Globalization and national commodity cycles: The case of wine in Australia

Abstract

Globalization may have reduced but certainly has not eliminated differences in national commodity cycles. This article examines the case of Australia's wine industry. Over the past four decades, all annual indicators of that industry's international competitiveness have traced a steep inverted V. This paper draws on recently compiled data to first summarize such indicators and contrast them with those of other key wine-exporting countries. It then offers a series of partial explanations for the industry's sharp rise and then equally steep fall in its international competitiveness (and its several bumps along the way). The New Zealand and Californian wine industry's prolonged expansions in particular are contrasted with Australia's. Despite the current downturn in the industry's fortunes, and notwithstanding the likelihood of further boom-slump cycles in the decades ahead, the paper concludes that a return to profitability is possible if vignerons and wine exporters were to raise their current rates of investments in R&D, quality improvements and promotion, and if the AUD remains relatively weak.