Select Committee on European Union Thirty-Ninth Report

CHAPTER 3: CONCLUSIONS

78.  In this concluding report we have sought to do two things—to re-examine, in the light of evidence from HM Government, our preliminary findings on the Commission's Legislative Proposal; and to draw attention to some key characteristics of the European wine industry which will need to change if a new Wine CMO along the lines proposed by the Commission is to produce real results. In this chapter we address the same two subjects in reverse order. First, we attempt to pull together our thoughts on the EU wine industry and then we set out our final conclusions on the Commission's proposals.

The EU Wine Industry

79.  The key objective of reform must be to stimulate a greater sense of competitiveness in many parts of the wine industry. Competitiveness, however, is one of those qualities, like virtue, to which everyone subscribes in principle while having differing views as to what it means in practice. Giusseppe Castiglione took the view that "it is absolutely necessary to give new impetus … to the European wine-growing companies facing these new challenges from countries which more and more are finding outlets in the European market for their wines, and it is something we have to face up to. We have to try and get new market share via reform". He thought the answer to the problem was more promotion of EU wines:

"The competitiveness of our undertakings can be made more profitable with sustained support for marketing. Our competitors, we have noted, really have massive advertising campaigns, even if their products are of lesser quality, are less good for the environment or less linked to the structure of the land. Nevertheless a tremendous amount of investment goes into the advertisements, certainly compared to what we are doing as Europeans" (Q 266).

80.  Lene Naesager agreed about the need to direct reform at increasing market share. She supported increased promotion, but she also took the view that other measures were needed too:

"We need 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, that 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 the money better. It is one of the reasons why we have created 'national envelopes'" (Q 309).

81.  Such initiatives—promotion, grubbing-up, restructuring, cross compliance—are all very well in their own right and we support them as stepping stones towards a more vigorous and profitable wine industry. They are, however, all administrative measures and, as such, they will have only limited success if there is not a more fundamental change in the outlook of those working at the coalface. There is in our view a need to move from the mind-set of an industry which, in some sectors at least, thinks in terms of wine quality as something apart from the consumer and from a structure which is fragmented both horizontally (with thousands of very small vineyards under family control) and vertically (with slender connection between those who grow the grapes, make the wine and sell the finished product). Julian Dyer offered this advice for getting the EU wine industry moving again:

"Be more open-minded. Take a look above the parapet and see what else is out there. Really understand what customers are drinking. Produce modern styles of wine that are in tune with today's palate. Be competitive on price. Work collaboratively as an industry. Those industries that do well work together. Australia is a great example: it is one industry; they are in it together. In France, Italy, Spain, it is each against the other" (Q 678).

82.  Small producers will always have difficulty surviving in an open market. Their survival depends on injections of funds unconnected with wine production, whether from personal income or public funds. The only market-oriented solution to this is to secure greater scale of production, whether from corporate or cooperative farming. Understandable as is the desire to maintain small-scale production, the plain fact is that such a structure is not economically viable in a global wine market and with changed attitudes to wine consumption. If persisted in, the consequence will inevitably be that the industry will continue to lose market share. Subsidies from public funds may palliate the situation but they will not solve the problem or make the industry more competitive. What is needed, therefore, is greater cooperation within the industry, and in our view this must be led by the marketers, as the people in touch with consumer demand, rather than the producers. Setting up such networks would, we believe, be a worthwhile use of wine CMO funds via national envelopes.

Conclusions

83.  Our final conclusions as regards the Commission's Legislative Proposal are therefore as follows:

DISTILLATION

(a)  We concur with the Government's view that the ending of subsidised distillation is a sine qua non of reform of the wine sector. While most of the other measures proposed by the Commission are to be welcomed, the ending of subsidies for distillation is crucial to the success of the reform package as a whole. Without it, none of the other measures will be able to deliver the efficiency gains which are necessary to set the industry on its feet again. We therefore confirm our strong support for this proposal (Paragraph 7).

NATIONAL ENVELOPES

(b)  We confirm our acceptance of the concept of national envelopes. While an allocation formula for national envelopes which gives priority to the main wine-producing States is acceptable in the short term, the medium term aim should be to reduce wine sector funding overall and to re-assess the allocation of national envelopes among Member States (Paragraph 10).

(c)  We support the Government's view regarding the usage of national envelopes—that they should be used for purposes which will promote the efficiency of the wine sector or address the consequences of its reform and that the most suitable way of achieving this is via transfer of funds from Pillar I to Pillar II of the CAP. For this reason we do not support the inclusion of 'Green Harvest' among eligible measures for funding from national envelopes and we confirm our opposition to this proposal (Paragraph 14).

GRUBBING-UP

(d)  We confirm our support for a programme of voluntary grubbing-up of uncompetitive vineyards and we reiterate our wish to see tight definition of the exemptions which Member States may invoke to block grubbing-up applications by wine growers (Paragraph 16).

THE BAN ON NEW PLANTINGS

(e)  We are pleased to see that the Government shares our view of the need to end the current planting ban. As regards the detail of this, we recognise that it is for the Government to make its own judgement of the situation, taking into account the concerns of the UK Wine Industry. However, it will be better for the EU wine industry as a whole if the ban is lifted sooner rather than later.

ENRICHMENT

(f)  We confirm our support for the ending of subsidies for the use of grape must in wine enrichment and our opposition to the proposed ban on the use of sucrose (Paragraph 23).

RURAL DEVELOPMENT

(g)  We confirm our support for the transfer of a substantial proportion of Wine CMO funds from Pillar I to Pillar II of the CAP in order to support Rural Development programmes in wine-producing regions (Paragraph 25).

(h)  We re-state our opposition to the use of Rural Development funds to remedy an economic problem resulting from a proposed administrative measure (banning the use of sucrose in wine enrichment) which makes no sense in its own right (Paragraph 28).

WINE CLASSIFICATION AND LABELLING

(i)  We confirm our earlier view that, while the proposed relaxations in labelling rules are to be welcomed, the proposed new wine classification system is unlikely to be sufficient to reverse the trend of mass consumption of non-EU wines. We also wish to sound a note of concern lest the new system could be used to prevent entrepreneurial new wine makers from entering the market after the ending of the current planting ban (Paragraph 33).

WINE MAKING PRACTICES

(j)  We confirm our earlier support for the Commission's proposal that OIV-recommended oenological techniques should become the benchmark for authorisation of wine-making practices within the EU (Paragraph 34).

SINGLE FARM PAYMENT

(k)  While we consider there would be advantage in bringing all land producing food and drink, including vineyards, within the Single Farm Payment system, we nonetheless support the more modest reform of bringing grubbed-up vineyard land within the ambit of the SFP (Paragraph 36).

84.  In short, a new Wine CMO must be seen by the industry as something to help it to become competitive rather than, as has been the case in the past, as a vehicle on which to ride. No CMO can, of itself, make the industry competitive or save it from yet further loss of market share if the right attitudes are not present on the ground. Most of the various measures within the Commission's Legislative Proposal are capable, given realistic and constructive application by Member States and the industry, of turning the EU wine sector round and pointing it towards a brighter future. The new CMO must, however, be seen for what it is: a facilitating mechanism rather than a support structure, enabling the industry to move from its present reliance on subsidies to self-sufficiency in the market place.

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