Wine Exports and Brexit; Does This Create Opportunities for Georgia?

While perusing Mike Veseth’s excellent US-based blog, The Wine Economist, I stumbled upon his review of a scholarly paper published by Australian economists Kym Anderson from the University of Adelaide and Glyn Wittwer  from Victoria University regarding Brexit and the wine market.

KA

Kym Anderson is Executive Director of the Wine Economics Research centre at University of Adelaide, the premier wine economics facility in the Southern Hemisphere, and having spent some time here in Georgia, has written extensively on trade blocs and technology uptake, and their likely impact on Georgian wine exports.

The UK imports over 1.8 billion bottles of wine a year; less than 1% of consumption is satisfied by domestic wine production. Existing free-trade arrangements with the EU are coupled with concessional market access for South African and Chilean wine at present.

UK

FIGURE 1: WINE’S SHARES OF UK MERCHANDISE IMPORT VALUE SINCE 1800 AND OF VOLUME AND VALUE OF UK ALCOHOL CONSUMPTION,a 1950 TO 2015 (%)

 

The chart is taken from Anderson and Wittwer‘s paper. While the UK has been importing table wines and fortified wines from France, Spain and Portugal for over 500 years, the chart above shows that wine consumption is a comparatively recent phenomenon amongst the masses, with wine now making up around a third of all alcohol consumed in the UK by volume, and almost a half of all alcohol consumed by value.

This has relevance to Georgia as, unlike France, Italy, Spain, or Portugal, the vast majority of British wine consumers are only first- or second-generation wine drinkers. The willingness to try something novel or exotic is more developed amongst such consumers, which creates opportunities for up-and-coming wine regions.

The “Free Trade” scenario put forward by the authors could put Georgia, and possibly Armenia, in a more advantageous position. Tariff treatment of wines from the Caucasus would be identical to that of European, Australian, South African or South American wines.

The “Large Brexit” would see Georgian wines facing a higher level of tariff than South African and Chilean wines. However, tariffs are rather small compared to domestic UK excise tax.

There is a third option not considered, of the UK negotiating a FTA with Australia, New Zealand, USA and Canada, while retaining tariffs on EU and Caucasus wines. The tariff situation does not favour Georgian exports. However, more robust trade and investment between the four Anglophone economies would likely add 10-20% to the GDP growth figures of the participants in this FTA, which would likely increase demand for wine, including that from Georgia. Much the the academic establishment would disagree with me on that claim, but my guess is that the UK’s economy 5 years after Brexit will be a great deal more robust than most project.

Overall, a thought provoking and interesting article with relevance for wine producers in this region.

 

 

 

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