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Abstract

South Africa negotiated the Economic Partnership Agreement (EPA) with the EU under the Southern African Development Community (SADC) - EU EPA configuration. SADC-EU (EPA) replaced the TDCA (Trade Chapter) after the SADC-EPA was signed by both parties and came into force in 2016. The annual (2016) tariff-rate quota (TRQ) for South African wine to enter the EU duty free was 50 126 000 litres under the TDCA and increased to 110 000 000 litres that will enter the EU market duty. The aim of this paper was to assess the potential impact of wine quota under EU-SADC EPA agreement on wine trade flows between South Africa and the European Union countries by adopting the Software on Market Analysis and Restriction on Trade (SMART). The increase in duty free quota is expected to stimulate more wine production hence increasing the exports to EU market, resulting in high wine export revenues. The estimated revenue increase is $80 million. The increased trade is expected to have both direct and indirect impact on the employment in South African wine industry. In terms of the out of quota impact, the simulation results reveal that wine TRQ under the EPA would lead to a significant decrease in EU wine imports from South Africa. The results further show that trade diversion largely exceed trade creation effects and overall trade effect would be negative for out of quota trade. The findings of this study are crucial for South Africa�s wine sector because it provides strong evidence for South Africa need to pay more attention to the impact of the EU wine quota and develop appropriate strategies and policies to compete and also look into other market opportunities for diversification purposes. Key words: Tariff Rate Quota, SMART model, partial equilibrium

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