Commentary

Why Boycotting Wine Won’t Work

This article was published in the Washington Times, March 23, 2003.

With a name like Reynolds, I naturally expect more French jokes in my e-mail than does my Cato Institute colleague Veronique de Rugy.

For the record, though, Grandmother Rosine Chable was French. And Reynolds is usually Irish. That certainly doesn’t keep me from enjoying a good French or Irish joke, but I sometimes wonder if the crusade to boycott French wine is just a bad joke. There would be winners and losers from such a boycott, but the losers would not include French consumers nor the French government. To understand why that is so is an interesting illustration of why emotion is no substitute for economics.

About 40 percent of Americans tell pollsters they favor boycotting French products, and that impulse is invariably translated into wine and cheese. Even as Americans fly around in an Airbus, they can’t seem to imagine the fifth-largest industrial economy producing anything but wine and cheese.

What France mainly produces is bloated government, but we have more than enough of that and certainly don’t want to import more. Wine accounts for less than 3 percent of our imports from France, the rest being mostly industrial products, chemicals and the like.

It is easy to see the popular appeal of boycotting French wine. It sounds like doing something while doing next to nothing. After all, how much personal sacrifice is involved in substituting New Zealand sauvignon blanc for French Sancerre? But the actual economic effects of such a boycott — who wins and who loses — would be entirely different than its proponents assume, even aside from retaliation (e.g., Europeans have been boycotting the U.S. stock market lately).

U.S. wine stores have recently been promoting the newly arrived 2000 vintage Bordeaux. Suppose 40 percent of American wine consumers refused to buy that Bordeaux — what would happen next? The boycott obviously can’t reduce the supply, because like all good red wine, it was produced a few years ago. I don’t see why anyone would single out French winemakers for financial punishment, but the boycott may not be able to accomplish even that dubious objective. The reason should be obvious: Any French wine you see in U.S. stores has already been bought and paid for by U.S. distributors and retailers. The French have our money, and we have their wine. Those actually being threatened with a boycott, at least for the foreseeable future, are U.S. wine merchants.

The world supply of French wine is relatively fixed in the short run because the monthly flow of drinkable new wine is much smaller than the huge inventory of old wine (particularly for reds). Reducing demand by boycotting wine in U.S. stores would have little effect on sales — the best French wine has already been sold — but it could have a significant depressing effect on the price. That would be very bad news for U.S. wine merchants, who might have to sell wine for less than they paid.

It would also be bad news for U.S. winemakers. Even though some boycotters might switch from French to California wine, the California vineyards would still have to cut prices to match artificially depressed French wine prices or lose market share to Australia, New Zealand and Chile.

When it comes to boycotting French wine, it is U.S. wine merchants and manufacturers who would be the immediate and primary losers — victims of the boycott’s reduction in the price of their inventories of French wine. There would also be many winners from such boycott, of course, but that is another reason to think twice about it.

The boycott’s cheapening of French wine would be a welcome gift to wine drinkers who do not participate in the boycott. The beneficiaries of the boycott would include nearly all consumers in France and Germany, including their political leaders.

If the boycott lasted a long time, which is highly unlikely, then it might begin to adversely affect orders for future French wine deliveries. But temporarily depressed prices would also make it less profitable for the French and others to produce as much wine, and that reduced supply would eventually push prices back up.

As perverse as a boycott of French wine would be, other U.S. protests against French foreign policy have been even sillier. One bunch of angry Americans attracted the TV cameras by smashing an old French car, a Peugeot. Someone neglected to notice that Peugeot, Citroen and Renault no longer sell cars in this country. Smashing an antique car was as senseless as smashing antique French furniture. And it was just as effective as renaming French fries as “pom frit.”

After the mindless Peugeot-bashing, a U.S. restaurant owner made the TV news by holding a “pouring party,” where people gathered to pour French wine down the gutter. There have been a few similar public displays of economic illiteracy. Who is supposed to be hurt by wasting wine? Certainly not the French government. Any French wine available to be poured down the drain is wine that has been paid for by some American. Destroying the wine after buying it doesn’t hurt the French seller, only the American buyer. If thousands of pouring parties could destroy enough French wine, the reduced supply could raise the price of wine. Such higher prices would, of course, hurt U.S. consumers and help French producers.

I don’t see how people manage to get angry at an entire nation, and particularly at only one of many nations opposing the Iraq war (if the Germans had a U.N. veto don’t you think they would have used it?). Many Americans who are enormously fond of President Bush have, like the French, worried he may be jumping into a big, nasty tar pit. If the war goes well, U.S. skeptics and the French government will end up looking too timid and a bit foolish. Since those proposing to boycott French wine claim to be supremely confident that the war will go well, they need do nothing but sit back and wait for the opportunity to say, “I told you so.”

Unless wine boycott advocates have some unspoken hatred of U.S. wine merchants, threatening to depress the price of the French wine is an extremely ineffective way to accomplish an unexplained goal.

Alan Reynolds is a senior fellow with the Cato Institute and a nationally syndicated columnist.