Memorandum by the Australian Wine and
Brandy Corporation
INTRODUCTION
1. The Australian Wine and Brandy Corporation
(AWBC) appreciates the opportunity to provide a submission to
the House of Lords European Union Committee's inquiry into the
reform of the EU wine sector. The new regime may have significant
implications for Australia's wine trade with Europe and is thus
of considerable interest to our wine producers.
2. The AWBC welcomes proposals from the European
Commission (Commission) for much-needed reform of this sector,
particularly in the area of wine labelling. We have set out below
our initial comments on the current approach favoured by the Commission.
BACKGROUND
3. The AWBC was established in 1981 to provide
strategic support to the Australian wine sector. It is an Australian
Government statutory authority directed by a board appointed by
the federal Minister for Agriculture, Fisheries and Forestry.
4. AWBC's responsibilities include:
— Export regulation compliance;
— Maintaining the integrity of Australia's
wine labels and winemaking practices;
— Defining the boundaries of Australia's
wine areas;
— Strategic marketing of the Australian
wine sector;
— Negotiating to reduce trade barriers
with other countries; and
— Providing high quality wine sector
statistics and analysis.
COMMENTS
5. The AWBC is pleased to submit the following
comments on the proposed reform of the European wine sector as
outlined in the Communication from the Commission to the Council
and the European Parliament "Towards a sustainable European
wine sector".
6. While welcoming the Commission's stated intention
to initiate much needed reform of this sector, it is apparent
that the current preferred approach is unlikely to move the sector
towards a more market-based orientation.
7. The Commission's analysis of wine sector
reform focuses on four main options: Option 1, Status quo with
limited changes; Option 2, Profound reform of the wine CMO; Option
3, Integration of the wine CMO into the model of the reformed
CAP; and Option 4, Deregulation of the wine market. Options, 1,
3 and 4 were dismissed as not constituting an adequate response
with Option 2 preferred as the best option for the European wine
sector.
8. It is disappointing that the other options
are not being pursued further. As the key objective of the reform
is to increase the competitiveness of the EU's wine producers,
it is surprising that option 4, which envisaged deregulation of
the wine market, was not explored further. The stated aim of the
reform is to counter the success of "new world" exports.
A market-based approach has been central to Australia's success
in recent times. Australia's wine producers are competitive as
they must respond to the market and adapt to changing consumer
demands. Accordingly if there is a genuine desire to emulate the
recent success of Australia and other "new world" producers,
it is surprising that the Commission did not go further down the
deregulation path. In contrast, the reform option preferred by
the Commission encompasses continuing high levels of public sector
regulation and monetary support for EU producers.
9. As profound reform of the Wine CMO is the
only option currently on the table, our comments below focus on
Option 2.
Support measures
10. The AWBC strongly supports the goal of reducing
excess production and market intervention as these mechanisms
currently distort markets for wine. We welcome the philosophy
underlying the proposed grubbing-up and producer-retirement schemes,
but question whether they will, in fact, address overproduction
if they remain linked to vineyard conversion policies.
11. We also welcome the proposal to eliminate
market support measures, such as distillation and storage aids,
and general shift to green box-type decoupled support. Such measures
would enable producers to respond more readily to market signals
and would—if taken far enough—reduce the structural
surpluses that have long plagued the European wine sector and
global marketplace.
12. At the same time, and given the considerable
level of support, it will be important to ensure that all programmes
the EC proposes as "green box" are truly "green",
and do not effectively continue to provide production incentives.
We would encourage the Commission to focus on targeted green box
measures that do not interfere with market signals and to reduce
the overall level of support. Both the magnitude and design of
support structures and market intervention should be kept under
constant review in order to tackle the problem of overproduction
more effectively.
13. Transparency in the new system will also
be important. Any devolution of responsibility to Member States
would need to be done within a framework of robust horizontal
rules that prohibit distortionary measures such as production-linked
payments. The use of "national envelopes" should not
inadvertently allow production- and trade-distorting policies
to be reinstated. Monitoring and compliance are critical, especially
to ensure full WTO-consistency of new measures.
14. The elimination of export subsidies would
help to generate a more sustainable industry in the longer term,
and would reduce the impact of the EU's structural surpluses on
world markets.
Labelling
15. We have expressed our concerns in the past
about the problems created by the current labelling regime laid
down in Regulation 753/2002. The reform of the sector provides
an excellent opportunity to improve labelling rules with the creation
of a single legal framework.
16. A more flexible system, with "truth
in labelling" at its core, and one that fosters innovation
and market responsiveness, would benefit European and third-country
producers as well as consumers.
17. To that end, more flexibility in labelling
such as the proposal to enable the use of particulars such as
variety and vintage on wines that do not carry a geographical
indication, is welcome. Likewise, the introduction of a single
set of rules for all wines (both still and sparkling) would also
be positive, as would adaptation of the current policy on trademarks
and more flexibility on the use of languages.
Geographical indications
18. We welcome the intention to create a new
system for the registration of wine GIs. It should mean that only
those names that fully meet WTO TRIPs Agreement requirements are
registered as GIs, and that third countries should receive GI
protection on an equal basis to products and producers in the
EU.
CONCLUSION
19. The AWBC appreciates the opportunity to
provide this submission to the House of Lords European Union Committee's
inquiry into the reform of the EU wine sector.
20. This reform process provides an excellent
opportunity for the EU wine sector to adopt more market-based
transparent policies which reduce the level of trade-distorting
support.
21. We remain interested in following the details
of the implementation of this reform as they are advanced.
February 2007
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