Is Mercosur promoting trade? Insights from Argentinean wine exports

As a consequence of the rapid and significative decrease in domestic demand, to avoid structural surplus traditional wine producing countries have been forced to export a growing share of their wine production. This article empirically investigates Argentinean trade policy on the wine sector over the last years, in order to understand its effect on export flows. An expanded gravity model was estimated through a Poisson pseudo-maximum likelihood estimator, in order to account for heteroskedasticity. The data used refer to Argentinean exports of bottled wine to all main world importers during the period 1997-2010, and account for more than 90% of total trade flows. Our results show that Mercosur membership has promoted Argentinean wine exports to other Latin American countries, but may as a whole have been counter-productive. A more open trade policy could increase Argentinean bottled wine exports by more than 5.8%. In addition, given the rise in wine importation and consumption in countries with high tariff barriers, such as China, the small number of free trade agreements could penalize Argentinean exports even more in the future