AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

AAWE Working Paper No. 19

 

The agricultural and food trade in the first globalisation:
Spanish table wine exports 1871 to 1935 – A case study

Vicente Pinilla and Raúl Serrano 

Introduction

The international economy has, for several decades, undergone an intensive process of integration, which has offered developing countries opportunities to increase their exports and, consequently, stimulate their economic growth. Although since the middle of the twentieth century, the greatest opportunities have emerged in the export of manufactured goods, for some countries primary products still constitute a substantial part of their foreign trade and the currency gained through trade. It is well known, however, that the development of such exports faces very diverse difficulties, such as the inelastic income demand for agricultural products, the low participation of these goods in intra-industrial trade or the serious institutional obstacles which exist, derived from the existence of protectionist policies, especially in the more developed countries, which limit their the possibilities of in this direction (Serrano and Pinilla, forthcoming).

The first phase of globalisation, which occurred between the mid-nineteenth century and the First World War, allows us to analyse, albeit in a different historical context, the principal factors which determine the possibilities of trade growth in the long term.

The debate regarding the causes which determined the growth of trade in the first phase of globalisation has notable similarities to that which currently exists with regard to the second phase, although the historical circumstances are obviously different. There is widespread agreement that the increase in incomes has, obviously, been a fundamental cause of its growth (Irwin, 2002; Estevadeordal et al., 2003; Jacks and Pendakur, 2007). In addition, trade liberalization and exchange rate stability have been very important (Jacks, 2006; Estevadeordal et al., 2003; López-Cordova and Meissner, 2001). By contrast, the debate regarding the role of the reduction of transport costs is by no means closed; certain authors believe that this was essential to explain the growth of trade (O’Rourke and Williamson, 1999; Jacks et al., 2008), while others find no evidence on this point (Jacks and Pendakur, 2007). Similarly, different positions exist between those who consider that the stock of immigrants in a country stimulated its trade with their country of origin (Dunlevy and Hutchinson, 1999) and those who believe that the effects of this circumstance were neutral (Jacks, 2005). Belonging to an empire, and therefore lower transaction costs or more favourable trade policies, has also been considered to encourage trade growth in this period (Mitchener and Wedenmier, 2008).

Within this context, the present study concentrates on trade in agricultural products, a group of products which played a central role in this period, maintaining from 1870 onwards a fairly stable participation of approximately 50% of international exchanges (Aparicio et al., 2008). However, very few studies have focused specifically on the determinants which stimulated trade in this type of products, and even less so on those which played such a role in this historical context.

To this end, the present study concentrates on a specific case i.e. trade in Spanish table wine. Wine was one of the key exports produced by Spanish farmers in the mid- nineteenth century. Together with cereals (especially wheat) and oil, it was one of the three key products of Mediterranean agriculture, occupying a significant part of cultivated land and agricultural production.

In the analysis of this case, the literature initially analysed the success of exports and their subsequent collapse as the exclusive consequence of the exceptional demand which existed in France between 1875 and 1891, due to the harm caused by the phylloxera plague in its vineyards (Carnero, 1980). Subsequently, certain wider visions explained the success of exports to France in the general context of the unequal advances of Spain in other markets (Pan-Montojo, 1994), or in the consideration of table wine as a product with low barriers to entry and therefore highly vulnerable to the entry of new producers; moreover, it encountered difficulties in penetrating the markets of non-producing countries (Simpson, 1995).

In recent years, various studies have attempted to study in depth the above- mentioned research lines, broadening them or employing different approaches with the help of econometric models which made it possible to empirically verify the proposed hypotheses. Most notable is the consideration of the harm caused by the French tariff policy (Pinilla and Ayuda, 2002) and the difficulties in penetrating the markets of high- income countries (Ayuda, Aparicio and Pinilla, 1998; Pinilla and Ayuda, 2007 and 2008).

Given this background, the objective of the present study is to analyze the overall trajectory of table wine exports and provide convincing explanations of the pattern. Thus, we employ an approach that takes all of the possible explanatory factors into account, instead of adopting a narrower approach which focuses on a single principal factor. The methodology employed consists of using a gravity model to explain trade flows in Spanish table wine.

Our results highlight the key role of trade policies in the determination of export possibilities and the difficulties derived from the export of products which are characterised by the low or non-existent change in demand when income changes. These results may shed a little more light on the determinants of trade in the first phase of globalization.

Following this introduction, the next section briefly examines Spanish exports of table wine. Subsequently, the data used and the gravity model employed are explained. Next, an analysis is made of the results obtained from the econometric model. Finally, the article ends by providing some conclusions.

Related Items

Menu