Examination of Witnesses (Questions 210
- 219)
MONDAY 7 MARCH 2007
MS EVA CORRAL
Q210 Chairman:
Thank you very much indeed for coming to talk to us this morning.
Can I explain who we are and what we are doing? We are collectively
what is called Sub-Committee D, which is the Agriculture, Environment
and Fisheries Sub-Committee of our main European Union Select
Committee. We scrutinise European policy and European directives,
regulations, anything that is coming up from the EU, and prepare
reports on major items of policy and then publish and circulate
them. We are carrying out an inquiry into the proposed reform
of the EU wine sector. We have already taken evidence in London
from a number of interested parties and we thought it would be
particularly useful to come to Brussels and meet people like yourself
who are much more closely involved in both the industry and the
proposals. We represent all political parties, and indeed we have
people who are called Cross-benchers who are members of no political
party. We also happen to cover just about all parts of the United
Kingdom so we are a fairly diverse bunch. It would be helpful
if you could give us a brief "idiot's guide" to what
your two organisations do and what their role is and then give
us your view of the Commission's thinking on the reform of the
wine regime.
Ms Corral: First of all, I am going to distribute
copies of a dossier which I have brought. I am going to explain
what COPA-COGECA is but, if you have time, you may want to read
it. The first document explains what COPA is and what COGECA is.
They are two different organisations but they have a common secretariat
in Brussels. The other document is the COPA-COGECA position on
the wine reform. I think you have all read it because you have
referred to it in your questions. The other one is a document
that tries to explain what the wine sector is in Europe. It is
very important to understand the structure of this sector in Europe
because it is very different from the sector in the new producing
countries. This is a fundamental difference and it has a lot to
do with what wine is in Europe and what is the sector and what
is the specificity of the sector in Europe. COPA is an organisation
that represents producers. It is an umbrella organisation, and
COGECA represents producer co-operatives.[1]
They were created almost at the same time as the Common Agricultural
Policy and they merged and established a common secretariat here
in Brussels. We represent all the Member States. We are now in
contact with some organisations in the two new Member States so
that they can participate, and we are a horizontal organisation,
which means that we work with all the agricultural sectors. We
also work with rural development, SANCO issues, organic farming.
I am also responsible for organic farming, and we work in five
languages. There are almost 50 people on the staff, so it is a
very big organisation. Our work is to link the points of view
of producers with what is decided at the European level and also
to inform them of what is happening at the European Union level,
so we are very much in contact with the European Parliament and
the Commission, Council members and with other organisations,
like CEEV. We work together on a number of issues, even if we
have some different points of view regarding the reform. On the
Commission Communication I think we all agree that we need a reform
because there is a crisis in the sector. We still are the number
one producer/consumer/importer/exporter, but we are losing market
share because of the very good promotion from third countries.
I recently learned that Iran is producing wine, which is very
interesting because what we consider to be traditional third countries—for
example, Australia, Argentina and the United States—are
not all the producing countries in the world. I have also learned
that the surface area planted with vines in China is bigger than
the surface area of California. We have this problem and we also
have the problem of surplus in the internal market. We are using
crisis distillation almost every year. This is not normal. It
should be an extraordinary mechanism to face crisis, not a mechanism
to use every year, so there is a problem and we have to solve
it. We need a reform and we do agree with some comments that Commissioner
Mariann Fischer Boel has made. She says that European wine is
the best wine in the world—I think we do agree on that—and
she says that we have a number of strengths: our culture, our
specificity and our tradition, and that the way to win markets
again is to use those strengths. We fully agree with that. However,
when we go into the Commission Communication we tend to find,
let us say, some inconsistencies with those aims. The Commission
is proposing the grubbing up of an enormous surface area, such
as the surface of California, same example I have already mentioned.
This is going to cause enormous problems because it is not managed.
It is a five year programme with an aid given to producers. That
money is twice the annual budget of the Wine Common Market Organisation.
On the one hand, we are spending too much on distillation and
on the other hand the Commission proposes grubbing up with money
that is double the annual budget of the Wine Common Market Organisation.
We (COPA/COGECA) consider that we should redistribute the money
in the Common Market Organisation for positive measures to modernise
the sector and adapt the production to the market. At the same
time as the Commission is talking about grubbing up, it is talking
about the liberalisation of planting rights, For us it is not
very clear how this can work to make the European wine sector
more dynamic. We all recognise the need to do promotion, to do
research, to do modernising but there is no budget in the Communication
for these important measures.
Q211 Chairman:
Can I start by taking your own words from what is on your website
the recognition that the incomes of producers have been declining
despite all the interventions through crisis distillation. As
you have just said yourself, we are living with surpluses, there
is increasing import penetration into Europe and there is declining
consumption; and, although we can all agree that some European
wine is the best in the world, it is far from saying that all
European wine is the best in the world.
Ms Corral: Yes, that is right.
Q212 Chairman:
You criticise Mrs Fischer Boel, particularly in relation to grubbing
up, and I think you rely on dealing with the problem by promotion,
modernisation and getting it closer to the market.
Ms Corral: Those are important measures; they
are not the only ones.
Q213 Chairman:
Ah, well, I am going to push you on the other ones.
Ms Corral: If there is a surplus, of course
prices go down. Farmers cannot sell their product. Prices are
also pushed down by imports, and there is wine coming from these
third countries at a very low price because of a number of characteristics
in the way they produce their product, et cetera. On the situation
of the market the starting point for us is not only a question
of surplus; it is also a question of an open market since 1994,
and our Common Market Organisation is not able to respond any
more to the situation of being in an open market. It is very important
to note that the wine sector is one of the sectors, together with
fruit and vegetables, that has a higher annual yield variation.
This has to be taken into account because it is very difficult
to plan things in a sector like that. The last report from the
OIV, Organisation Internationale de la Vigne et du Vin, recognises
that we are still suffering the consequences of the world's harvest
from 2004. In this harvest there was a surplus[2]
of around 24 million hectolitres regarding 2003 and 2005.
Q214 Chairman:
Yes, but the surplus that we have is not a surplus just of exceptional
harvests. There is a structural surplus there. How do you remove
the structural surplus?
Ms Corral: There is a structural surplus but
what I mean is that it is not the only reason. The problem is
that, when we have a very big harvest and we do not sell it, it
stays there stored in the warehouse or whatever and becomes a
surplus that goes over every year, and this is also a factor to
take into account. What we are proposing is the idea of "national
envelopes" which have been adopted by the Commission. This
is also because the wine sector is very different from one Member
State to another, from one region to another—the type of
product, the type of organisation of this sector in each region
or in each country, the size of the sector. The idea is to have
two types of measure. There will be a number of measures that
will be dealt with at a horizontal level, at European Union level,
for all the Member States, and there will be a toolbox. In this
toolbox there will be a number of instruments. Of course, we are
not talking about re-nationalisation of the Common Agricultural
Policy. This should be 100% funded by the European Union and it
should be controlled by the European Union. The idea would be
that each Member State, according to the characteristics of its
wine sector, could decide on the different plans they were going
to carry out and would submit these plans to the European Commission.
The Commission would see that they are OK, they are consistent,
approve those plans and it would be the Member State or the region
that would implement these plans together with the sector as a
whole. The sector is organised in very different forms in each
Member State—inter-profession, producers', organisations,
the trade, et cetera. In some countries it is the producing region
that is the most important structure dealing with wine production.
That would be a type of reform that would allow each Member State
to manage its wine sector in a better way.
Q215 Chairman:
Do you think that an inevitable consequence of the reform of the
wine regime will be a significant reduction in the number of producers?
Ms Corral: We think that there should be some
grubbing up. We are not opposed to that; it is necessary. As you
say, not all European wine is the best in the world, so we are
going to have to restructure the sector and there will be a number
of producers that will find it more appropriate to go out of the
sector, to take early retirement, and we have to offer them the
possibility of joining the early retirement scheme. Of course,
this is just one tool that should not have the dimension that
the Commission is proposing and it should be managed inside a
restructuring programme. Otherwise it will have very negative
impacts in terms of the economy of the producing regions or the
employment and even the landscape, because most of the wine in
Europe is produced in convergence regions which were Objective
1 before. There is going to be a need to change some things. I
am not saying that the wine sector is perfect. There are a number
of problems and they are going to have to be addressed.
Q216 Viscount Brookeborough:
Has there been any year in recent years when there has not been
crisis distillation. And is it therefore no longer crisis but
the norm?
Ms Corral: I cannot say what is recent before
three years ago because I have only been in COPA-COGECA since
2004. It is true that we are using crisis distillation every year
and, as I say, this is not normal.
Q217 Viscount Brookeborough:
Is it true that Germany is a country which does not over-produce
at all or, to put it a different way, markets all its products
in wine?
Ms Corral: Production in Germany is very small
compared with big producers in Europe, and the climatic conditions
as well mean that they cannot produce as much because of lack
of sun. This is a question that links to the question of oenological
practices.
Q218 Viscount Brookeborough:
If you had one extreme reform which could put an end to distillation,
and the ban on planting rights is ending anyway and perhaps grubbing
up was no longer an issue and there was a more open market, do
you have any estimates of the effect on prices, employment and
the environment?
Ms Corral: I have data on employment in the
European Union in the wine sector. There are almost 1.6 million
farmers making wine in the European Union and it is a very labour-intensive
crop. 71% of the farms have an average surface area of five hectares[3]
and there are 2.5 million jobs linked to the harvest. In the wine
producing areas all the economy of these areas is built around
the wine. It is very impressive to know that in Languedoc/Roussillon
44% of the value of agricultural production comes from the wine
sector. It is not only the jobs linked to the harvest or the jobs
linked to the vinifying process because normally it is the producers
and the caves coopératives that are making the wine.
All the villages are structured around that. There will be a school,
and there will be a market, and there will be shops, and there
will be cafés; everything is linked to that. It is very
important to understand that, if we are going to talk about the
wine sector and the implications of this policy of distillation,
et cetera. Talking about jobs, we have to consider that at the
moment the wine sector provides for a very high number of jobs
and we have to be very careful about the way we do our reform
because of these jobs and because of the regions. If, for example,
there is uncontrolled grubbing up in one region and half of the
sector goes out because there is a crisis, they will say, "OK,
I am going to get the money. I am very tired of continuing to
fight in this sector", what is going to happen to the other
half? It is going to be affected by that. That would be very serious.
It is not distillation that will have an impact on jobs. But,
if we talk about distillation, there are four different types
of distillation at present in the European Union. It is true that
we have to consider that, as it is given as a possibility, a number
of farmers are using that possibility to get an extra revenue
and this is not what it should be. It is true that we will have
to consider eliminating some types of distillation but we do consider
that there are two types that we have to maintain. One is by-product
distillation, because this is not a distillation to remove products
from the market. This is a distillation that is aimed at maintaining
the quality of the product, because it is a distillation that
means you are not going to utilise the lees and the marcs. I am
not sure if you are familiar with the wine vocabulary, but the
marcs are what you get once you have pressed the grapes and the
lees are what you get after the first fermentation. This distillation
means that you are not going to use those products, which implies
that the quality of the product will be better, that you will
not use that to produce table wines or alcohol for other purposes
and that you are not going to put that in the environment because
it is an organic product with a lot of alcohol and it is a contaminant.
We consider that this type of distillation should be maintained,
even if the way of working of this distillation should be reviewed
because currently the money for the distillation is not going
to the producers; it is going to distillers. In the four types
of distillation the distiller is getting the money, not the producer.
The other type of distillation is the alcool de bouche,
potable alcohol. We do not consider that this is a distillation
to eliminate product but rather to supply a market. There is a
very clear example of this and this is in the Castilla La Mancha
in Spain, which is a region south of Madrid. In this region 45%
of wine producers are producing grapes to use for distillation
to produce potable alcohol, and they provide half of the total
potable alcohol in the European Union. They are not producing
wine; they are producing these products; and, if we eliminate
this type of distillation, I imagine that all that quantity of
grapes will go to produce wine, which is going to be a problem,
and also the price of these products is going to go up.
Q219 Viscount Brookeborough:
But that distillation that you have just talked about is a market
one and that would therefore be paid for by the people that require
that distilled product. Did I understand you to say that there
are some people who are producing wine of such a quality because
they know that it will go for crisis distillation and, therefore,
that is an abuse of the system to a certain extent?
Ms Corral: I was not meaning crisis distillation.
Crisis distillation works as a mechanism that normally should
be employed in exceptional circumstances.
1 Note by Witness: COPA is the Committee of
Professional Agricultural Organisations in the European Union.
COGECA is the General Confederation of Agricultural Co-operatives
in the European Union. Back
2
Note by Witness: In the European Union. Back
3
Note by Witness: 71% of holdings have less than 5 has. Back
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