Aircraft Dispute, Wine, and the US–EU Trade War: Implications for US Consumers and Wine Suppliers

Lisha Zhang,James L. Seale,Gulcan Onel

doi:10.1017/aae.2021.10

Lisha Zhang, James L. Seale + Show 1 more

Open Access

https://doi.org/10.1017/aae.2021.10

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Abstract

AbstractThis paper estimates changes in demand for imported wines by source country and resulting welfare effects due to Section 301 tariffs imposed on certain European wines in October 2019. A two-stage expenditure allocation scheme is used to estimate the import demand for red, white, and other wines in the first stage, and source-differentiated red wine and white wine demand in the second stage. From derived price elasticities measuring first and second stage interactions, welfare measures are simulated capturing effects of the new tariffs on both taxed and non-taxed exporters as well as the US importers of red and white wine.

Highlights

In terms of value, wine is the most traded agricultural product between the United States (US) and the European Union (EU)1 (US Department of Agriculture Foreign Agricultural Service, 2020)
Major source countries for US imported red wine were identified as France, Italy, Chile, Spain, Australia, and the Rest of the World (ROW); the major source countries for US imported white wine were identified as France, Italy, Australia, New Zealand, Germany, and the ROW.2
This paper develops a consumer demand framework to estimate changes in import demand due to 25% tariff increases imposed on select EU wine exporters in October 2019 and to measure the welfare effects of these changes by source country

Summary

Introduction

Wine is the most traded agricultural product between the United States (US) and the European Union (EU) (US Department of Agriculture Foreign Agricultural Service, 2020). The US and the EU both have a variety of domestic and international policies in place that affect wine trade, including schedules of differentiated tariffs and a variety of non-tariff barriers set through domestic regulations. We evaluate the welfare effects of the October 2019 Section 301 tariffs imposed by the Trump administration on certain EU wines An additional 25% tariffs are applied to wines imported into the US from France, Germany, Spain, and the United Kingdom (UK). The effects of the newly imposed additional wine tariffs are differential in that wines from other countries, including other EU countries, are exempt from the tariff increase

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