Title: Wine Trade and the Economics of Import Duty and Excise Tax Drawbacks
Presenter: Daniel A. Sumner
Abstract:
In 2003, the United States changed import duty and excise tax policy for table wine allowing for wine produced in the United States to be used as matching eligible exports for "substitution" drawback purposes. The implementation of the new wine drawback regulation has been controversial largely because imports that are matched with commercially interchangeable exports of wine effectively pay only one percent of the excise tax in the United States. These imports compete in the U.S. market with wine produced in the United States that pay the entire excise tax. This paper examines the effects of this new trade policy on the U.S. wine trade. We show that the degree to which the excise tax and duty drawback stimulates imports or exports depends on the relative volume of accumulated imports of commercially interchangeable wine not yet claimed by eligible exports at the time of importing compared to the expectations of future exports of commercially substitutable wine. The wine drawback policy has at times mostly benefited imports and at times mostly benefited exports. It has subsidized wine trade both in and out of the United States at the U.S. taxpayers´ expense. It subsidizes trade relative to domestic consumption of domestic production, with complex consequences within the industry. Results from our conceptual model and econometric estimation show that the wine drawback policy contributed significantly to growth in both wine imports and exports, especially for bulk wine.
About the author:
Daniel A. Sumner is the Frank H. Buck, Jr., Distinguished Professor in the Department of Agricultural and Resource Economics at the University of California, Davis and the Director of the University of California, Agricultural Issues Center. Sumner was raised on a fruit farm in Suisun Valley, California where he was active in 4-H and FFA. He received his bachelor´s degree in agricultural management from California Polytechnic State University in San Luis Obispo in 1971, a master´s degree from Michigan State in 1973, and a Ph.D. in economics from the University of Chicago in 1978. His research and writing focuses particularly on the consequences of farm and trade policy on agriculture and the economy. Among other recognition, the Agricultural and Applied Economics Association (AAEA) honored Sumner for Outstanding Policy Contribution in 1995 and (with coauthors) for Quality of Research Discovery in 1996; his work has also been honored for Quality of Communication. He was named a Fellow of the AAEA in 1998 and presented the Fellows Address to the AAEA in 2015. He and coauthors won the award for the Outstanding Article in the American Journal of Agricultural Economics in 2015. Prior to returning to California in January 1993, Sumner was the Assistant Secretary for Economics at the United States Department of Agriculture where he was involved in policy formulation and analysis on the whole range of topics facing agriculture and rural America. From 1978 to 1992 Sumner was a professor in the Division of Economics and Business at North Carolina State University. He spent much of the period after 1986 on leave for government service in Washington, D.C. including serving as a Senior Economist at the President's Council of Economic Advisers. https://are.ucdavis.edu/en/people/faculty/daniel-sumner/.