Professor Kym Anderson belongs to the “founding fathers” of wine economics. He is a co-founder and co-editor of the Journal of Wine Economics and has headed the Wine Economics Research Centre at the University of Adelaide since its inception a decade ago. The International Economics of Wine, a 700+ page strong volume, is, if not a complete, but at least the quintessential summary of his wine-related research, and includes previously published articles from various journals between 2000 and 2018.
Anderson's research not only reflects the rising significance of wine economics as a field of scholarship, but it has crucially contributed to it and furthered it in fundamental ways. His work cannot be separated from the unique and massive data collections he has built over the years. All databases are freely accessible at the University of Adelaide's Wine Economics Research Centre and include: Data on the Economic Contributions and Characteristics of Grapes and Wine to Rural Regions of Australia; Global Wine Markets, 1961 to 2009: A Statistical Compendium (with Signe Nelgen); Australian Grape and Wine Industry Database, 1843 to 2013; Annual Database of National Beverage Consumption Volumes and Expenditures, 1950 to 2015 (with Alexander Holmes); Annual Database of Global Wine Markets, 1835 to 2018 (with Vicente Pinilla); and Database of Regional, National and Global Winegrape Bearing Areas by Variety, 1960 to 2016(with Signe Nelgen).
The book includes 26 articles (chapters), all authored or co-authored by Kym Anderson, and is organized in six sections that refer to aspects of wine and wine economics: Globalization of Wine; Australia's Wine Internationalization; Market Developments on Caucasia and Asia; Distortions to Wine Producer Incentives and Consumer Prices; Internationalization of Winegrape Varietal Choices; and Convergence in National Alcohol Consumption Patterns.
“Globalization of Wine” sets the stage. Seven papers analyze the enormous rise in the global wine trade over the last 30 years. This globalization surge is all the more astounding because global production has hardly increased since 1960. But wine sales have grown significantly in value terms. Exports as a share of global wine production have risen from 5% to 15% between 1960 and 1990, and to 40% by 2012. Wine, formerly one of the least traded agricultural products, has become one of the most internationally traded ones.
What caused this change? It seems the emergence of highly competitive and productive New World producers, such as Australia and New Zealand, are among the contributing factors—not always to the benefit of classic European wine-producing countries.
Various free trade agreements (FTAs) have added to the rise of wine's globalization. Chile and Australia, with their numerous FTAs, have mastered this domain like no other countries. Anderson mentions the positive influence of the Canada–U.S. FTA that preceded the North American Free Trade Agreement (NAFTA). Instead of decimating Canada's budding wine industry, it fostered Canada's specialization in cool-climate wine making.
Driven by rising incomes and accompanying changes in taste, the increasing complexity of wine demand has further fueled the international trade of wine. Consumers are no longer content with just the local product and wish for greater variety. In addition, increasing specialization has led to a surge in intra-industry wine shipments. Many wine exporting countries are also large wine importers. For instance, France, the world's largest wine exporter by value, is also the world's third-largest importer of bulk wine—mainly from Spain.
The first section of this book includes a paper analyzing the impact of climate change on the competitiveness of the world's wine regions. In particular, Anderson examines the market challenges for cool climate regions. Cool-climate wine production is riskier due to shorter growing seasons, higher freezing risk, and higher vintage-to-vintage variations. This, and the fact that cool-climate producers tend to be small, make cool-climate wine production more expensive. However, New Zealand has shown that these obstacles are not insuperable.
The Globalization section ends with two articles on the effects of Brexit. Kym Anderson and Glynn Wittwer employ a partial equilibrium model to simulate various scenarios. Their results suggest that the impact outside the United Kingdom will be minor, compared with other developments in the world's wine markets. “Inside the United Kingdom, however, the effect of Brexit on incomes and the British pound are likely to have nontrivial initial impacts on the domestic wine market and to be far more consequential than the direct impact of changes in bilateral tariffs” (Anderson and Wittwer, Reference Anderson and Wittwer2017, p. 212).
In the section of the book on “Distortions to Wine Producer Incentives and Consumer Prices,” Anderson sheds light on taxes and subsidies, including examinations of excise taxes versus import tariffs (for nonproducing countries) and ad valorem taxes versus taxes on the alcohol content of wine and its competitors.
In a paper with Hans Jensen (Anderson and Jensen, Reference Anderson and Jensen2016), Anderson analyzes the European Union's (EU) long-standing financial support for its wine industry. The authors show that subsidies are nontrivial and distributed unevenly across EU member countries. Their calculations suggest that during 2007–2012, annual assistance amounted to approximately 700 euros per hectare of vines or €0.15 per liter of wine produced in the EU at winery gate, “equivalent to a nominal rate of direct plus indirect producer assistance of approximately 20%” (Anderson and Jensen, Reference Anderson and Jensen2016, p. 289).
The section on the “Internationalization of Winegrape Varietal Choices” is based on Anderson's recently updated Database of Regional, National and Global Winegrape Bearing Areas by Variety, 1960 to 2016 (Anderson and Nelgen, Reference Anderson and Nelgen2020a), which lists the bearing areas of almost 1,600 wine grape varieties in 53 countries and 600 of the world's wine-growing regions for 1990, 2000, 2010, and 2016. A paper entitled “Drifting towards Bordeaux? The evolving varietal emphasis of U.S. wine regions,” by Alston, Anderson, and Sambucci, reveals the results for the United States. In fact, all papers in this section of the book demonstrate that there has been considerable convergence of varietal choices across countries over the past 30 years. The trend to so-called international varieties (mostly of French, Italian, and Spanish origin) can be observed everywhere.
The book is densely packed with knowledge, data, and data analysis, too much to discuss in this brief review. Needless to say, this book is a must-have for every wine economist and interested layman. It is uniquely informative and may inspire future research.
For those who need more, there is good news. Kym Anderson recently published four additional books that are equally inspiring: Which Winegrape Varieties are Grown Where? (Anderson and Nelgen, Reference Anderson and Nelgen2020b); Growth and Cycles in Australia's Wine Industry (Anderson, Reference Anderson2020); Global Wine Markets, 1860 to 2016: A Statistical Compendium (Anderson, Nelgen, and Pinilla, Reference Anderson, Nelgen and Pinilla2018); and Wine Globalization: A New Comparative History (Anderson and Pinilla, Reference Anderson and Pinilla2018).
