Examination of Witnesses (Questions 20
- 39)
WEDNESDAY 7 FEBRUARY 2007
MR JEREMY COWPER, MR ROBIN MANNING AND MS SIMONE
PFUDERER
Q20 Viscount Brookeborough:
But a large amount of their wine, at least up until very recently,
has been going east and not west.
Mr Manning: It is difficult to comment on that
but I think the important thing is that they are in now from 1
January and they have six months to prepare themselves for the
Commission's proposals coming out, and so they will be able to
play an active part in the reform. But looking ahead as to the
impact on their markets, I think that is quite difficult to assess.
Q21 Viscount Brookeborough:
Do you have anything else to say on what the Commission itself
thinks about the current state of affairs?
Mr Manning: The Commission has been very categorical
that we cannot go on as we are. Their impact assessment makes
it perfectly clear—it is very black and white—that
the current regime is unsustainable and that, if we carry on as
we are, by around 2010-11, which I think is the figure in their
impact assessment, we could have effectively a 15% production
with no market in the Community, and that situation is only going
to deteriorate because imports are going up—exports are
flat, consumption is going down. We are very pleased to see the
Commission's very thorough impact assessment of the situation
as regarding no change. We fully support their objectives and
the new wine policy, which is all about increasing competitiveness
and having clearer rules, but preserving the best traditions of
the EU wine production. I think the important point now would
be to see what they come out with in their proposals, and this
comes back to the point that Lord Bach was making earlier on,
that what we would expect to see is something which is probably
going to be around Option 2, and we will certainly be using the
time between now and when the proposals come out. And I think
the work of this Committee will be helpful in influencing the
Commission as well in terms of trying not to limit the level of
our ambition, because if the Commission settles too quickly on
Option 2 then there is only one way that you are going to go in
terms of the final settlement. So it does come back to the point
that Lord Bach made earlier on.
Q22 Viscount Brookeborough:
Looking at the figures that you gave us, 15% of the agricultural
workforce, but it is 2.5% of the CMO budget. Is that not an argument
from the countries that wish to stay in some sort of regime that
you are really targeting something that uses a small percentage
than the total workforce?
Mr Manning: I think that is a fair point as
well. I think you only need to look at the situation on the market
where we are frankly not competitive. Even the producer Member
States realise that change has to happen. I think the issue will
be how that change happens, how quickly that happens and how much
money is available to make that change happen.
Chairman: Lord Plumb.
Q23 Lord Plumb:
The Chairman will continually remind us during the next month
or two that our study is the EU regime and we should concentrate
our thoughts there. But we cannot avoid knowing, of course, that
there is an increase in consumption of wines from the New World,
as it is so often called, and some good wines too that are coming
through. The reason that is given—reading all the evidence—is
better harvests in the last year or two, which obviously has a
considerable effect, and that has meant the excess of supply over
demand. But you have already said, and you said earlier, that
production will exceed demand by as much as 15% by 2010—and
you say that there has been crisis distillation in four of the
last six years. The question therefore we have to face is what
measures ought to be taken to try to bring that under control?
May I say that one of the problems here is the problem that one
has in food production as well as in wine production, that when
there is a climatic change we might, for instance, in one year
get double the quantity of potatoes over another year purely because
of the climate. We are not making nuts and bolts and this is the
difficulty, that you will never find a system which says that
we have this under control year by year by year; I think that
would be asking for the moon. On the other hand, you have to have
that sort of flexibility to have a regime that at least brings
it into a semblance of control if it cannot be complete. Where
are we going? What ideas do you have other than those that you
have already given to try to match supply to demand?
Mr Cowper: Certainly we recognise the problem
is that it does change from year to year. But the trend is certainly
an excess of production over consumption, and one of the things
we need to do is to stabilise production, and to us that looks
as though we need to end the market support—the support
for private storage and crisis distillation—which is encouraging
wine producers to carry on producing products for which there
is no market, effectively. There is a risk of sitting here in
London and commenting on wine producers in various places and
it is a generality. Of course, a lot of wine producers are producing
products which are very much sought after, but the production
regime and the support for production in particular encourages
farmers to go on producing wines for which there is no market
and they are unconnected with the market. I think a lot of what
the Policy Commission—Sir Donald Curry's Policy Commission—said
about reconnection of our agriculture with the market applies
here, and measures like private storage and distillation and offers
to take surpluses off people's hands in that way, are not focusing,
not helping growers focus on the real market. Similarly, we have
referred already to the need to make the industry more competitive,
and the planting ban, which has a perverse effect of stopping
the good producers—as well as the bad ones—expanding
their operation, needs to go, I think. That is another of the
issues that is getting in the way. The labelling regulations is
another matter that is cutting off producers from the market place—in
particular, the rules that say that, unless you are a wine with
a Geographical Indication or a Quality Wine from a specified region,
you cannot specify the grape variety, for example, or the vintage
are tying the hands behind the backs of the producers, whereas
the New World producers have made great strides in terms of producing
varietal wines, so that people know, roughly speaking, what they
are going to get and enjoy, and those labelling rules are obviously
hampering, the market and that is another competitive point. Similarly,
wine making practices are slow to adapt because of the systems
that we have in the EU, and that is why we think that moving to
the OIV, allowing more of the wine making processes that the New
World, the Third Country producers, use to be open as options
to our producers would be a good thing; and to get the recognition
for enrichment with must or sugar as a proper methodology would
be helpful. I think we need to encourage market orientation but
there are a number of ways of doing this. Again, this is more
of a comment than a formal proposal, but as an observation I do
think that market orientation requires producer groups to understand
their market better. I would hesitate to interfere in the French
system with Négociants and all the rest of it, but I think
that some of the messages that we put out, or the Curry Commission
put out to our farmers in this country, are highly relevant in
understanding, and getting a better connection with the chain
of supply would be a very good thing, and measures that would
encourage producers in that direction and would be all part of
the package, the direction of travel is part of the package of
measures we would like to see, together with some environmental
issues. But I think competitiveness is about the labelling regime,
the market support and the ability to respond to consumer demand.
Lord Plumb: Lord Chairman, the cooperative
approach would have been said long before Curry. There is nothing
new in it, it is a matter of getting it going and encouragement
being given.
Chairman: Lord Palmer.
Q24 Lord Palmer:
I reckon my question has already been answered, both when you
were answering Lord Sewel and indeed Lord Plumb, and it certainly
came as no surprise to me when, in your written evidence, you
clearly stated, "The current regime protects inefficient
and poor quality producers and prevents producers who have developed
strong market demand for their wine from expanding." Is there
anything else that you would like to add that you have not already
mentioned in replying to Lord Plumb and our Chairman?
Mr Manning: I think, Lord Palmer, we have cut
across your point already, but maybe to crystallise it around
your question. We think that primarily the planting ban is of
great concern. One can understand why it was thought a good idea
to introduce it in the 1980s but the fact of the matter is that
it is a double-edged sword because, on the one hand, it is constraining
production, but, as I said earlier on, it does mean that we are
actually preventing the best producers from expanding to meet
market demands, and this is why, of everything that we are referring
to in terms of what we would like to see come out of this report,
that we want to see the liberalisation of this planting ban no
later than 2010. I think that is very important.
Q25 Lord Palmer:
You do not think that is too late?
Mr Manning: The market is anticipating 2010
because it is in the existing regime at the moment, so that everybody
is working on the basis that it would end on 31 July 2010. I think
you need to provide some time for the inefficient producers to
adapt to the fact that the planting ban will disappear, and so
I think 2010 is the optimum time for that to come off. So it not
only sends a clear signal that the ban is going to end but it
gives people time to adjust. I think, in terms of English and
Welsh production, 2010 should be OK as well. We are about 15,000—16,000
hectolitres a year at the moment, but that is going up incrementally
each year, and we would expect to be around the 25,000 hectolitres
by around 2010—2011. So, provided it goes in 2010, then
that should be sufficient and would give everybody time to adjust
to that. In terms of the market management measures, we think
it is also important that they disappear very quickly because
they are insulating the inefficient producers from the market;
they are continuing to produce wine for which they have no market
on the basis that the Community regime will take that wine off
their hands and dispose of it for them. We have mentioned a couple
of times that crisis distillation is no longer really `crisis',
it is more a structural measure, having been used in four years
out of the last six. A large amount of money is spent at the moment
on private storage of wine—about €67 million in the
latest budget—and to our minds there is no reason why we
should be paying for something which in most other sectors the
industry would pay for themselves. So we think it is important
that that goes. As Jeremy said earlier on, as part and parcel
of this there must be simplification of labelling and marketing
possibilities so that the consumers are much better informed about
the wines that they can buy from the Community.
Q26 Lord Moynihan:
My Lord Chairman, I would echo the remarks made by Lord Bach about
the importance in reflecting on the fact that, whilst you so readily
dismiss the idea of market de-regulation from a practical negotiating
point of view, it will, I hope, be key to the work that you do
over this year to consider in far greater detail the implications
of Option 4, to look at them and to make sure that the strength
of those arguments in all areas is put forward in negotiation,
so that that is not lost. In that context can we look further
at the labelling and marketing issues? I think the direction in
which you are heading may lead to a positive answer on this, but
would you support wines being branded in Europe in the same way
as New World wines are? Large scale branding, which makes it much
easier for consumers, who are not experts, to identify with the
product and hence are more likely to become regular purchasers.
I would be interested in your views on that, particularly when
you see UK television coverage of the Ashes, for example, sponsored
by Wolf Blass, the Australian wine, and Friends sponsored
by Jacob's Creek. New World wines are advertising and promoting
themselves very heavily in this country. Would you support EU
wines doing the same?
Mr Cowper: Yes, we would certainly support EU
wine producers being much more market orientated, much more adaptive
and much more flexible in their approach, and labelling and branding
clearly has been very successful for the New World producers,
who have operated from a very well—thought—through
marketing strategy. This is not just based around brands, it is
based around consistency of product, simplicity of product, and
aimed at particular price segments in the market, and having a
very good view of the distribution in the retail chain in Europe
generally. We would certainly want to facilitate that for European
producers. Another point that is worth picking up about brands
is the scope for a brand to cover a range of different varieties
within it, so you can keep promoting the name, as you have indicated.
However, I think we must be careful about not losing our heritage,
not moving too far. Branding is one option—and brands does
not necessarily mean good quality, of course, it is not a panacea.
I have already touched on the point about the scope for table
wines, or the lack of current scope for table wines, to be able
to refer to the variety or the vintage, and that is certainly
hampering people. There are some Négociants who have good
names and are equivalent to brands, but in general terms, yes,
the labelling regime is a hindrance. But there are obviously some
very powerful, historic, famous and still extremely successful
Appellation Geographical Indications, which are at the heart of
the EU wine sector, which is of course still the biggest in the
world and very, very valuable. If you look at the exports one
example of this is the fact that in volume terms France is not
at all the largest exporter but it has huge value, and that is
because those Appellations, those Geographical Indications, are
recognised and they do monitor quality very carefully. So I think
that branding alone is not the solution.
Q27 Lord Moynihan:
That answer rather indicates a positive response to the Geographical
Indications, the GI concept of marketing EU wine. That is in contrast
in your written evidence, where you suggest that the GI system
may "serve to insulate the producer from the market, for
example by encouraging the production of wine that the market
does not value". Can you expand on that for us?
Mr Cowper: Yes, I will. Thank you very much
for the chance to do so. I do think that there are considerable
strengths in the GI system. It provides a measure of authenticity,
it operates within local and national rules and, in the EU framework,
and it gives some assurance and information to the consumer. It
is about provenance, and that is what consumers value; we are
told that consumers increasingly want to understand what it is
they are buying. I have touched on some of the GIs being world-recognised
assets—Champagne, Port Rioja, Barolo, whatever; there are
plenty of them. GIs that do provide clear differentiation and
useful information and also preserve quality and authenticity
are helpful. However, the GI system—and the material from
the Commission indicates this—has become one which is very
producer—rather than consumer—orientated, and partly
because of the issue about the labelling rules giving you more
flexibility to describe your product once you have a Geographical
Indication, it looks as though it has become rather a formula
to try to get a GI with your wine, without necessarily having
a good basis for doing so, either particularly in quality or necessarily
a strong link to the place, to where you are coming from. Therefore
it has been devalued. We had some conversations with the Comité
Européen des Entreprises des Vins and they gave us the
analogy of a tree—the plethora of GIs has now become a huge
growth which is actually shading, cutting out the sunshine, and
it has become excessive, and I think in that case, yes, the GI
has become a weakness. It does not provide useful information
for consumers necessarily and I think there is an argument for
saying that it builds inertia into the system. In order to adapt
your wine or your production methodology to meet changing consumer
tastes you would have to get agreement from the owners of the
GI and that may not necessarily be straightforward if some of
the traditionalists do not want to change it. So it can be a handicap.
Lord Moynihan: Thank you, my Lord Chairman.
Chairman: I was in China recently, and
the Chinese Minister was going on about how they wanted to develop
the Chinese wine industry and they took great pride in the fact
that they had gone to the French experts. I did not say anything!
Viscount Brookeborough.
Q28 Viscount Brookeborough:
I think in many ways you probably have nothing left to add because,
after all, we are here in a way to find out how we do compete
and you have mentioned many parts of it. So, if you have anything
to add, please do. You mentioned the inertia and so on. But are
the actual production methods controlled by the various districts
and the people who administer the GI system? And is the lack of
modernisation not entirely in the hands of the individual vineyards?
I have a little knowledge—and I accept that is very dangerous—of
Taylor's Port. Taylor's is family—run, which includes various
others such as Fonseca and so on. But they are very much behind
the market and they have modernised their production methods in
the most incredible ways, and they do not necessarily agree that
the human body crushing the grapes adds a particular flavour or
whatever. Who is controlling this? And why can Europe not modernise
its production of wines at a certain level? Because it seems to
me that, whereas we have the very expensive French wine and whatever,
this is almost a different product in as much as port, maybe.
And where we have the problem is not at a lower but at the more
commercial level such as the New World is producing.
Mr Cowper: In terms of the production rules,
as I understand it, there is a framework set by the EU regulatory
framework, the general level about the types of vines that can
be used and the production methods. Then national Geographical
Indications have to be agreed at the national level and they also
have to be agreed locally, whether it is the region or the locality,
and by the owners of the GI. So there are various levels.
Q29 Viscount Brookeborough:
Does that dictate the mechanisation that the actual systems use?
Mr Cowper: All of those would have a bearing
on it. If you wanted to propose a methodology that was not acceptable
at the national level or within the EU regulations, you would
be unable to do so. But at the local level the producers for the
Commune, or whatever it is, who own the GI would start off by
agreeing the yield that they are going to allow and the production
methodology and so on, and then they would get it registered with
the Regional Committee within the national rules and so on. One
of the problems is that, because we do not import all the methodologies
that are allowed by the International Organisation of Vine and
Wine, Europe does not recognise all the production methodologies
which some of the New World producers do, and we think that the
Commission is on the right lines in suggesting that we ought to
recognise that Europe as a whole, through the medium of the Commission,
ought to pick up more of those production methodologies to make
them options available to producers within the EU, because again
we are constraining ourselves in some of the new methodologies.
As you say, within Europe, as I understand it, there are fantastic
leading technologies in how to produce wine, but some of the methodologies
are not yet approved that the New World producers are using, for
example. I think one of them is using oak chips in barrels which
has only recently been approved.
Q30 Lord Moynihan:
Various options are being considered to remove over-production.
What priority would the Government give to, firstly, further constraints
on production—for example, grubbing—up and the restrictions
on planting rights; secondly, finding additional outlets for excess
production; thirdly, restructuring and greater support for rural
development? Looking forward to the 25,000—hectolitre threshold
here in the UK, how exactly do you see the grubbing-up process
working in the UK in the future? And what alternative crops would
you consider suitable for cultivation on grubbed-up vineyards?
Mr Cowper: I very much hope that we do not get
to grubbing up in the UK.
Q31 Lord Moynihan:
Potentially in the not—too—distant future, with the
steady growth and becoming members of the CMO, we have to consider
these issues, have we not?
Mr Cowper: Yes, I suppose we might. But grubbing-up,
it seems to me, would be the result of a market failure of an
industry that was not in tune with its market and had expanded
too fast and needed to be encouraged to cut back or to move on
to better land. I think that the Commission's idea we should have
some grubbing-up until 2010, or whatever, a fairly intensive encouragement
to grub up and to encourage producers who are clearly not producing
what the market wants to move to other enterprises, is an important
part of it, although it is a very negative connotation, I think—it
sounds rather unpleasant. I certainly hope that the UK industry
will be free to develop in a market-orientated way that will not
bring that about. Where grubbing-up does take place, I think it
is important that it should go hand in hand with environmental
measures so that, whatever happens to the land afterwards, it
is not just left in a bad state but it is managed in some positive
way. I am certainly not in a position to advise what other crops
might best be grown on it. I think in terms of other uses, were
you talking about other uses of the land?
Q32 Lord Moynihan:
Removing over-production and grubbing-up being one, obviously,
and further constraints on production, but additional outlets
for excess production—do you give that a high priority in
the negotiations? And the restructuring and the greater support
for rural development are the other two options that are being
considered to remove over production.
Mr Cowper: I think whatever other uses there
are should be market led and not artificially induced by using
taxpayers' money to carry on encouraging people to produce stuff
for which somehow a use will be found. I think our position would
be that people should get a clear market signal that, if there
is no market for it, then do not produce it, rather than perpetuating
market management.
Q33 Lord Moynihan:
So we are going back to the idea of market de-regulation at the
forefront of your mind in that context?
Mr Cowper: That is certainly what we want to
get to. The Government's vision for the Common Agricultural Policy
does envisage, not market management but moving support into Pillar
2, where the taxpayer, the public, can get a return for their
money in terms of environmental management and the delivery of
public goods rather than unwanted market goods.
Q34 Lord Moynihan:
My Lord Chairman, there does seem to be a growing credibility
gap between the logic of a lot of what is said. We have very interesting
evidence on effectively going towards market de-regulation, and
yet being a long way in terms of the position that you will be
taking with regard to the overall reform of the EU wine sector,
and you seem to seek minor improvements around the Option 2 area
as a success story. I would hope that the thrust of the very good
answers that you have given on a range of issues will lead you
maybe to go one or two steps further than where you were indicating
your negotiating position is likely to be.
Mr Manning: Can I respond to that? I think it
is important to look very closely at what the options mean. Option
2 is all about market de-regulation; what it is saying essentially
is that all of the market support instruments which are there
currently will go—the planting rights will be liberated—so
the industry can respond to market signals. What it is saying
is that a large proportion of the money which is currently spent
on the wine budget will be used to facilitate the transition,
will be used to go to rural development programmes of Member States
in order to provide local, targeted social/environmental responses
to the particular situations in which these local communities
find themselves. So that is what Option 2 is about, and we still
see that as a very liberalising measure. The difference between
Option 2 and Option 4 is that Option 4 is effectively saying that
you are on your own, that your budget goes and that is that. All
along we have said that we want to get to a situation where there
is much greater market liberalisation and we spend less money
on the wine regime than we are at the moment, and that is certainly
the view that we have taken in the discussions on the proposals
on the Communication so far. Option 2 should not be dismissed
as being a light option, there is still a lot in it and still
a lot which is positive in terms of getting a greater market orientation,
but I think the point you have mentioned very clearly—and
I am glad it has come out—is the actual cost of that, and
so it is essentially a financial issue as much as anything.
Q35 Chairman:
Can I check that I understand? A fairly broad level of agreement
here and between us that de-regulation, moving money into Rural
Development, Pillar 2, is the way forward, but I thought I heard
you say in one of your answers that the wine producing countries
where this is most necessary are actually most opposed to the
movement of money out of the wine regime into the Rural Development?
Mr Manning: That is exactly right.
Q36 Chairman:
So that is where the fight is going to be, is it not?
Mr Manning: Yes.
Mr Cowper: I think they would be concerned to
focus money on wine—related issues rather than just going
to a general Pillar 2 point, that would be one thing. Of course
they do have a much bigger interest, they have lots of families
engaged—
Q37 Chairman:
But that leads inevitably on to national envelopes, does it not?
Mr Cowper: Yes.
Q38 Chairman:
If you have national envelopes and you have rural development
all done at the national level with national schemes—I will
try to choose my words carefully—the opportunity for evasion
is high.
Mr Cowper: We have already identified that,
should we be in a situation where we were discussing Option 2
and national envelopes, we would want to try to encourage a regime
where Member States were not using national envelopes to reintroduce
market measures by the back door, if you like. The direction of
travel in which we want to go is towards 3 and 4.
Q39 Chairman:
What is going to happen at some stage is that you are going to
get some Member States turning round and saying, "If we do
not grow wine in X, it will be devastation; there is nothing else
you can do." What is the response to that sort of claim?
Mr Manning: I think some of these concerns are
very real, which is why we would like to see them addressed through
the Rural Development programme rather than through market management,
because at the moment market management is maintaining the infrastructure
but with no focus on the market whatsoever. Under Rural Development
programmes you can adapt programmes to meet local needs and the
Member States can decide what they want to spend the particular
programmes on. However, I think the important thing is—and
I think we mention it in our evidence—that it is not just
carte blanche, you will have a list of measures which are fundable
under the Rural Development regulation. So it may be agri-environmental—you
have a specific production area which is very sensitive and, if
it was not maintained, then you would get a major ecological problem,
and it may well be that the Member States would want to allow
some sort of production to continue there, but it has to be done
in conformity with the Rural Development programme and all the
conditions which attach to the Rural Development programme. So
we would see that as a situation where Member States design their
own programmes but based on a central menu. It is imperative,
we believe, that the market management instruments we are looking
to see phased out are not introduced through the back door, through
the RDR programme. The other thing which I should clarify about
RDR that may be of some concern amongst the producer Member States
is, of course, these sorts of programmes entail a national contribution
to the measures, and I think there is a budgetary issue there
for those countries.
|
