Toxic trade: the impact of preferential trade agreements on alcohol imports from Australia in partner countries.

Abstract

Trade liberalization is hypothesized to increase the availability of imported alcoholic beverages in importing countries. This study provides the first longitudinal analysis of the impact of preferential trade agreements (PTAs) on alcohol imports. Panel data comprising alcohol-product (n=15) by importing country (n=16) observations from 1988 to 2016 constructed from global databases. The relationship between PTA status, tariff level and alcohol imports were assessed using a log-linear model. Unobserved heterogeneity was addressed through a combination of differencing and product-year fixed-effects. Australia and its 16 free trade partners (PTA year in parentheses), classified by low [<50%: Brunei (2010), Cambodia (2010), Indonesia (2010), Malaysia (2010, 2013), Myanmar (2010), Thailand (2003, 2010) and Vietnam (2010)] and high (>50%: Chile (2009), China (2015), Japan (2015), Korea (2014), Laos (2010), New Zealand (1983, 2010), Philippines (2010), Singapore (2003, 2010) and United States (2005)] percentage of alcohol consumers in the population. Independent variables were the existence of a PTA with Australia and tariff (border tax) rate on Australian products. Outcomes were (log) Australian imports; and a binary indicator of any imports from Australia. Introducing a PTA has been associated with a statistically significant increase in the share of Australian alcoholic beverage imports in its partner country's total alcoholic beverage import supply, mainly from trade in new alcoholic beverage categories (0.067, P<0.05). Tariff rate reductions have been associated with increased imports in both low and high consumption country groups; however, the effect has been larger in low consumption countries (-0.189, P<0.01 compared with -0.016, P<0.05). The impact of PTA adoption was significant in low consumption countries only (1.141, P<0.05). Preferential trade agreements involving Australia have been positively associated with alcohol imports from Australia in countries with low rates of alcohol consumption, due primarily to trade in new products.