Short-Term Impact of the EU-Japan EPA: The Case of Wine Exports from France, Italy, and Spain to Japan

Abstract

In February 2019, the Economic Partnership Agreement between the European Union and Japan was enforced, liberalising most of the bilateral trade. For example, Japan eliminated the duties on European products such as chemicals, textiles, clothing and wine immediately upon entry into force of the agreement. In this study, we attempt to quantify the short-term effect of the EPA on European wine exports to Japan. We fit a seasonal auto regressive integrated moving average (SARIMA) model to the monthly exports of wine from France, Italy, and Spain to Japan up to the month prior to the activation of the EU – Japan EPA. Subsequently, we use the estimated models to forecast twelve months ahead starting from February 2019, i.e., from the first month of implementation of the EU – Japan EPA. Finally, we compare the forecasts with the observed values for the same period. The results show that our forecasts do not outperform the observed values. Consequently, we conclude that the positive difference between the observed values and the forecast is due to the effect of the agreement.