By Monia Snoussi-Mimouni, Erik Wijkström and Wolf Meier-Ewert
The first edition of the Vine and Wine World Trade Forum, held earlier this month in Dijon, France, revealed that international trade in wine and vine products has grown significantly over the past two decades.
The market has also become more diversified as consumer tastes have changed. While traditional winemaking economies, such as France, Italy and Spain, maintain their dominance in wine exports, “new world” winemakers, such as Australia, Chile and the United States, are also making major inroads. However, the share of China as an importer has declined following a period of growth, possibly due to global disruptions, such as the COVID-19 pandemic.
Although tariffs have decreased in international wine trade, the wine industry is strongly influenced by non-tariff measures, such as increasing regulatory activity and health and safety considerations, including health warnings about wine consumption. At the same time quality schemes like geographical indication (GI) protection have a strong positive impact on export values. These trends underline the WTO’s importance as a forum for fostering international cooperation to avoid trade frictions and fragmentation.
An upward trend for international trade in wine and vine products
International trade in wine and vine products has almost tripled over the past two decades. Figure 1 shows its value steadily rising from US$ 17.7 billion in 2000 to over US$ 50 billion in 2021 and 2022. Wine accounted for the majority of this trade (76 per cent in 2022), while the remaining 24 per cent consisted of fresh and dried grapes and grape juice.
International trade has increasingly become a crucial component of the wine industry over the past two decades (see Figure 2). While in 2000 approximately 22 per cent of wine production was traded internationally, by 2022 this proportion had nearly doubled, to 42 per cent. This suggests that the focus of the wine industry has increasingly shifted towards international markets. The share of imported wine in global wine consumption grew from 25 to 45 per cent over the same period, indicating that consumer tastes have become more internationally diversified.
The “old world” continues to dominate wine exports (see Figure 3), with France, Italy and Spain holding the top three positions in both value and volume. From the “new world,” Australia, Chile and the United States are the main suppliers in terms of value (see Figure 4), although their shares in the international market remain smaller than those of the top three.
On the imports side (see figures 5 and 6), the primary wine-importing countries are Germany, the United Kingdom and the United States. They are closely matched in terms of volume, but the United States takes a clear lead in value. A surge in China’s wine imports began in 2005 and peaked in 2017, but it has more than halved since then. This decline may be due to short-term disruptions, such as the COVID-19 pandemic, as well as longer-term structural shifts, such as increased domestic production and possible changes in consumer preferences.
Tariffs on wine
The most-favoured-nation (MFN) tariff for wine, as for many other alcoholic products, is high in the tariff schedules of many WTO members. In 2000, the average MFN applied tariff stood at 58 per cent, declining slightly to 48 per cent by 2022 (see Figure 7). However, when actual imports are considered, the trade-weighted average tariff stood at 8.8 per cent in 2022. This much lower figure indicates that most wine is imported by economies with relatively low tariffs.
Taking into account preferential rates under regional trade agreements (RTAs) and preferential trade arrangements (PTAs), the applied tariff rate is substantially lower. Weighted by the import value of the beneficiaries of these preferential rates, the average stands at a mere 4 per cent.
This lower rate implies that WTO members have successfully negotiated more favourable terms in their bilateral and regional trade agreements. The trend can be seen in the decline in applied tariffs from 7 per cent in 2014 to 4 per cent in 2022.
Tariff rates on wine vary widely among WTO members (Figure 8). Over half of WTO members have bound tariffs exceeding 50 per cent, and 20 per cent have tariffs higher than 100 per cent. Meanwhile, fewer than a third of members impose MFN applied tariffs below 15 per cent — a threshold often perceived as high — and 60 per cent of members apply MFN tariffs ranging between 15 per cent and 50 per cent. More than 10 per cent of members maintain MFN applied tariffs of above 50 per cent.
Non-tariff measures on wine and vine products
Apart from tariffs, other trade measures also affect wine and vine products. Many of these measures are non-tariff measures (NTMs) covered by the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) or the Agreement on Technical Barriers to Trade (TBT).
Under both of these agreements, governments are allowed to take measures to protect health and safety, or to regulate other aspects affecting the quality of wines (and other alcoholic beverages in general). For instance, governments often include health and pregnancy warnings in labelling and certification requirements.
Other examples include measures related to inspection protocols, wine sampling and testing methods, geographical designations or the use of traditional terms. Because they affect international trade, these measures need to be notified to the WTO as a means of communicating their impact on exporters, giving them an opportunity to comment on and review the measures. This is a core transparency obligation under the WTO.
Notifications to the WTO related to wine have increased over time, which may indicate more regulatory activity in this area. The WTO’s ePing database has recorded around 400 notifications of TBT measures and 300 SPS measures related to wine and alcoholic products since 2000 (see Figure 9), at the same time around 100 of these notified measures have been discussed in the TBT and SPS committees, allowing WTO members to seek clarification about the trade impact of the measures during these discussions.
Geographical indications and value premiums on wines
Origin and quality schemes have a particularly high impact on prices in the wine trade, and many of the major wine exporters use geographical indications (GIs) to protect the names of wines from particular regions or quality production methods.
The availability of such protection is required by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), in which GIs for wines and spirits are singled out for more protection than other goods.
GIs, often in the form of appellations of origin, have long been significant in the wine trade, in particular, and among the 9,500 origin brands that are estimated to be in use globally, 2,535 are used for wines. Within the European Union, a prime user of GIs, of the 3,500 GIs registered at the EU level, 1,627 are for wines.
Not all GI products are equally successful, but a 2021 study on the EU experience shows that the average value premium rate (i.e., the volume-weighted price premium for GI products compared to non-GI products) across all EU GI products was 2.07 in 2017. This indicates that the sales value of GI products was on average 2.07 times higher than that of comparable non-GI products.
GIs for wines are even more successful, commanding a value premium rate of 2.85 across all EU wine GIs, up from 2.72 in 2010. And in wine export markets for wine originating in the European Union, the value of wine GIs rises even higher. France leads the score with a value premium rate of 4.13 (see Figure 10).
European GI products are mostly sold nationally (60 per cent in terms of value and volume) or traded with other EU countries (23 per cent in terms of volume and 20 per cent in terms of value).
However, the most lucrative markets are the growing exports to economies outside the European Union (i.e., extra-EU), (16 per cent in terms of volume and 22 per cent in terms of value) — mostly to the United States, the United Kingdom and Canada — in which the relative value per volume has been highest for the biggest wine exporters, as shown in Figure 11.
Several regional and bilateral agreements, as well as international conventions administered by the World Intellectual Property Organization (WIPO), provide for more elaborate levels of protection than the TRIPS Agreement. However, the TRIPS rules provide the only fully multilateral minimum standard of protection for how wine GIs must be protectable in these export markets.
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