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Measuring trade creation effects of free trade agreements: Evidence from wine trade in East Asia

Kimie Harada and Shuhei Nishitateno ()

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: East Asia has experienced an unprecedented expansion in its wine market over the past two decades. This paper examines the extent to which import tariff reductions through bilateral free trade agreements (FTAs) have contributed to an increase in wine imports to Japan, China, and South Korea. Our empirical method involves estimating an augmented version of the gravity equation by the Poisson pseudo-maximum likelihood (PPML) technique. Analyzing a panel dataset for 1990–2016 covering 27 exporters, we find that overall a 1 percentage point reduction in tariff among FTA member countries is associated with an increase in the wine import volumes by 0.042%, which is seven times higher than a similar reduction in tariff on an MFN basis. The strongest trade creation effects are founded for bottle wine. The results are robust to various specifications..

Keywords: wine trade; FTAs; non-tariff barriers; gravity equation (search for similar items in EconPapers)
JEL-codes: F14 F69 L66 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2021
New Economics Papers: this item is included in nep-agr and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:pas:papers:2021-13

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