Modelling the World Wine Market to 2005: Impacts of Structural and Policy Changes

This paper addresses the question: What will the global wine market look like by 2005, when premium wine from Australian and other New World plantings will be ready to market? It does so using a newly developed World Multisectoral Wine Model which distinguishes premium from non-premium grapes and wine. After describing the model, we present results of projecting it from 1999 to 2005 to estimate the impact of known winegrape plantings of the late 1990s on producer and consumer prices in different regions, without and then with additional effective market promotion by Australia. Using the latter 2005 scenario as the base, we then examine in turn the effects on the global market of a strengthening of the US dollar, of a spread of Pierce’s Disease in California, of a European trade policy response to the growth in premium wine exports from the New World, and of a reduction in wholesale and retail margins on beverage wines (thanks to expanding supermarket and internet sales). Production, trade and welfare results are provided for ten regions spanning the world