14 Reform of the European wine sector
| (27621)
10851/06
COM(06) 319
+ ADDs 1 & 2
| Commission Communication: Towards a sustainable European wine sector
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| Legal base | — |
| Document originated | 22 June 2006
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| Deposited in Parliament | 29 June 2006
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| Department | Environment, Food and Rural Affairs
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| Basis of consideration | EM of 10 July 2006
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| Previous Committee Report | None, but see footnote
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| To be discussed in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
14.1 The Community's common market organisation for wine was introduced
in 1970, and, since then, there have been a number of reforms,
most recently in 1999.[46]
Despite this, the regime remains complex, comprising measures
to reduce production potential (such as a ban on new plantings,
premia for the abandonment of wine-growing areas, and the restructuring
and conversion of vineyards); market measures (notably compulsory
and voluntary distillation into alcohol, private storage aid,
aids for enrichment,[47]
and export refunds) and regulatory measures (governing wine-making
practices, provisions on quality and the protection of geographical
indications, and labelling), supplemented by national and regional
rules. It is also costly, with expenditure varying from year to
year between 2.5% and 5.5% of the total budget for the Guarantee
Section of the European Agricultural Guarantee and Guidance Fund
(EAGGF), and amounting in 2005 to €1,269
million (of which 40% related to distillation, 35% to restructuring,
and 16% to enrichment). In view of this, and the changes which
now have taken place in most other commodity sectors as a result
of the Agenda 2000 reforms of the Common Agricultural Policy (CAP),
the Commission has now put forward this Communication indicating
ways in which the European wine sector can be made more sustainable.
The current document
14.2 The Commission points out that the Community
is the world's leading producer, consumer, exporter and importer
of wine, and that the sector's economic activity is vital, with
more than 1.5 million holdings accounting for 5.4% of overall
agricultural output (and double that figure in a number of Member
States). The Commission also notes that, despite the changes made
in 1999, production (particularly of quality wines) has been increasing
at a time when consumption has been declining "steadily and
significantly", and that, although both exports and imports
have been rising, with the Community still being a net exporter,
the rate of increase in the latter has been much quicker. This
in turn has led to an increase in surplus production, which it
is now estimated will be equivalent to 15% of output in 2010-11
(or about 8.4%, after distillation measures), and the Commission
comments that the need for Community wine producers to become
more competitive is further highlighted by the surge in "new
world" production and sales.
14.3 The Commission identifies a number of other
aspects of the current regime which have created problems. These
include:
- the extent to which the current
ban on planting rights has been offset by increases in yields
and the extent to which Member States have used the provision
allowing the granting of additional rights under certain conditions;
- the extent to which distillation — including
measures intended to be used only in a crisis — has become
a permanent outlet sustaining an unsaleable surplus, covering
not just table wines, but quality wines as well;
- the adverse effect on competitiveness of the
rigid procedures for adopting and adapting rules on wine making
practices, and the complexity of the various regulations;
- the complexity of the labelling provisions, and
the confusion this creates for consumers; and
- the extent to which the inflexibility of those
provisions hampers the marketing of European wines.
The Commission adds that independent analysis has
suggested that a liberalisation of wine-making practices in line
with internationally established rules and more consumer-oriented
labelling would enable Community wine producers to expand their
outlets and reduce the structural imbalance.
14.4 Against this background, it says that the regime
should be amended to ensure that the sector's "huge potential"
can be further developed in a sustainable manner, to make provision
for the smooth integration of Bulgaria and Romania, and to enable
the Community to respect fully its international obligations.
In particular, it should seek to:
- increase the competitiveness
of the Community's wine producers, strengthen the reputation of
its quality wines, and recover old markets and win new ones both
within the Community and worldwide;
- create a regime which operates through clear,
simple and effective rules, which balance supply and demand;
- create a regime which also preserves the best
traditions of Community wine production, reinforces the social
fabric of many rural areas, and respects the environment;
- take due consideration of increased concerns
over health and consumer protection.
14.5 The Commission says that it has accordingly
considered four possible approaches. The first would be to maintain
the status quo, with some limited adjustments. However, it
suggests that, in view of the serious difficulties arising from
the current arrangements, such an approach would not be sustainable
economically or politically, and that major changes are necessary.
The second approach would be the amend the regime along the
lines of the reforms introduced since 1999 for most other
commodities, by shifting support to direct payments, which would
be decoupled from production and included in the Single Payment
Scheme. It notes that this would increase flexibility and market
orientation, and would also be more likely to be compatible with
the rules of the World Trade Organisation (WTO). On the other
hand, it says that the potential amount of any decoupled payment
would probably not compensate many growers for the loss of market
support, and that, although it should be possible to achieve a
balanced market in the medium to long term, this would likely
to entail a major crisis in the sector leading to a "massive"
adjustment process. The third approach would be complete deregulation
of the wine market, but the Commission says that the harsh adjustment
which this would entail, and the lack of accompanying structural
measures would produce severe negative economic social impacts
on the regions concerned.
14.6 The Commission has therefore opted for what
it describes as a "profound" reform of the present
market organisation, where it has put forward two variants, aimed
at achieving the same result, but over different time scales.
Thus, one approach would aim to achieve reform in a single step
by lifting immediately the ban on new plantings and abolishing
the grubbing up premium, whereas the other would first seek to
restore market balance by extending the ban on new plantings for
a period (until 2013), strengthening the grubbing up premium,
and continuing the arrangements for restructuring and reconversion.
14.7 Otherwise, each approach would be similar, in
that it involve abolishing market management measures; greater
integration between measures in this sector and Member States'
rural development plans, for example by strengthening early retirement
or agri-environment measures; a substantial revision of the current
regulatory framework governing quality and geographical indications;
a simplification of procedures relating to wine-making practices,
including a recognition of those established internationally;
amending the rules on enrichment; simplifying the labelling provisions
and increasing their flexibility; pursuing a vigorous promotional
and information policy; and the introduction of minimum environmental
requirements, covering such aspects as soil erosion and contamination,
the use of pesticides, and waste management. In these respects,
the approach would be broadly similar to amending the regime along
the lines of the Agenda 2000 reforms, except that the funds released
by abolishing the current market management measures would be
re-directed, not to the Single Payment Scheme, but to a newly
established budget envelope for each wine-producing Member State
from which it would be allowed to finance measures chosen from
a given list.[48]
The Government's view
14.8 In his Explanatory Memorandum of 10 July 2006,
the Minister for Sustainable Farming and Food at the Department
of Environment, Food and Rural Affairs (Lord Rooker) says that
the Government will be evaluating this Communication in the light
of overall CAP reform policy and general liberalisation, adding
that key issues for the UK are that the status quo is not an option;
the need for a more sustainable regime, preferably at a lower
budgetary cost; the need to address simplification, competitiveness
and the balance of supply and demand; the provision of flexible
market instruments and an end to the institutional support for
over-production; and the need for production controls and aided
storage to be replaced in favour of industry bearing the costs
of surplus in order to force re-structuring.
14.9 The Minister also notes that the UK has a small
domestic production concentrated in southern England and Wales,
with 388 vineyards currently registered, comprising 761 hectares,
though only 295 of these (comprising 722 hectares) are in commercial
production. Production amounted to about 19,000 hl in 2004 and
13,000 hl in 2005, of which about 85% was white wine, and, because
of its relatively small size, the UK does not benefit from the
full range of current support measures (though it is still required
to comply with the rules on wine-making practices and labelling).
14.10 The Minister says that there are several issues
of importance to UK producers, which the Government will need
to take into consideration during discussions on the Communication.
In particular, UK producers are currently exempt from the planting
ban, which applies only to Member States where annual average
production over the last five years exceeds 25,000 hl, but the
indications from new plantings are that the UK could reach this
ceiling within the next few years. It will therefore be necessary
to ensure that the ceiling is increased if the planting ban is
not abolished. Secondly, due to climate considerations, UK producers
often need to enrich with sugar to aid fermentation and achieve
satisfactory alcohol levels: the Government will therefore aim
to ensure that the current enrichment levels for Member States
in the same zone as the UK remain.
Conclusion
14.11 Though clearly increasing, the UK's production
of wine remains relatively small, and consequently its main interest
in this regime arises from a consumer and budgetary perspective.
To the extent that wine is now one of the two major sectors of
the Common Agricultural Policy which has not been subject to reform
in recent years, this Communication is to be welcomed, not simply
for stimulating debate, but for pointing the way towards reforms
which will no doubt be seen as fairly radical by the powerful
wine interests which exist in a substantial number of other Member
States. This is therefore an important document, which we are
drawing to the attention of the House, but which we are clearing
on the basis that further consideration can be given to this issue
when the Commission produces formal legislative proposals early
next year.
46 Council Regulation 1493/1999 OJ No. L 179, 14.7.1999,
p.1. (19365) 9624/98; see HC 155-xxxix (1997-98), para 2 (4 November
1998) and HC 34-xiv (1998-99), para 6 (24 March 1999). Back
47
This increases the natural alcoholic strength of wine by adding
either sucrose or concentrated grape must. Back
48
The Commission suggests that this might include restructuring
and re-conversion, support for safety net mechanisms, and support
for green harvesting. Back
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