Examination of Witnesses (Questions 382
- 399)
THURSDAY 8 MARCH 2007
MR LUIGI POLIZZI
Q382 Chairman:
Good morning. First of all, can I thank you very much indeed for
finding the time to come and help us with our inquiry. I will
just explain briefly who we are and what we are doing. We are
known as Sub-Committee D. We are a sub-committee of our Select
Committee on the European Union, and we look at Agriculture, the
Environment and Fisheries. We are carrying out an inquiry into
the reform of the wine regime. We have been taking evidence in
the United Kingdom and we came to the view that it was very important
for us to come across to Brussels and meet people who are more
directly involved in the policy-making process so that we have
a more immediate understanding of the issues involved. We have
spoken to a number of representatives of the industry. We have
spoken to the Commission and we have spoken to members of the
European Parliament. Today we are seeing a number of representatives
from Member States to try and get a feel for what the reform could
mean to individual Member States. If it is all right by you, I
will start with a general question which hopefully will enable
you to make your country's position clear on the general issues.
Then I have a number of colleagues who will take up specific policy
areas. The Commission have identified the problems of the wine
regime by saying that it is unsustainable and that it is in crisis
for a number of reasons. We have declining incomes for farmers,
we have increased import penetration into the European market,
we have declining consumption of wine in Europe generally, and
we have the development of a long-term structural surplus of wine,
particularly lower quality wine. Does your country agree with
that analysis? And, if so, what is your reaction to the Commission's
Communication?
Mr Polizzi: First of all, thank you very much
for this opportunity to speak with you and to have an exchange
of views concerning what are very sensitive issues for us. With
the French, we are the most important producer of wine, so this
reform of the wine market is really important to us. You know
that work on the Communication has been finalised and also that
the European Parliament has concluded its resolution. The outcome
was not clear but at least we have the basis on which to start
a discussion on the Commission's proposal for reform. We know
that the Commission is already preparing this reform, so we are
awaiting this and we are hoping that the Commission will take
our remarks into account, particularly those from the producer
countries. The reaction from Italy was positive because we consider
that we need reform to give enhanced competitiveness to the sector,
not only in the European market but also outside it. That is a
personal view. In the last 10 years this sector has been completely
closed to the changes around the world from the New World producers,
and we share completely the objective of this reform—namely,
to increase competitiveness but also to reduce some of the measures,
concerning, for example, distillation, and to use this budgetary
resource for other things which would be useful for the producers
and the growers and so on. We have some critical points on this
proposal—grubbing-up, for example, because you know that
the Commission has proposed the grubbing-up of 400,000 hectares.
We consider that this measure is the focus of this proposal, among
other measures, that we will use to give competitiveness to the
sector, but we would like this grubbing-up to be used by Member
States with some flexibility. You know that Italy is a long country
geographically, so we have northern, central and southern areas.
The wine growers cover the whole territory but their geographical
situations are completely different. In some parts of Italy it
is important for the landscape, for the environment, that the
growers continue to maintain it, so we do not like, because it
depends on the level of the amount of aid that will be given to
the producers, that some of these growers will completely go out
of the market. We would like to maintain some sensitive areas,
like in northern Italy but also in the south of Italy, the heel
of Italy, which are not really competitive with the other parts
of Italy. So we would like the grubbing-up measure to be among
other measures, not the central measure. We consider too that,
if we reduce our production, other producer countries throughout
the world will compensate for this loss of production. That means
that, if we cut 400,000 hectares, we will eliminate some production
in the European market and other producer countries will compensate
for this production. In other words, we will be open to imports
from other countries. Our aim is to improve the quality of European
wine—Italian wine, Spanish wine, French wine. This is one
of the critical points of this reform and we hope that the Commission
will modify this part of the reform proposal. This measure also
is seen as an important budgetary resource because we are talking
about two milliard euros for this measure. I would just like to
summarise by saying that we think grubbing-up should not be the
main measure in this proposal but along with other measures that
will be announced, and at the same we should give some subsidiarity
to Member States by the participation of the growers in the use
of these measures, because the Member States may say "We
choose where. What area is possible?". For example, do we
do it in some areas of Italy, namely, in the south of Italy? We
have some regions that produce just for distillation, not for
the market, so we would like, of course, to concentrate these
measures in this area, because the areas where production will
be competitive are those where the quality is high, so this is
one of the first critical points. The other point is the "national
envelopes", and this is linked to subsidiarity, so we would
like, also for the other measures, that Member States have "national
envelopes". This "national envelope" is not to
be used for the same measures in the current reform—in other
words, not for distillation aid or for the other measures. But
we would like to use it for some specific intervention in the
chain, such as to join up all the processing investments, because
in Italy, for example, compared with other situations, the average
surface area is really small, one hectare or less. We need for
this reason to promote association among producers, and in this
case we would like the measures to be used to concentrate supply
and at the same time to get the instruments to promote production
and so on. At the same time, during the transitional period we
would like to use some old measures—for example, crisis
distillation—just during a transition period, because even
if the climatic conditions are good five or six% of the production
is not good quality. It is important that it is not put on the
market because otherwise the price will be lower. It is important
that during this transition period the distillation price is maintained
but also that the aid for this distillation is reduced, so we
would like this transition period for the use of these measures.
This is concerning the "national envelope". Another
issue is labelling. You know that the Commission wants to modify
the situation on labelling because the labelling of the New World
producers is really simple. I would like just to stress that for
Italy the situation is different, because we do not have any problem
with trade. At the moment our trade and our exports have increased
because, compared with the French situation, our prices are lower,
so we are more competitive with New World imports, even if the
market share of the import production has increased during these
last years. In any case, for the traditional Geographical Indication
we have really simple labelling because it is important that we
maintain a linkage between the product and the area where it is
produced. It is important for us and it is important also for
the consumer to have this linkage. In Italy on the table we always
have a glass or a bottle of red wine. It is in our culture, so
it is a complete linkage to our behaviour. We recognise that this
product is linked to a specific area and that this area has a
heritage, a traditional process and a traditional culture, so
the wine is a symbol of our country and of a small town or an
area. Of course, we are hoping to follow the proposal of the Commission
but we would like the current system to be completely changed
because we have a different target for our products. We have high
quality products and also DOC, the main quality. This is a target
less than the other ones but it is really good, because the price
and the quality are nice and so it is very competitive with the
products of other countries. So we do not have any specific problem;
we just give consumers the information about the kind of product
that we have. Just to touch on another area, because I have seen
your question paper, what are the lessons to be learned from the
New World producers? First of all, it is the trading policy. The
marketing is really well organised in these countries and they
use an easy communication with the consumer because they use five
or four international varieties. In Italy we have in each region
different varieties in each region. It is really difficult to
put the information on one line. I come from Sicily, and in Sicily
we have some varieties. But I live in Naples, and in Campagna
we have other varieties which are completely different from Sicily.
If you go to the north of Italy you have the most important: Chianti,
Barolo and the other varieties. But now, for example, I can tell
you that in Sicily we have a good wine like Nero d'Avola, which
in less than three years has increased production greatly but
also its market share in Europe, so the situation has improved
a lot. These are just a few elements concerning our position.
I do not know if it was clear but we completely share the efforts
of the Commission to reform the market organisation of the wine
sector because we consider that it is important to take into account
that imports from the New World countries have really increased
a lot, mainly after all the preferential bilateral agreements
with South Africa, Chile, Australia and so on. All these products
are important, but we would like to maintain our market and we
would like also to expand our market and now we are going to organise
some fairs in China and India. These are new markets, and so it
will be useful for us to be there in competition with the other
producer countries.
Chairman: Thank you very much. That was
very helpful in explaining your country's position.
Q383 Viscount Brookeborough:
I want to clear in my mind about a few things you said. I understood
you to say, when you were initially talking about grubbing-up,
that you did not want to reduce production because that reduction
would be taken up by other people coming into the market. Then
I think you said that there was wine being produced further south
which was going direct to distillation, and therefore by definition
you have got a surplus of wine, have you not?
Mr Polizzi: But, as I say, the surplus is physiological
in the whole sector, because in any case in some parts the wine
is not good quality, so what do we do with this? We stock and
we pay for the stock? It is important to ask what do we do with
this part of the wine that is impossible to put on the market?
Q384 Viscount Brookeborough:
But do you mean that there are people producing wine of a quality
which they know, before they produce it, will go to distillation
and not on the market? Therefore, they are intentionally producing
it?
Mr Polizzi: Yes, but for this reason I stress
that it is important to give Member States the instruments to
manage this measure. It depends on the amount of the aid. If the
aid for grubbing-up is high, all the growers will go out. It is
not specifically the growers that are producing for distillation.
It is important for the Member States to know exactly what is
the situation. Where could we intervene specifically to reduce
this part of the production? At the moment the situation is that
we have aid for distillation. If we decided that this aid would
be reduced and that there would be a phasing-out during a transition
period, I think the situation would be different, and at the same
time the Member States would intervene specifically on this area
to grub up and eventually to promote and diversify production.
That means diversifying production in a quality manner.
Q385 Viscount Brookeborough:
So a phasing-out of distillation whilst other measures also change—your
government would back that?
Mr Polizzi: With other measures.
Q386 Viscount Brookeborough:
Phasing-out and more money for grubbing up so that distillation
would not become a normal practice; it would only be in a crisis?
Mr Polizzi: In the last three years this has
been a normal measure for France, Spain and Italy too, but we
would like also to avoid it. I can tell you that Italy was really
a very substantial user of this measure in the last two years.
Q387 Viscount Brookeborough:
Can you quantify how much you put into distillation or what proportion
of your table wine production you put into distillation?
Mr Polizzi: It depends on the market situation
each year. Last year we requested three million hectolitres. Spain
requested six million, the French four million, so this is the
situation. We would like to avoid it because we would like to
use this budgetary resource for other measures, not for distillation.
However, crisis is impossible to foresee. It is important to maintain
safety net measures in each sector; otherwise, what do we do when
a crisis happens—a crisis for the price, a crisis because
of the drought? Sometimes now it is a chronic situation. In the
south, and now in the north, the drought is every year, so we
have a reduction in production and the quality of the wine is
not good, so what do we do? It is important to have some instrument
to face this situation. For this reason we would like to have
a transition period, and during this transition period to look
at what has happened, whether this is a good way or whether it
is important to change and use another instrument.
Q388 Lord Cameron of Dillington:
Under your criteria what area would you be grubbing up? What area
are we talking about that is now going automatically to distillation?
Mr Polizzi: Automatic distillation?
Q389 Lord Cameron of Dillington:
You produce one third of the wine of Europe.
Mr Polizzi: We do not have any correct analysis
on that, because it depends in the end what is the level and the
amount of the aid for grubbing up. If, for example, at the end
of the proposal the aid were to be €6,000 per hectare, people
would consider that between 148,000 and 160,000 hectares would
be cut. But it would depend on the level of the aid, because if
you fixed the aid at €10,000, more people would request it.
It depends also whether this global amount of 400,000 hectares
remains, and if so how it will be distributed between the Member
States, how will it be managed, because at the same time you know
that, when you use the grubbing-up, the growers are go into the
Single Payment Scheme, so we need other money for that. It is
important to know the global situation because the situation is
different at the end. At the moment it is unclear.
Q390 Lord Cameron of Dillington:
I am just wondering whether you are trying overall to reduce the
amount of grubbing-up or whether you would be happy to accept
that Italy is responsible for grubbing up so many thousand hectares.
Mr Polizzi: We would like to introduce some
mechanism and some level of participation, because participation
in grubbing-up will be voluntary for the growers, not mandatory.
That means that we want to participate and that at a certain ceiling
the Member States can intervene, at 30%, for example, and after
intervening decide where to stop.
Q391 Lord Plumb:
You gave us a very interesting overview of the situation in Italy.
You said that you were in favour of sharing the objectives of
the reform, but then, of course, you say, "But we have to
do it my way", and it is not necessarily the way the Commission
are proposing at the moment—although you are not very far
away, I think, from what we heard both from the Commission and
the Parliament. As far as grubbing-up is concerned, one of the
things that has come out of the European Parliament and also appears
to be approved of by the Commission itself, from the evidence
we took yesterday, is that they tend to accept that the initiative
should come from the individual producer, and if it came from
the individual producer then it should be on a voluntary basis
and it should be temporary.
Mr Polizzi: Yes.
Q392 Lord Plumb:
That, obviously, would fit into the pattern that I think you were
presenting to us. Secondly, I think the thing that producers are
going to be concerned about is that they take the initiative and
they grub out some of their vineyards and reduce the quantity
in anticipation that they are then going to get a better market
for what they have left. That being so, that is fine. But then
the proposal that seems to be on the table at the moment is that
there will be a continuation of the ban on replanting until 2013.
If I were a grower, I would say "I am going to grub up but
all I am doing is opening the door to wines coming in from all
over the world which are taking the place of my wines, and I have
not got a chance to come back into competition". Is this
a problem? Will Italy reject the proposal to keeping the ban for
replanting for a period of time, because that seems to be one
of the issues at the end of the day as far as grubbing-up is concerned?
From all we have heard we would certainly accept that grubbing-up
is only one part of the deal. It may not be the major part at
the end of the day, but it has got to be one part if you are going
to reduce the volume that is there at the moment, which is over-supply
from production.
Mr Polizzi: Concerning your last remark, we
would like to move the ban on new planting for 10 years so that
we maintain the ban for 10 years. First of all, it is important
to give the producers who remain in activity the opportunity to
safeguard their investment, because otherwise what it means is
that one side grubs up and the other side is open, so we need
to maintain some balance in this measure.
Q393 Chairman:
How will you increase the quality if you keep the new planting
ban in place for 10 years?
Mr Polizzi: Why do you link a new planting ban
with quality? We could improve the quality with the existing investments.
It is important to modify the approach to quality. That is the
reason we would like to use the budgetary resource for quality
measures but we would also like to change oenological practice.
This is also perhaps one of the instruments for improving the
quality.
Q394 Lord Plumb:
Is that quality improvement as part of the processing, because
if you are not replanting, if you cannot change your vines, you
cannot suddenly put a different grape on your vine?
Mr Polizzi: I understand and I will be very
frank with you. This position is a little contradictory because,
if we want to admire the aim of this reform—to improve competitiveness,
of course the aim is to give the best producers the opportunity
to enlarge their investments and invest in the quality process,
I agree with you. But at the same time I think it will be necessary
to safeguard the investments. This was also the outcome of these
measures over 18 years. These were good measures because a lot
of the surface of our wine sector was completely eliminated, but
at the same time 50% of this space came into the sector, so we
would like to avoid this outcome. I also want the benefits in
Sicily of these measures. I do not want to grub up my vineyard
but at the same time a lot of other people close to me start to
plant vineyards, so we would like to avoid this contradictory
outcome.
Q395 Lord Cameron of Dillington:
I think there is a slight misunderstanding on our side because
you can replant new vines on the existing area at the moment.
Mr Polizzi: This is another thing. This is diversification.
We would like to improve these measures.
Q396 Lord Cameron of Dillington:
Exactly, but what you are saying is that you do not want new blood,
new enterprising people to come into the industry and renew it?
You are saying only the existing growers, the old growers, should
be able to survive for 10 years. That is more or less the result
of what you say?
Mr Polizzi: Yes. I also stress that this is
a contradictory position in our country. I spoke too frankly to
you!
Q397 Chairman:
It is important to try and resolve things.
Mr Polizzi: It is important in the end to achieve
a compromise and this is a contradictory situation. We had the
experience in the past that the grubbing-up measure was a good
measure because a lot of the lower quality wine of Italy was cut.
But at the same time new producers came in, so now we have two
aims: competitiveness on one side and quality on the other. It
is important that we work with existing producers and we would
like all the investments to be for improving quality and at the
same time, if possible, for the existing producers also to be
able to enlarge their surface area.
Lord Plumb: I understand.
Q398 Lord Cameron of Dillington:
You mentioned that the Geographical Indication is important for
Italy.
Mr Polizzi: It is very important.
Q399 Lord Cameron of Dillington:
It probably is in many instances, although we are aware that there
are more than 10,000 Geographical Indications in Europe and probably
9,950 of those are irrelevant to most consumers.
Mr Polizzi: At a personal level I agree with
you, because this is one of the reasons we lost our market share.
But at the same time we would like you to know that Geographical
Indication is the subject of debate in the Doha Round of negotiations.
It is impossible that we present with 10,000 Geographical Indications.
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