Wine: IIT in a Globalized Industry

Wine: IIT in a Globalized Industry

Wine: IIT in a Globalized Industry Kym Anderson Joe Francois Wine Economics Research Centre University of Adelaide World Trade Institute University of Bern Doug Nelson Glyn Wittwer Murphy Institute Tulane University Centre for Policy Studies Victoria University We all know that David has written (a lot) about intra-industry trade Theory

Greenaway (1982). Identifying the Gains from Pure IntraIndustry Exchange. Journal of Economic Studies, V.9-#3, 40-54. Greenaway, (1985). Trade in Differentiated Goods and Commercial Policy, in D. Greenaway ed Current Issues in International Trade Theory and Policy. London: Macmillan, 81-98. Greenaway & Milner (1988). Intra Industry Trade and the Shifting of Protection across Sectors. European Economic Review, V.32-#4, 92745. Egger, Egger and Greenaway. (2007). Intra-Industry Trade with Multinational Firms. European Economic Review, V.51-#8, 1959-84. Falvey, Greenaway and Yu. (2011). Catching up or Pulling Away: Intra-Industry Trade, Productivity Gaps and Heterogeneous Firms. Open Economies Review, V.22-#1, 17-38. We all know that David has written (a lot) about intra-industry trade Methods

Greenaway & Milner (1981). Trade Imbalance Effects in the Measurement of Intra-Industry Trade. Weltwirtschaftliches Archiv, V.117-#4, 756-62. Greenaway & Milner (1983). On the Measurement of Intra-Industry Trade. The Economic Journal, V.93-#372, 900-08. Greenaway (1984). The Measurement of Product Differentiation in Empirical Studies of Trade Flows, in H. Kierzkowski ed Monopolistic Competition in International Trade. Oxford: Oxford University Pres, 230-50. Greenaway, Hine, Milner & Elliott (1994). Adjustment and the Measurement of Marginal Intra-Industry Trade. Weltwirtschaftliches Archiv, V.130-#2, 418-27. Greenaway & Milner (2001). Intra-Industry Foreign Direct Investment and Trade Flows: New Measures of Global Competition, in L. Cheng and H. Kierzkowski eds, Global Trade and Production in East Asia. Dordrecht: Kluwer, 111-28. We all know that David has written (a lot) about intra-industry trade Applications

Greenaway (1983). Intra-Industry and Inter-Industry Trade in Switzerland. Weltwirtschaftliches Archiv, V.119-#1, 109-21. Greenaway (1983). Patterns of Intra-Industry Trade in the UK, in P. K. M. Tharakan ed Intra-Industry Trade: Empirical and Methodological Issues. Amsterdam: North-Holland, 14160. Drabek & Greenaway (1984). Economic Integration and Intra-Industry Trade: The EEC and CMEA Compared. Kyklos, V.37-#3, 444-69. (1984). A Cross Section Analysis of Intra-Industry Trade in the U.K. European Economic Review, V.25-#3, 319-44. We all know that David has written (a lot) about intra-industry trade Greenaway (1987). Intra-Industry Trade, Intra-Firm Trade and European Integration: Evidence, Gains and Policy Aspects. Journal of Common Market Studies, V.26-#2, 153-72. Greenaway (1989). Regional Trading Arrangements and IntraIndustry Trade: Evidence and Policy Issues, in D. Greenaway, T. Hycak and R. Thornton eds, Economic Aspects of Regional Trading Arrangements. Wheatsheaf Books, 31-42.

Greenaway & Milner (1989). The Extent and Consequences of Intra-Industry Trade, in J. Black and A. I. MacBean eds, The Changing Structure of World Trade. Basil Blackwell, 60-88. Cooper, Greenaway & Rayner (1993). Intra-Industry Trade and Limited Producer Horizons: An Empirical Investigation. Weltwirtschaftliches Archiv, V.129-#2, 345-66. We all know that David has written (a lot) about intra-industry trade Greenaway & Hine (1991). Intra-Industry Specialization, Trade Expansion and Adjustment in the European Economic Space. Journal of Common Market Studies, V.29-#6, 603-22. Greenaway, Hine & Milner (1994). Country-Specific Factors and the Pattern of Horizontal and Vertical Intra-Industry Trade in the UK. Weltwirtschaftliches Archiv, V.130-#1, 77-100. Greenaway, Hine & Milner (1995). Vertical and Horizontal IntraIndustry Trade: A Cross Industry Analysis for the United Kingdom. The Economic Journal, V.105-#433, 1505-18. Greenaway, Hine & Milner (1998). Vertical and Horizontal IntraIndustry Trade: An Analysis of Country-and Industry-Specific Determinants, in M. Brulhart and R. Hine eds, Intra-Industry Trade and Adjustment: The European Experience. London: Macmillan, 7097. We all know that David has written

(a lot) about intra-industry trade Menon, Greenaway & Milner (1999). Industrial Structure and AustraliaUK Intra-Industry Trade. Economic Record, V.75#1, 19-27. Greenaway, Milner & Elliott (1999). UK Intra-Industry Trade with the EU North and South. Oxford Bulletin of Economics and Statistics, V.61-#3, 365-84. Greenaway & Torstensson (2000). Economic Geography, Comparative Advantage and Trade within Industries: Evidence from the OECD. Journal of Economic Integration, V.15-#2, 260-80. Greenaway, Haynes & Milner. (2002). Adjustment, Employment Characteristics and Intra-Industry Trade. Weltwirtschaftliches Archiv, V.138-#2, 254-76. We all know that David has written (a lot) about intra-industry trade Surveys

Greenaway & Milner (1986). The Economics of IntraIndustry Trade. Oxford: Basil Blackwell. Greenaway (1987). The New Theories of Intra-Industry Trade. Bulletin of Economic Research, V.39-#2, 95-120. Greenaway & Milner (1987). Intra-Industry Trade: Current Perspectives and Unresolved Issues. Weltwirtschaftliches Archiv, V.123-#1, 39-57. Greenaway & Milner (1987b). Theories of Intra-Industry Trade: A Review of the State of the Art, in Nordic Studies on Intra-Industry Trade. bo, Finland: Abo Academy Press, 11-34. We all know that David has written (a lot) about intra-industry trade Greenaway & Milner (2005). What Have We Learned from a Generation's Research on Intra-Industry Trade?, in S. Jayasuriya ed Trade Theory, Analytical Models and Development: Essays in Honor of P.J. Lloyd. Cheltenham: Edward Elgar, 147-60. Greenaway & Torstensson (1997). (1997). Back to the Future: Taking Stock on Intra-Industry Trade. Weltwirtschaftliches Archiv, V.133-#2, 249-69.

We also know that David, shall we say, enjoys a glass of wine It looks like Sue is driving. Probably an Australian chardonnay. So, of course, We Need A Paper on IIT in Wine! Provide an overview, with projections, of the global wine industry. Provide some details on intra-industry trade in the global wine industry. The Global Wine Industry Who are the main wine producers Source: Anderson & Nelgen (2009). Global Wine Markets, 1961-2009. The Global Wine Industry Who are the main wine consumers

! The Global Wine Industry Wine consumption is declining in much of the world; and Wines share of the booze market is declining The Global Wine Industry Wines share of the booze market is declining Wine consumption is declining, but Not everywhere, and not in the UK The Global Wine Industry Wines share of the booze market is declining Wine consumption is declining, but Not everywhere, and not in the UK

Definitely not in China World Wine Market For this presentation, Im going to focus on the largest producers ITA ESP FRA USA ARG CHL AUS CHN ZAF DEU PRT ROM GRC RUS BRA 1969 6,896 2,597 6,272 799 2,092

453 171 0 456 558 1,080 631 421 1979 7,128 3,262 6,661 1,557 2,436 540 353 0 581 871 922 818 528 1989 6,747 3,255 6,609 1,736 1,918

401 439 33 815 954 813 806 454 135 250 310 1999 5,615 2,951 5,759 2,065 1,424 436 677 739 795 972 673 636 418 227

271 2009 4,823 3,576 4,777 2,501 1,450 847 1,250 686 967 957 648 492 394 494 323 Top 15 producers by 2013 volume 2013 4,490 4,473 4,202 2,200 1,498 1,280 1,246 1,170

1,097 830 674 428 370 361 273 Market share in production volumes of top 11 producers from 2009 1969 1979 1989 1999 2009 2013 1 ITA 24.8 22.3 22.3 21.1 17.9 16.1 2 FRA 22.6 20.9 21.9 21.6 17.8

15.1 3 ESP 9.3 10.2 10.8 11.1 13.3 16.1 4 USA 2.9 4.9 5.7 7.7 9.3 7.9 5 ARG 7.5 7.6 6.3 5.3 5.4 5.4 6 AUS 0.6 1.1 1.5

2.5 4.6 4.5 7 ZAF 1.6 1.8 2.7 3.0 3.6 3.9 8 DEU 2.0 2.7 3.2 3.6 3.6 3.0 9 CHL 1.6 1.7 1.3 1.6 3.1 4.6 10 CHN 0.0

0.0 0.1 2.8 2.5 4.2 11 PRT 3.9 2.9 2.7 2.5 2.4 2.4 SUM 76.9 76.1 78.5 82.9 83.5 83.1 Hirfindahl (for top 11) 1,303.3 1,143.3 1,195.3 1,166.0 997.5 925.2 Recall that this is the ratio of a countrys wine exports to total exports

divided by the same ratio for the world as a whole. An RCA > 1 implies that the country has a comparative advantage. Top 25 importers of 2009 ranked by value, by decade Top 25 exporters of 2009 ranked by value, by decade 2009 1999 1989 1979 1969 1 GBR GBR GBR USA FRA 2

USA USA DEU DEU DEU 3 DEU DEU USA GBR USA 4 CAN JPN CHE

FRA GBR 5 BLX BLX BLX BLX CHE 6 NLD CHE NLD CHE BLX 7

JPN NLD FRA NLD NLD 8 CHE CAN JPN CAN CAN 9 SWE FRA CAN

DNK 10 DNK DNK ITA 11 FRA SWE 12 RUS 13 2009 1999 1989 1979

1969 1 FRA FRA FRA FRA FRA 2 ITA ITA ITA ITA ITA 3 ESP

ESP ESP ESP PRT 4 AUS AUS DEU DEU ESP 5 CHL PRT PRT PRT

DEU 6 DEU CHL USA AUT GRC 7 USA USA AUS HUN ZAF 8 PRT

DEU ROM GRC HUN ITA 9 ZAF ZAF GRC BLX BLX ITA SWE 10 NZL

ARG CHL CHL AUS DNK SWE DNK 11 ARG BLX BGR USA AUT ITA SWE

JPN AUT 12 BLX BGR BLX BGR CHL HKG IRL PRT IRL FIN 13 AUT

NZL HUN ROM BGR 14 CHN PRT AUS AUS AUS 14 CHE HUN ARG ARG

ROM 15 AUS RUS AUT AUT HKG 15 HUN GRC CHE AUS CHE 16 ITA AUT

IRL PRT SGP 16 GRC CHE AUT ZAF USA 17 SGP SGP ESP BRA BRA

17 BGR AUT NZL CHE ARG 18 IRL ESP HKG MEX JPN 18 UKR ROM

ZAF BRA TUR 19 FIN FIN FIN HKG ESP 19 GEO GEO BRA TUR CAN

20 AUT BRA BRA FIN MEX 20 ROM UKR TUR CHN CHN 21 BRA AUS MEX

SGP IRL 21 CAN HRV CHN NZL NZL 22 ESP HKG SGP ESP PRT 22

HRV TUR CAN CAN BRA 23 MEX MEX KOR KOR CHN 23 BRA CAN GEO

GEO GEO 24 KOR CHN CHN CHN KOR 24 TUR CHN UKR UKR UKR 25

PRT KOR RUS RUS RUS 25 CHN BRA HRV HRV HRV BLX = Belgium/Lux; HRV = Croatia; SGP = Singapore; ZAF = S. Africa Trade Among Top 11 Wine Producers, 1969 Trade Among Top 11 Wine Producers, 1979 Trade Among Top 11 Wine Producers, 1989

Trade Among Top 11 Wine Producers, 1999 Trade Among Top 11 Wine Producers, 2009 Intra-Industry Trade in Wine Quick reminder on calculating IIT IIT is just IIT j :2 min X j , M j X j M j X j M j The Grubel-Lloyd index is Xj Mj IIT j X j M j X j M j GL j : 1 . TT j X j Mj X j M j Xj = Mj GLj = 1, all trade is IIT;

Xj or Mj = 0 GLj = 0, all trade is inter-industry. Intra-Industry Trade in Wine While production techniques vary systematically across countries, IIT in wine would seem to be driven primarily by a preference for variety. Loosely speaking, with a few exceptions (e.g. Great Britain), demand for wine and local production grow together, followed by increasing demand for other varieties. This is clearest, in more recent times, for the case of new world producers; also Even more recently, the case of China Intra-Industry Trade in Wine GBRs role in the global wine trade is very interesting.

Never a major producer, but for a very long time a major consumer. As Nye (2007, War, Wine & Taxes) shows, British demand for wine has played a major role in the development of the French (and Portugese) wine industry back to the 15th century. Then, in the mid-1980s, the government permitted grocery shops to sell wine, this led to a massive boom in imports from Australia and New Zealand. Intra-Industry Trade in Wine What we want to do is look at the way the elements of the IIT measure (Xwine, Mwine, Ywine), along with national consumption, evolve, especially in the core producing countries. Unfortunately, the data made its way to me yesterday. So, right now, Ill show you some basic IIT measures in wine. IIT Indexes (volume and value) top producing

countries 69 vol 69 val 79 vol 79 val 89 vol 89 val 99 vol 99 val 09 vol 09 val Argentina 0.14 0.16 0.11 0.12 0.05 0.09

0.14 0.13 0.05 0.07 Australia 0.02 0.01 0.09 0.14 0.12 0.14 0.07 0.06 0.09 0.06

Chile 0.02 0.13 0.05 0.07 0.01 0.04 0.02 0.04 0.02 0.02 China 0.00 0.00 0.08

0.09 0.07 0.08 0.05 0.05 0.11 0.11 France 0.08 0.07 0.07 0.07 0.05 0.09 0.14

0.14 0.12 0.13 Germany 0.08 0.08 0.06 0.08 0.09 0.16 0.15 0.18 0.16 0.19 Italy

0.03 0.01 0.06 0.04 0.07 0.06 0.07 0.08 0.08 0.08 New Zealand 0.00 0.00 0.00 0.01

0.05 0.03 0.02 0.05 0.07 0.09 Portugal 0.11 0.09 0.08 0.07 0.11 0.07 0.08 0.11

0.04 0.10 South Africa 0.13 0.09 0.17 0.17 0.14 0.18 0.11 0.14 0.19 0.20 Spain 0.04

0.06 0.04 0.08 0.04 0.06 0.16 0.13 0.17 0.18 USA 0.01 0.03 0.02 0.03 0.03

0.05 0.03 0.07 0.11 0.14 Core IIT Indexes (volume and value) top producing countries 69 vol 69 val 79 vol 79 val 89 vol 89 val 99 vol 99 val 09 vol

09 val Argentina 0.16 0.15 0.16 0.15 0.13 0.22 0.31 0.26 0.18 0.23 Australia 0.04 0.03

0.18 0.22 0.13 0.16 0.23 0.17 0.21 0.10 Chile 0.03 0.17 0.13 0.16 0.03 0.10

0.05 0.14 0.07 0.07 China 0.00 0.00 0.21 0.17 0.22 0.20 0.10 0.10 0.01 0.01

France 0.11 0.12 0.03 0.07 0.19 0.32 0.22 0.38 0.22 0.32 Germany 0.02 0.07 0.08

0.19 0.06 0.08 0.23 0.21 0.10 0.11 Italy 0.14 0.07 0.03 0.07 0.12 0.24 0.15

0.24 0.31 0.29 New Zealand 0.06 0.02 0.13 0.08 0.14 0.13 0.10 0.10 0.17 0.13 Portugal

0.01 0.01 0.00 0.01 0.15 0.01 0.05 0.18 0.11 0.18 South Africa 0.04 0.10 0.10 0.08

0.22 0.13 0.22 0.23 0.14 0.29 Spain 0.05 0.13 0.03 0.05 0.09 0.17 0.08 0.18

0.30 0.29 USA 0.09 0.05 0.14 0.16 0.16 0.15 0.11 0.10 0.13 0.09

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