Examination of Witnesses (Questions 300
- 319)
MONDAY 7 MARCH 2007
MR LARS HOELGAARD, MS LENE NAESAGER, MR EMMANUEL
JACQUIN AND MR DOOLEY
Q300 Lord Plumb:
I am not quite clear on the retirement grant. Supposing a grower
decides, "I have had enough. I am going to retire".
The retirement grant is based purely on the decision by the national
government. You said the one would be linked to the other if the
country is applying the farmer retirement scheme. Supposing you
are in a country where there is no scheme and yet the farmer decides
that he has had enough and wants to retire from wine growing.
Does he get a grant? Or does he not get a grant?
Ms Naesager: If early retirement is not a part
of the national programme of a Member State when implementing
the rural development regulation, then it is not possible for
the wine grower to ask for early retirement.
Q301 Lord Plumb:
That is what I assumed but I was not absolutely clear.
Ms Naesager: This is something which is clearly
set out in our Rural Development Regulation. It is Regulation
No.1698, adopted in the year 2005, I think. It is Article 23.
Q302 Lord Plumb:
I must look it up.
Ms Naesager: But in this article you have the
different conditions on how to apply for the early retirement
premium and what is the rate, what type of premium you can get.
This is set out in the annex. A key element for obtaining this
is that the Member State has put it in its national programme
in implementing the Rural Development Regulation.
Lord Plumb: In the British system it
is a waste of time looking it up.
Q303 Baroness Miller of Chilthorne Domer:
Can I ask how many Member States have put in for early retirement?
Ms Naesager: I think it is most of them so far,
but we are on the point of approving the national programmes.
Baroness Miller of Chilthorne Domer: Perhaps
we have a different view because we have not.
Q304 Chairman:
We have not, no. Grubbing-up seems to me to be absolutely vital
to the success of your strategy and yet it is clearly something
that there is a great deal of suspicion, reluctance, hesitancy
about. We had this wonderful exposition about where a Member State
should be able to intervene and prevent grubbing-up, even though
the individual producer wished to, and it is contained in the
European Parliament document. Basically, any area at all you could
define into those criteria. There is nothing that stands out.
It does seem to me that without grubbing-up the chances of getting
rid of the surplus and the low quality wine is not achievable.
Is that your perception?
Ms Naesager: I think this is our perception,
yes—that we need grubbing up in order to let those who are
not able to compete with regard to their wines to get out of business
but in a dignified way.
Chairman: Does that not come back to
Lord Cameron's argument that, if they are getting out of business
in these areas, you have to have a strong Pillar 2 contribution
to provide them with something else? And yet this again is something
that you have got opposition to?
Q305 Lord Cameron of Dillington:
In addition to that, are you going to carry on paying this restructuring
grant which is encouraging new investment at the same time as
the grubbing-up scheme?
Ms Naesager: No. These are two completely different
things.
Q306 Lord Cameron of Dillington:
So the one with the restructuring would stop?
Ms Naesager: No. The one with the restructuring
will continue with new and better wines. The one with grubbing-up
will go out of business, will receive the premium that we will
set for the grubbing-up and his areas will be subject to the Single
Farm Payment Scheme, so there will be the area premium as such
and then, if it is provided for in the national rural development
programmes, he can get the early retirement premium.
Mr Hoelgaard: It is true that the grubbing-up
is a key element but I would not call it a fundamental element.
I would not call it a key to success. Why? Either you go for the
rough method, which is that we simply abolish distillation measures—there
is no more support on the market, and then there will be a crisis,
there will be surplus and then you will have a lot of farmers
who will simply not be able to survive the process. They will
then go out. What we are trying to say is that there is a surplus
on the market. We want to give those farmers who know that they
do not really stand a chance in a market-oriented type of environment,
without all these distillation measures artificially supporting
the prices a chance to get out, which will be to the benefit of
them as well as to the rest of the market, so that there is a
better balance when you start from scratch, saying that now we
have an equilibrium between what we get in from third countries,
what we export and what is internally available for consumption.
It is not that, if we do not succeed on grubbing-up, there is
no reform. No. It is just that this is a way of having a soft
landing, if you like. It is a soft landing versus a crash landing,
and why the producing Member States are so critical about it is
that they know exactly that there are so many of their farmers,
the wine producers, who are just sitting and waiting for this
possibility to get out. That is what they are scared of. It is
a bit like the discussion on the Single Farm Payment and the decoupling.
It is really not the farmers that they have in mind. It is the
dependency on that activity in the rural areas—the processors,
the distillers, the employment. That is really the underlying
resistance against having a farmer with a chance to go for this
and open the door to get out. That is really where the problem
is, and therefore we need to have a solution which on the one
hand accommodates a certain market clearance to the benefit of
those who leave as well as those who stay, and at the same time
not have a complete demolition of some areas of wine producing
where it would lead to quite dramatic consequences in terms of
infrastructure, employment, et cetera. That is why, as Lene Naesager
has said, we would provide for, say, a limited exception in terms
of the agri-environment, in terms of slopes. If you ask a farmer
today, "Can you survive on the basis of what you get from
the market in terms of the costs of production?", the answer
to that is no, he cannot survive; but there are means and ways
by which you can artificially maintain such farmers in place if
you want to do so for other reasons by way of extra support. That,
I think, is something that we have to take into consideration,
but in general there has to be a balance between the considerations
of the farmer, the vintner himself and the general societal considerations.
Q307 Chairman:
If you pursue the steep slope environment issue, should the funding
come out of a policy for wine or out of a policy for the environment?
Mr Hoelgaard: We do both, basically. We have
an environment policy, we have our legislation on nitrate, pesticides,
et cetera. We now have introduced this in specific cases, like
in fruit and vegetables, where we are saying that in the operational
programmes farmers have to put in place environmentally-friendly
methods for which we can provide extra support to farmers, and
then we have the general notion, as you know, in terms of cross-compliance,
so that there is an ability to withdraw money if farmers do not
comply. We do not do a single avenue.
Q308 Chairman:
It is part of that programme?
Mr Hoelgaard: Yes.
Q309 Viscount Ullswater:
If I can turn to competitiveness, what you have been explaining
to us is that, whereas you want to reform the wine regime, at
the moment it is entirely budget neutral and that, if you take
away the distillation costs, which are nearly 50% of the cost
of the CMO, you are going to redistribute that money in various
forms in order to give the soft landing that you are talking about.
However, surely one of the key things is that since 2000 at least
you have noted, I think, that the EU has become highly permeable
to third country wines? I just do not quite link that what you
are doing is going to make EU wine more competitive and more market-orientated,
so that the consumer says, "I want to buy EU wine".
We have heard now that 70% of wine in the UK is sold through supermarkets
and that they have great promotions of various sorts of wine,
including from Australia and New Zealand but not necessarily,
I have to say, from the European Union. What is it that has allowed
this permeability? And what steps do you feel now ought to be
taken to make EU wine more competitive, because we are talking
about a global market? Obviously, the structures are European
but we are talking about a global market in wine.
Ms Naesager: It is clear that it has become
a global market in wine. It started in particular after the Uruguay
Round in 1995, and the changes this led to were one of the reasons
why we had the wine reform in 1999. What happened was that the
EU had no more a reference price and also we reduced the taxes
quite a lot, so it meant that the obstacles that had been there
beforehand at the borders disappeared. At the same time we started
to negotiate bilateral wine agreements with some third countries.
So we had in 1994 the first wine agreement with Australia, and
I do not think that people were expecting this huge import of
Australian wine afterwards, but this is a fact. We continued the
negotiations with other third countries—Chile, South Africa,
also the United States recently. We have one with Canada and one
with Switzerland, but with these wine agreements I would say that
we have two types of wine agreement. Some of the wine agreements
are more what you could call import agreements of wine into the
EU. This is particularly the case for Australia, South Africa
and Chile. There are some others which are more export agreements
for the EU, which are the ones with the United States (even though
it is criticised but this is something else), Canada and Switzerland.
Then you say, "How do we want to improve the competitiveness?",
and this is really something that is key to our reform. This figures
in the objectives as well, that we want to improve the competitiveness
of EU wine and gain market share. We have to look at the different
tools that we have now and we believe that the combination of
the different tools will lead to better competitiveness for EU
wines. For instance, if we look at the money that is now being
used for distillation, this is not a very positive measure, using
money to distil the wine that we produce. That is one of the reasons
why we want to use this money better. It is one of the reasons
why we have created the "national envelopes", where
we say to Member States, "Here you have a series of measures
that you can choose to use if you think that this is good for
your wine sector". We also want to do far more on promotion,
this has been a strong request from the sector, and we want to
do more in order to help the European wine sector to promote and
commercialise its wines.
Mr Hoelgaard: In terms of competitiveness, let
us take them one by one. Restructuring is competitiveness. It
is making sure that the quality of the wine is more marketable,
that it has a higher value and it gives a better return. Of course,
there is conversion, the fact that market orientation in itself
is also competitiveness because it means being able to survive
at a lower price and being more self-sufficient. Probably the
result, as in other areas, is that there will be a certain degree
of amalgamation of surpluses. This is a process which is, of course,
going on and will probably be reinforced. The third element of
competitiveness, as Lene has mentioned, is promotion. The fourth
element is the fact that by the "national envelopes"
we will have more integration between producers and the selling
of the product, which is one of the areas where many of our stakeholders
are saying there is a lack of integration, a lack of coherence,
and there is a need to reinforce this whole chain, which is much
more pronounced in some of our third country competitors. The
fifth element of competitiveness enhancement is in the area of
our Geographical Indications, the protection of economic issues,
the fact that we can also in the future, as we do for third countries,
allow our producers to market their wine even if it is not necessarily
quality wine but is still a wine that has value, by indicating
the vintage year and the grape variety, which we have seen is
one of the areas where the third countries have made inroads and
encroached on our market. We want to put our wine producers on
the same footing. A sixth element is in oenological practices
where we say that we should give our wine producers the same possibilities
in terms of methods, modern techniques, et cetera, that they have
in the third countries. If a producer organisation, a protected
denomination of the Geographical Indication, says, "I do
not want to use those methods because it will infringe on the
reputation of my wine" fine, then let him do so. But at least
that possibility should be available for the wine growers to make
use of. I think we could mention more but those are some of the
main ones.
Viscount Ullswater: All of the things
you say are incredibly refreshing to hear but I do not think we
were getting that message.
Chairman: That is the problem, I think.
We would all sign up to that.
Q310 Viscount Ullswater:
The producers were much more hesitant about opening their doors
to changes in oenological production methods, and I think were
critical of some of the things in the document because they felt
that they were going to change the nature of this very special
EU wine.
Mr Hoelgaard: There is a high degree of conservatism.
Q311 Viscount Ullswater:
But I do not know whether the consumer at Sainsbury's in the King's
Road in London is really going to think, "Gosh, this is a
special wine".
Mr Hoelgaard: It depends. In Germany the German
consumer will be very attentive to the wine-making methods, and
you may have followed the discussion with the US/EU wine agreement,
where there was strong criticism from the German side, which was
certainly mobilised to a degree by the wine producers but also
in government circles (and maybe even consumer organisations),
that they were allowing methods of wine which had nothing to do
with wine and therefore they wanted to make sure that the wine
they were consuming was made on the basis of good, old, traditional
practices that applied in Germany. There is very little of that
approach, say, in non-producing, wine-consuming Member States
like the UK, Denmark, Norway, Sweden, Ireland and others, which
have no particular adherence to the culture, compared to those
who come from wine-producing countries who have a very strong
relation to that, so there is that diversity in the approach.
I would say that, if you went to Member States like Italy, they
would probably be much more open than in a case where you were
talking about Germany or even France.
Q312 Chairman:
When we were talking about promotion generally to other stakeholders,
what came across was almost a "blame the consumer" culture—that
it was the consumer's fault, that he was letting down the European
wine industry, that promotion was about telling the consumer that
this was good for him. There was no recognition that you have
to look at the product and you have to look at what the consumer
wants, because with all the promotion in the world the consumer
is quite capable of turning round and saying, "Well, actually,
I prefer another product".
Mr Hoelgaard: We have no inhibitions in telling
the third countries that our wine is better than whatever comes
from any other country, but we certainly do not want to use that
policy internally. We want to make sure that the consumer is informed,
that there are pros and cons in terms of consumption and that
he or she needs to be informed. That is basically what our policy
in terms of wine should be about, and it is also to promote this
notion that our wine maybe does have long-standing traditions
and, if you as a consumer want to make sure that these are safeguarded,
then you are also given a chance to demonstrate that in the supermarket;
but, if you do not care, then you buy whatever is available.
Q313 Viscount Ullswater:
Can you get round this by changing the labelling rules?
Mr Hoelgaard: To some extent, yes.
Q314 Viscount Ullswater:
So that you can indicate exactly how the wine has been made on
one part of the label and exactly what the wine is on the other
part of the label?
Ms Naesager: Then we would be talking about
including statements that we do not have yet for wine. As far
as I have understood from the sector, this is not necessarily
the way they would like to go because we have a lot of different
oenological practices. If you put them down on paper they look
very strange to the consumer, so consumers might not be so tempted
to buy the wine.
Q315 Viscount Ullswater:
But it should be transparent.
Ms Naesager: It should be transparent, I agree
with you. I come from a very Nordic approach about labelling,
but we also need to take into account what the sector would like
to see.
Q316 Lord Cameron of Dillington:
When you say "the sector", it is the growers, not the
consumers?
Ms Naesager: When I say "the sector",
I mean the wine growers and the producers, but today we have some
kind of labelling requirements. We have obligatory labelling requirements
when we talk about sulphites, because allegedly they can give
you a headache and so on, so therefore we have to put on all the
wine products that this wine contains SO2. We start slowly to
go down the road but it is not an easy task.
Chairman: What is the argument on labelling—Lord
Cameron's point that he has been making during the day: let people
put on the label whatever they want as long as it is true?
Q317 Lord Cameron of Dillington:
One of the examples of that is that Robert Mondavi was the first
person in California to put grape varieties on a label and people
thought he was mad, "No-one is going to understand this".
But now the whole world understands it and, of course, it has
become the practice. I am sure there could be equally things that
people would want to put on their labels, and frankly why not
let entrepreneurship and enterprise flourish and let them put
what they want on their labels, providing it is true?
Ms Naesager: This is a very strong argument
and, when we had the wine negotiations with some of the third
countries with whom we had concluded wine agreements, this was
an argument, "Why do you have all these specific rules?.
We just want to put truthful information on. Why can we not put
the wine variety on a table wine?" It is difficult to explain
that, and that is one of the reasons why we are opening it up
now. We say that, if there is a table wine, we should be able
to see what is the wine variety that has been used, what is the
harvest year and so on. This is linked to what we have done in
international negotiations. In addition to that, when we do so,
we give our wine producers the same opportunities as the wine
producers in third countries. This is also something that applies
again when we talk about oenological practices, the wine-making
practices: why should we not give them the opportunity, say, in
Europe? It is up to them if they want to use it, but at least
the door is open.
Q318 Viscount Ullswater:
Should the OIV be the gatekeeper here for oenological practices?
Ms Naesager: What we say is that we want to
filter the practices recommended by the OIV into our internal
legislation: we want to have the OIV as a reference institution.
Today we already have OIV as a kind of reference institution but
we want to make that even stronger, and then also we say that
it should no longer be the Council but the Commission which is
competent. One of the ideas behind that is that most of our Member
States, and certainly all the wine-producing Member States, are
already members of OIV. They have already said "yes"
once, because OIV works on the basis of consensus. So, if they
have said "yes" once in an international organisation,
why could we not just say that it should be the Commission that
decides, which is far simpler and quicker?
Q319 Baroness Miller of Chilthorne Domer:
Some of your comments this afternoon with regard to the environment
suggested—for example, when we were talking about the slopes
issue and whether the money from distillation subsidy would be
better used elsewhere—that you would have favoured Option
3 in your paper and, given the Commission's efforts elsewhere
in developing strategies on soil and water and all the directives
for those, it is surprising that you seem to be moving away from
Option 3 at this point. I would appreciate your explanation as
to why you are throwing in the towel on that option already.
Ms Naesager: I would not say that we are doing
that. We have a lot of good things in the Single Farm Payment
scheme. What we have already announced in our Communication is
that an important tool for the environment, such as cross-compliance,
will apply after grubbing-up and we have also announced in our
Communication that there are a lot of other environmental considerations
that we will need to integrate into our wine reform in order to
avoid soil erosion, in order to look at plant treatment, and so
on. We are still looking into ideas that we could use for the
Single Farm Payment scheme because it is, and this is a personal
comment, the future for the whole agricultural sector.
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