publication do not necessarily represent the policy or views of the Grape and Wine Research and Development Corporation. No person should act on the basis of the contents of this publication without first obtaining specific, independent professional advice. The Grape and Wine Research and Development Corporation will not be liable for any loss, damage, cost or expense incurred or arising by reason of any person using or relying on the information in this publication. ABARE project 2639 foreword The Australian wine industry has been one of the success stories of Australian agriculture over the past generation. This success has brought forth large increases in wine production in Australia that must largely be sold on export markets. The aim in this report is to chart the key barriers to international trade that face the Australian wine industry in expanding its export markets. An understanding of these trade issues will be important in developing Australia’s negotiating stance in the new round of world trade negotiations that was launched in Doha in 2001 under the World Trade Organisation (WTO) arrangements. The key message in the report is that while tariffs on imports and subsidies on domestic wine production around the world remain distorters of trade in wine, a range of trade regulations are also important. The major trade regu- lations relate to quarantine requirements; technical requirements such as product labeling; and protection of intellectual property rights. The usual justification for these regulations is that they are correcting for the failure of markets to deliver desirable outcomes. In at least some cases, however, there is an issue of whether the regulations are appropriate responses to market failure or they have simply been put in place to protect domestic industries from import competition. This report is one of a series of reports that ABARE has either recently published or is preparing on the key issues associated with the new round of world trade negotiations. This case study of the world wine industry is partic- ularly apt in the trade liberalisation debate because it illustrates many of the trade issues that will arise for a range of agricultural commodities under the WTO framework. BRIAN S. FISHER Executive Director September 2002 Barriers to trade in wine iii acknowledgments The authors wish to thank Neil Andrews, Fran Freeman, Vince O’Donnell and Gil Rodriguez from ABARE and Tony Battaglene from the Winemakers’ Federation of Australia for their helpful comments during the preparation of this report. This project is supported by Australia’s grape growers and wine makers through their investment body the Grape and Wine Research and Develop- ment Corporation, with matching funds from the federal government. iv ABARE research report 02.6 contents Summary 1 1 Introduction 8 2 Nature of the world wine market 10 World wine production 10 World wine consumption 12 World wine trade 14 Price formation 19 3 Australian wine industry 20 Production and export availability 20 Australian wine policy environment 22 4 Market access measures 26 WTO tariff arrangements 26 Tariff rates 27 Trade preference agreements 32 Tariff rate quotas 35 5 Domestic support 39 Domestic support and the WTO 39 EU Common Market Organisation 40 Domestic support reform 44 6 Export measures 46 Export subsidies 46 Export subsidy reform 47 Barriers to trade in wine v 7 Trade regulation 49 Sanitary and phytosanitary barriers 49 Intellectual property rights 51 Technical barriers to trade 57 State trading enterprises 61 8 Conclusion 61 Appendixes A Country profiles 66 Argentina 67 Australia 70 Bulgaria 76 Canada 79 Chile 86 China 89 European Union 92 France 98 Germany 101 Hungary 103 Italy 106 Japan 109 New Zealand 113 Norway 117 Portugal 120 Romania 122 South Africa 124 Spain 127 Sweden 129 Switzerland 132 United Kingdom 135 United States 137 B Statistics 142 References 155 vi ABARE research report 02.6 Boxes 1 The importance of climate for wine grape and wine production 12 2 Mutual Acceptance Agreement on Oenological Practices 24 3 The impact of a tariff quota 35 4 Product labeling and uncertainty about quality or safety 59 Figures A Trends in world wine production 10 B Wine production and shares of total production, by country, 2001 11 C Relationship between wine consumption and income, 2000 14 D Value and unit values of wine exports, by country, 2000 15 E Trends in world export market shares and relative wine prices 17 F Wine imports and import unit values, by country, 2000 19 G Trends in wine export prices, selected countries 19 H Trends in production and disposal of Australian wine 20 I Share of export volume, by container and wine type, 2001 21 J Main export destinations for Australian wine, 2001 21 K Trends in Australia’s wine export returns, by broad category 22 L Sources of Australian wine imports, 2000-01 23 M Key wine tariffs: ad valorem equivalents, most favored nation, 2001 30 N Tariff profiles for key wine exporting countries: still wine in bottles 30 O Tariff profiles for key wine exporting countries: still wine in bulk 31 P Tariff profiles for key wine exporting countries: sparkling wine 32 Q EU Common Market Organisation funding 40 Barriers to trade in wine vii Text tables 1 Average ad valorem equivalent tariffs faced by the main wine exporting countries 3 2 Shares and growth of wine consumption in key countries 13 3 Numerical targets for cutting agricultural subsidies and protection under the Uruguay Round Agreement 15 4 Shares and growth of world wine trade, selected countries and regions 16 5 Composition of wine exports, by value, selected countries, 2000 17 6 Leading international wine companies 18 7 Summary of most favored nation tariff measures for wine in key countries 28 8 Key multilateral trade preference agreements influencing world wine trade 33 9 Selected tariff rate quotas for wine 37 10 EU budget appropriations to support the EU wine industry 41 11 EU intervention rates for storage and distillation 42 12 EU export subsidies for wine: outlays and WTO commitments 47 Appendix tables A1 Key trade barriers and issues: Argentina 68 A2 Supply and utilisation of wine: Argentina 69 A3 Key trade barriers and issues: Australia 71 A4 Tariff schedule for wine: Australia 72 A5 Supply and utilisation of wine: Australia 75 A6 Key trade barriers and issues: Bulgaria 77 A7 Tariff schedule: Bulgaria 78 A8 Supply and utilisation of wine: Bulgaria 78 A9 Key trade barriers and issues: Canada 80 A10 Tariff schedule for wine: Canada 85 A11 Supply and utilisation of wine: Canada 85 A12 Key trade barriers and issues: Chile 87 A13 Tariff schedule for wine: Chile 88 A14 Supply and utilisation of wine: Chile 88 viii ABARE research report 02.6 A15 Key trade barriers and issues: China 90 A16 Tariff schedule for wine: China 90 A17 Supply and utilisation of wine: China 91 A18 Key trade barriers and issues: European Union 93 A19 Tariff schedule for wine: European Union 94 A20 Supply and utilisation of wine: European Union 97 A21 Key trade barriers and issues: France 99 A22 Supply and utilisation of wine: France 100 A23 Key trade barriers and issues: Germany 102 A24 Supply and utilisation of wine: Germany 102 A25 Key trade barriers and issues: Hungary 104 A26 Tariff schedule for wine: Hungary 105 A27 Supply and utilisation of wine: Hungary 105 A28 Key trade barriers and issues: Italy 107 A29 Supply and utilisation of wine: Italy 108 A30 Key trade barriers and issues: Japan 110 A31 Tariff schedule for wine: Japan 111 A32 Supply and utilisation of wine: Japan 112 A33 Key trade barriers and issues: New Zealand 114 A34 Tariff schedule for wine: New Zealand 115 A35 Supply and utilisation of wine: New Zealand 116 A36 Key trade barriers and issues: Norway 118 A37 Supply and utilisation of wine: Norway 119 A38 Key trade barriers and issues: Portugal 121 A39 Supply and utilisation of wine: Portugal 121 A40 Key trade barriers and issues: Romania 123 A41 Supply and utilisation of wine: Romania 123 A42 Key trade barriers and issues: South Africa 125 A43 Tariff schedule: South Africa 126 A44 Supply and utilisation of wine: South Africa 126 A45 Key trade barriers and issues: Spain 128 A46 Supply and utilisation of wine: Spain 128 A47 Key trade barriers and issues: Sweden 130 A48 Supply and utilisation of wine: Sweden 131 A49 Key trade barriers and issues: Switzerland 133 A50 Supply and utilisation of wine: Switzerland 134 A51 Key trade barriers
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