The impact of COVID-19 government policy on the international wine trade

Abstract

To control the health impact of the COVID-19 pandemic, governments implemented various restrictive policies, such as stay-at-home orders and restrictions on internal movement, which had adverse effects on consumption and, consequently, on international trade. This was observed even for products intensively traded and minimally impacted in terms of production, such as wine. Thus, to work towards a better awareness of future crises, this study assesses the impact of government policy responses to COVID-19 on the international wine trade. A gravity model, a benchmark approach for studying the determinants of trade, is estimated using monthly data for 20 exporting countries and 214 potential importing countries. The findings suggest that, ceteris paribus, the value of wine export flows was inversely related to the intensity of government policy response in importing countries due to lower demand provoked by restrictive measures. This effect was considerably reduced, however, concerning wines coming from the Old World, which are inferred to be more resilient, a factor primarily attributed to their higher share of wines exported with geographical indications. On the other hand, only the exports from Old World countries were negatively influenced by restrictions on internal movements in the exporting country, which reflects a business model with a complex supply chain in which several intermediaries are involved, thus weakening the direct linkage between wine producers and consumers.