Select Committee on European Union Thirtieth Report


CHAPTER 3: CONCLUSIONS

77.  In this Chapter we repeat, for ease of reference, the conclusions which we have reached in our preliminary consideration of the Commission's proposals. Before doing so, however, we wish to address the proposals as a package and to make some general comments.

78.  The Commission's proposals appear to us to point the way to a brighter future for the EU wine industry and we are prepared therefore to give them as a package our broad support. They contain however a number of important pluses and minuses. We strongly support the proposal that subsidised distillation should cease. Without this fundamental change, reform of the wine sector has little chance of success. The ending of distillation also contains the key to the vexed issue of planting bans, on which we comment below. We are also pleased to see the proposals that the current restrictions on wine labelling should be lifted and that the OIV should provide the benchmark for the authorisation of wine-making practices within the Community.

79.  We cannot however support the proposals to extend the planting ban until 2013 and to prohibit the use of sucrose in wine making. We recognise that some may see a prima facie contradiction between launching a subsidised grubbing-up programme on the one hand and lifting the current ban on new plantings on the other. However, if subsidised distillation is abolished, there is no need of planting bans to control production capacity, as there will then be no incentive for anyone to embark on new plantings for which a clear market outlet cannot be foreseen. Nor can we accept the argument which is being advanced in favour of a ban on the use of sucrose in wine-making—that the removal of subsidies for grape must requires such a prohibition in order to remove internal trade distortions. This argument simply does not hold water. There is a more logical way of removing trade distortions, and that is to permit the use of sucrose in wine-making throughout the Community. This would have the added advantage of levelling the EU wine market not only internally but also in relation to third countries, who are not subject to such a restriction.

80.  Some might perhaps argue that the proposals to subsidise grubbing-up and to provide retirement aid are not strictly necessary in order to bring supply and demand into balance, as the ending of subsidised distillation will of itself achieve that objective. We are however prepared to support these measures on the basis that we are dealing here with an industry which is not evenly spread across the Community, or indeed across individual wine-producing Member States, and that there is a short-term need for support to help those whose livelihoods centre on wine-production to adjust to a new market situation. The problem of displacement should not be over-stated. Many of the Community's wine-growers do not rely solely on wine production for a livelihood. We were told by the French Agriculture Ministry that more than half of the wine-growing concerns in Languedoc-Roussillon were run by people who had other jobs but who had inherited vineyards and who "keep their few hectares alive producing grapes and deliver their grapes to the cooperative" (Q 754). Nonetheless we recognise that there will be problems of adjustment and we concur with the need for transitional measures to help those who will be displaced from the wine industry. We are clear however that such support should be carefully defined and time-limited.

81.  National envelopes have been presented as an extension of subsidiarity and as providing Member States with flexibility to tailor Community support to the particular demands of their own wine-producing regions. While we have no difficulty with the principle of such decentralisation, we remain concerned that the rules governing it should be tightly drawn. Funding from national envelopes must not become a way of life. In the medium term the industry itself must take onto its own shoulders responsibility for restructuring production, for insuring itself against crisis and for marketing its own products. The reformed Wine CMO must recognise the interests of consumers and taxpayers as well as those of producers.

82.  We will leave the last words with two wine growers from France—Jean-Louis Alaux, President of the Independent Wine Growers Association (FVIA) of the Aude region of Languedoc-Roussillon, and Alain Vironneau, President of the Inter-Professional Wine Council of Bordeaux Wine Growers (CVIB). M Alaux told us, when we took evidence from the FVIA in Narbonne: "This CMO must be the last but it must be very efficient. We need to stop this situation, we need to do it once and for all and take a position on the market as it is in its own reality" (Q 769). And M Vironneau told us in evidence at CIVB Headquarters in Bordeaux: "We do not want subsidies, we want to hold our head high" (Q820). These words eloquently sum up our essential message.

83.  Our conclusions, as recorded in Chapter Two, are:

    (a)  We strongly support the Commission's proposal to end all subsidies for distillation and for its associated storage. (Paragraph 26)

    (b)  We support the inclusion of vine-growing areas and of land withdrawn from vine-growing within the ambit of the Single Farm Payment and its rules concerning cross compliance. (Paragraph 29)

    (c)  We support the transfer of funding from the Wine CMO Budget to provide for a range of Rural Development schemes on the basis of co-financing by Member States, but we do not support the employment of Rural Development funds to compensate for changes in the rules governing wine enrichment. (Paragraph 31)

    (d) We support the Commission's proposed grubbing-up programme but we consider that there is a need for tight definition of the exemptions from it which Member States may invoke. (Paragraph 38)

    (e)  We do not support the proposal to extend the ban on new plantings beyond 2010. We consider that, with the removal of subsidised distillation, production capacity will adjust itself to demand as the result of market forces, especially if the subsidised grubbing-up programme proposed by the Commission goes ahead. (Paragraph 42)

    (f)  We welcome the proposed relaxation in the current regulations on wine labelling. While we also regard the proposed new rules governing the registration of wines with a geographical indication as a step in the right direction, we do not believe that the proposed changes will be effective in raising the market profile of EU wines vis-à-vis their New World counterparts. (Paragraph 47)

    (g)  We support the Commission's proposal that the OIV list of recommended wine-making practices (WMP) should be adopted as the benchmark for EU oenological practices and that the filtering of individual WMP into EU regulations should be the responsibility of the Commission. We suggest also that consideration should be given to the establishment of reciprocal arrangements between the EU and the WWTG. (Paragraph 53)

    (h)  We do not support the Commission's proposals on enrichment. We agree that the existing subsidies for concentrated grape must should be removed but we consider that a requirement on producers to use grape must rather than sucrose will unnecessarily increase production costs and at the same time create a distortion in the market vis-à-vis non-EU producers. (Paragraph 58)

    (i)  We support the concept of national envelopes, but we consider that there is a need for care to ensure that the size of the dividend and the formula for its allocation among Member States reflect the objectives of the reform process and do not result in a perpetuation of either the current Wine CMO Budget or the current pattern of subsidies across Member States and wine regions. We would wish to see spending on the wine sector reduced over the medium term. To achieve this, both the overall sum and the individual allocations to Member States should be reviewed prior to the adoption of the EU's multi-annual financial perspectives in order to audit the results which have been obtained from the funds provided and to determine what, if any, further EU funding may be needed in order to revitalise the wine industry. (Paragraph 63)

    (j)  On the understanding that it is focused on harvest insurance and will not allow the reintroduction of subsidised distillation through the back door, we support the use of national envelopes for crisis management measures. We urge the Commission, however, to stand fast on this restriction and to ensure that the new regulations make clear that the purpose of crisis management support is to help the industry to manage its own crises, not to remove the risk from commercial decisions. Wine sector funding for this purpose should be regarded as a short term measure. (Paragraph 65)

    (k)  We do not support the use of national envelopes for "Green Harvest" measures. (Paragraph 66)

    (l)  We support the continuation of grants for restructuring of the wine industry, but we would wish to see such assistance restricted to projects for which a sound business case can be made and robust arrangements made for audit of the results. (Paragraph 70)

    (m)  We support the inclusion, as an eligible measure for funding from national envelopes, of activities designed to boost the sales of EU wines, but we do so on the basis that promotion is interpreted as marketing, that it covers more than simply advertising and that it includes action to promote vertical integration between producers and buyers and the creation of proactive marketing networks. Marketing should be targeted at consumers within as well as outside the Community, especially in those Member States where wine consumption is increasing. Support for promotion from national envelopes should be a short-term measure and should be designed to enable the industry to market itself rather than to have an ongoing subsidy from the EU taxpayer for the purpose. (Paragraph 76)

84.  We will review these conclusions in the light of evidence which we shall be taking from UK Agriculture Ministers on 25 July. Our final report will be made to the House after the Summer recess.


 
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