FACTORS INFLUENCING THE INTENSITY OF EU WINE EXPORTS TO THE UNITED STATES

The standard gravity model is adapted to determine and quantify factors which influence EU wine exports to the United States. Using the trade intensity index to represent a country’s relative share of the U.S. wine market, independent variables are chosen to augment the standard gravity model and identify the effects of transaction costs and productivity on the competitiveness of EU wine exports. Variables considered in the model include factors which represent a country’s capacity to trade and those that represent their cost of trade. Factors that influence a country’s capacity to trade include gross domestic product and relative per capita wine productivity; factors which influence cost to trade include distance between countries, import tariffs, and dummy variables related to trade agreements and whether the country is landlocked. Each of these factors is analyzed to determine how it affects the trade intensity. The positive GDP coefficient indicates the existence of intra-industry trade and suggests that the protection of Designations of Origin and Geographical Indications will help maintain EU wine exports. This analysis provides information that will enable producers and policy makers to better evaluate potential trade agreements and other strategies that influence the competitiveness of European wine in the world market