| What would happen if export tariffs to Africa, China and the US are dropped? The latest BFAP Baseline report illustrates this scenario. Tariff reductions and free trade agreements are increasingly playing an important role in the global wine trade. Because of the impact of tariff reductions that could be negotiated through free trade agreements, a model of these impacts was built by the Bureau for Food and Agricultural Policy (BFAP), based on the elimination of tariffs with other African countries, with the USA and with China. The recently constructed BFAP wine model was used to simulate what would happen, first with the current tariffs in place and then with the removal of all the tariffs. It is important to note that the results are conservative: when negotiating such agreements it is usual to also look to the reduction of non-tariff barriers, but these are not included here because they are difficult to quantify. THE AFRICAN DREAMSouth Africa’s main competitors in Africa are France, Spain, Portugal and the United States. Figure 1 illustrates the relative shares of the value of exports from the top 11 exporting countries into Africa by value of bottled and bulk exports. TABLE 1: Wine tariffs in selected African countries.
The tripartite trade agreement between SACU, SADC and COMESA is currently in effect. Country participation and implementation, however, remains sporadic and countries like Angola and Namibia are yet to ratify the agreement. The BFAP wine model explicitly accounts for exports to Angola, Kenya and Nigeria. |  | ||||||||||||||||||
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To simulate the impact of complete tariff reductions, with full country participation within the region, tariffs on wine were removed in these countries (Table 1). This induced an 870 000 litre increase in wine exports in 2016 relative to the baseline, (0.19% of total wine exports) which decreased gradually to a 730 000 litre increase from the baseline (0.13%) in 2024 (Figure 2). Over the nine years from 2016 to 2024, exports are projected to increase by 8.6 million litres.
GO EAST MY SON
Based on the top 11 countries exporting wine into the BRICS region, it is clear that South Africa is more competitive in terms of bulk wine exports, competing with Spain, Chile and the Ukraine. In terms of bottled wine, competitors include Portugal, Germany and the United States.
South African wine enters China at a competitive price compared to other exporting countries and removal of the import tariff in China (Table 1) effectively increases the total South African wine exports 163 000 litres (0.04% of total wine exports) in 2016 (Figure 4). Over the period from 2016 to 2024 wine exports are projected to increase by a total of 1.6 million litres from the Baseline. The absolute increase in total exports as well as the percentage increase of wine exports to China relative to the baseline are depicted in Figure 4.
THE STATE OF THE STATES
South Africa is respectively in 10th and 9th place in terms of the value of bottled and bulk wines exports to the US. Top competitors include Portugal, Argentina, France and Chile, although South Africa is a far smaller supplier to this market. Removal of wine import tariffs on bottled and bulk wine in the US (Table 1) improves the competitiveness of South African wine and increases the total South African wine exports by 14 400 litres (0.003% of total exports) in 2016, with the change increasing to 33 800 litres in 2021 before declining marginally to 2024 (Figure 6). In total, wine exports are projected to increase by a total of 300 000 litres over the period 2016 to 2024.
Combining the total effect of possible trade agreements in Africa, China and the USA, the tariffs listed in Table 1 are removed simultaneously: the effect is shown in Figure 7. In 2016 total exports increase by 1.05 million litres (0.23% of South Africa’s expected total exports) and by 2024 total exports have increased 890 thousand litres from the baseline levels (0.17%). Over the next 9 years (2016 – 2024) total wine exports would increase by 8.5 million litres as a result of the tariff removals in the countries illustrated. This increase amounts to just under 2% of any given year’s total wine exports.
These impacts are small: even though significant export growth is expected in these markets Africa, China and the US make up only 3%, 1% and 1.5% of the total South African export market respectively. Furthermore, tariff levels in the US are less than 1% at present due to preferential market access under the African Growth and Opportunities Act, and for other markets such as Africa, non-tariff barriers pose further challenges to market access. Further work on a larger sample of African countries, and on the impact of removing non-tariff barriers is required to illustrate the full impact. w
*The Bureau for Food and Agricultural Policy (BFAP) has as its main purpose to inform decision-making by stakeholders in various industries through the provision of independent research-based policy and market analyses. (www.bfap.co.za)
This report was published in WineLand on behalf of Sawis (South African Wine Industry Information & Systems).
