Globalisation results when markets and industries become more integrated because of lower tariffs or reduced trade costs, or both. These costs have fallen over the long term because of sustained advances in transport technology and, even more dramatically, in information and communication technology (ICT). Moreover, advances in transport technologies have significantly reduced the time traded goods spend in transit (Hummels 2001). Improved transport and information technologies eventually were complemented by the modern global supply chain, an organisational innovation that leverages information and transport technology to better coordinate the activities of geographically dispersed economic agents. Direct communication costs tend to be a minor component of total transaction costs in international trade, and their share in total trading costs of any one shipment is smaller yet. Indirect communications cost, in particular the opportunity cost of imperfect coordination due to poor communication, are unknown but may be significant. Perhaps it is because of reduced loss of coordination that the diffusion of digital ICT - the 'digital grapevine' - is believed to stimulate international trade to an extent that appears to be large in proportion to the share of ICT costs in trading costs (Hummels 2007). Some of the information technology, such as satellite systems and network standards, are global commons and are available to all. Others, such as computers and wired networks, are exclusive goods. Because investment costs in computers and wired networks are significant, their diffusion across regions and countries is uneven. Moreover, the diffusion varies significantly across information technologies.

Globalization results when markets and industries become more integrated because of reduced transaction and transport costs. These costs have fallen over the long term because of sustained advances in transport technology and, even more dramatically, in digital information and communication technology (ICT). Improved transport and information technologies then were complemented by the modern global supply chain, an organizational innovation that leverages information and transport technology to improve the coordination of widely dispersed economic activity. Communication costs tend to be a minor component of total transaction costs in international trade, and their share in total trading costs of any one shipment is smaller yet. Nevertheless, diffusion of ICT - the 'digital grapevine' - is believed to stimulate international trade to an extent that appears to be large in proportion to the share of ICT costs in trading costs. Wine has always been traded over long distances. Global trade in wine has, however, experienced accelerated growth and change during the past quarter century. First 'New World' wines from Australia, California and New Zealand penetrated markets which 'Old World' suppliers from Europe considered as theirs, and later other new entrants to the world wine market, such as Chile, South Africa and Argentina, added to global trade in wine. Moreover, wine traders ostensibly have employed ICT and modern transport technologies, and global wine supply chains have evolved. What impact has the digital grapevine exerted on global trade in wine? Has it been commensurable with its impact on trade in other goods? We address these questions with a gravity model of trade in wine that includes the major wine trading countries and covers the period from 1995 to 2008. The model explains the value of wine trade in terms of the adoption levels of internet access and mobile phone, and we include fixed telephone for nostalgic completeness. We also control for a broad range of other factors that might also affect bilateral wine trade.

Motivation: • What impact does ICT have on the volume of international trade in cut flowers? • What impact do have specific ICT elements have on the volume of international trade in cut flowers? ... Results from a World Bank study: • communication cost influences international trade significantly • the impact is larger with differentiated goods than with homogeneous goods • A reduction by half of the costs of a telephone call • from the importing country to the exporting country • increases bilateral trade by 43%

Globalization results when markets become more integrated because of reduced transaction and transport costs. These costs have fallen because of sustained advances in transport technology and, more dramatically, in digital information and communication technology (ICT). Although communication costs tend to be a minor component of total trading costs, reductions in these costs may strongly stimulate international trade. The empirical evidence in support of this effect is, however, scant and its strength may depend on the composition of ICT. We test the hypothesis of an ICT effect on trade for the case of trade in flowers. We employ a gravity model of international trade which includes 92 countries and which covers the period from 1995 to 2006. The models explains the volume or value of flower trade in terms of the level of internet and mobile phone diffusion, and of a broad range of factors that might also affect bilateral trade. We tested whether a fixed effects model is appropriate. Mobile phone usage in exporting countries is a significant positive factor influencing trade in cut flowers in both exporting and importing countries, but its impact is less than that of fixed telephone usage. Fixed telephone usage has a significant influence on trade in both exporting and importing countries, but the impact of its usage on the value of trade is greater in exporting countries than in importing countries. Internet usage has a significant and positive effect on trade in importing countries that is comparable in magnitude to that of mobile telephony, but it has no significant effect in exporting countries.