Working Paper: CEPR ID: DP12621
Authors: Kym Anderson; Glyn Wittwer
Abstract: Since Britain accounts for a major share of the world’s wine imports, and EU member countries include the world’s major wine exporters, Brexit and subsequent UK and EU27 bilateral free-trade agreements (FTAs) have the potential to disrupt wine markets globally. We use a model of the world’s national wine markets, projected to 2025, to examine potential impacts of Brexit and a series of follow-on bilateral FTAs. The scenarios assume a UK-EU27 FTA is followed by EU27 bilateral FTAs with Australia and New Zealand and then UK bilateral FTAs with those two plus South Africa and Chile (with whom the EU already has FTAs). The new EU-Japan FTA is also assessed. Brexit’s impact comes more from assumed changes to the UK’s income growth and the pound’s exchange rate than to its tariffs. The bilateral trade consequences of the trade-diverting and trade-creating effects of each additional FTA are highlighted. They are then compared with the effects of a multilateral agreement to remove all wine import tariffs globally. Unrealistic though this is, it exposes the far bigger contributions to wine producers and consumers that could emerge from a single multilateral undertaking than from several bilateral or regional FTAs.
Keywords: Brexit; Global Wine Market; Modeling; Preferential Trading Agreements
JEL Codes: F15; F14; F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Brexit (F19) | disruption of global wine markets (F69) |
| Brexit (F19) | changes in UK's income growth (O49) |
| Brexit (F19) | depreciation of the pound (F31) |
| changes in UK's income growth (O49) | wine consumption (L66) |
| depreciation of the pound (F31) | wine consumption (L66) |
| Brexit (F19) | decline in wine consumption in the UK (L66) |
| bilateral trade consequences of FTAs (F10) | trade diversion (F14) |
| subsequent FTAs with countries (F15) | complexity in trade dynamics post-Brexit (F12) |
| multilateral agreement to remove wine import tariffs (F13) | benefits for wine producers and consumers (L66) |