39TH REPORT: EUROPEAN WINE: A BETTER DEAL
FOR ALL: FINAL REPORT WITH EVIDENCE
DEPARTMENT
FOR ENVIRONMENT,
FOOD AND
RURAL AFFAIRS
INTRODUCTION
The Government welcomes the Committee's report
which makes an important and helpful contribution to the on-going
discussions about the future of the EU wine sector and the role
that the Common Market Organisation (CMO) for Wine should play
in this.
The current Wine CMO is highly complex extending
to production, market mechanisms, wine making practices, wine
c1assification, labelling and trade. Yet this complexity is not
helping the sector, which is at the crossroads in terms of its
future sustainability. The problems facing EU wine producers are
set out in the Impact Assessment accompanying the Commission's
proposal and are also referred to in the Committee's report. In
short, there is a significant and growing mismatch between EU
wine production and consumption which is perpetuating a reliance
on expensive market management measures to remove surplus wine
production from the market. The reasons for this are clear. Consumption
is falling in the main wine producing countries as lifestyles
change and the penetration of imports of wine from the so called
"New World" producers is increasing steadily, with strong
demand in consumer countries such as the UK.
In the Government's view, the Wine CMO is not
sustainable in its current form and we strongly support the thrust
of the Commission's reform proposal. However, given the importance
of the wine sector in the key producing Member States of the Community,
we do not underestimate the difficulty of reaching agreement on
a far reaching reform. The Commission estimate that the EU has
around 2.4 million wine producers tending vines on around 3.6
million hectares of land, with wine production accounting for
at least 4.8% of the total share of EU agricultural production
and more than 10% in France, Portugal and Italy. Wine is therefore
an important economic activity in terms of its contribution to
agriculture and employment in rural areas.
The EU is the world's largest producer, consumer,
exporter and importer of wine, and accounts for around half of
the area under vine and around 60% of production. However, in
the period between 1986 and 2004, the EU vine area has decreased
by 15%, whilst the area in other countries has shown considerable
growth (+21% in the USA, +33% in South Africa, +52% in Chile,
+178% in Australia, +360% in New Zealand). The EU remains the
world's largest exporter of wine with 17 million hl in 2006, but
the so called "New World" countries are beginning to
catch-up and are making significant in-roads into the EU market
with imports virtually doubling to 10.1 million hl between 1999
and 2004.
The Commission's proposal provides for a significant
reform of the Wine CMO building on the principles of market orientation
and sustainability started in 2003 for the arable crops and livestock
regimes and continued with sugar in 2005 and fruit and vegetables
earlier this year. The objectives of the reform are to:
— increase the competitiveness of the
EU's wine producers, strengthen the reputation of EU quality wine
as the best in the world, recover old markets and win new ones
in the EU and worldwide;
— create a wine regime that operates
through clear, simple, effective rules that balance supply and
demand; and
— create a wine regime that preserves
the best traditions of EU wine production, reinforces the social
fabric of many rural areas, and ensures that all production respects
the environment.
The Commission's proposal was published on 4
July 2007. The Portuguese Presidency's aim is to reach political
agreement on the dossier at the December Agriculture Council,
with the new regime being implemented from 1 August 2008. Whilst
this is an ambitious timetable for such a substantial reform,
the UK Government is working closely with the Commission, the
Presidency and other Member States to try and ensure it is achieved.
RESPONSE TO
THE COMMITTEE'S
SPECIFIC CONCLUSIONS
Conclusion (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.
The Government strongly supports the Commission's
proposal for the immediate abolition of market support measures,
such as distillation of surplus wine. These measures are costing
around €800 million a year, yet are not leading to any discernible
positive change in the sector. The Government therefore sees the
abolition of these measures as the single most important item
of the reform, as it will immediately introduce much greater market
focus than is currently the case.
Conclusion (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.
The Government accepts the concept of National
Envelopes, which provide the mechanism for Member States to introduce
national measures to fund the adaptations that will be required
in wine growing areas. The Government agrees with the Committee
that in the medium-term the funding of National Envelopes should
be reduced and re-directed to the Rural Development Programme,
which provides a broader range of specific measures to be funded
to deal with the social and environmental implications of reform.
Conclusion (c): We support the Government's
view regarding the use 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.
The Government shares the Committee's concerns
about the "green harvesting" of grapes as an eligible
National Envelope measure. In our view the measure resembles old
style CAP support, although beneficiaries will be required to
contribute at least 50% of the cost. However, the Government is
prepared to accept "green harvesting" as a National
Envelope measure as part of an otherwise acceptable reform package,
and the rules under which the scheme is implemented are tightly
drawn to ensure an appropriate level of control.
Conclusion (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.
The Government supports the Commission's
proposal for a new grubbing-up scheme to provide a way for uncompetitive
producers to leave the industry with dignity. We have strongly
supported the Commission's position that the structure of the
scheme should be designed so as to provide for early uptake to
facilitate the rapid transformation of the sector following the
removal of market support measures. We share the Committee's view
that ultimately decisions on whether to apply for grubbing-up
scheme should be an economic choice for individual producers and
that concerns about the social, environmental and economic impact
of grubbing-up are more appropriately addressed through tailored
Rural Development measures.
Conclusion (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.
The Government agrees with the Committee's
assessment. In our view the planting ban should be lifted at the
earliest opportunity to ensure that efficient EU producers can
expand their production to compete with strong competition from
imported wines. We recognise the link that the Commission has
drawn between the extension of the planting ban to 2013 and the
completion of the grubbing-up scheme. But we have made it clear
that we could only accept such an extension, if there was a corresponding
change to the de minimis provisions of the proposal to
ensure that the future development of the small English and Welsh
wine sectors is not adversely affected.
Conclusion (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.
The Government supports the abolition of
the grape must aid scheme and has argued strongly against the
proposed ban on the use of sugar for enrichment of wines. Whilst
we do not support the use of sugar to artificially increase the
alcohol content of wine, we do support its continued use in countries
where this is a traditional enriching agent. Banning the use of
sugar for enrichment will increase the cost of producing wine
in northern and central European Member States and, in the Government's
view, is inconsistent with one of the central aims of the reform
to increase the efficiency of the sector and the competitiveness
of the EU's wine producers.
Conclusion (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.
Conclusion (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.
The Government believes that Pillar II
represents better value for money than Pillar I. We also believe
that Pillar II provides a broader framework for Member States
to introduce measures into current rural development programmes
to help their wine production areas adapt to the changes introduced
by the reform. As we have indicated in our answer to Conclusion
(b) above, we are arguing that over the period of the reform a
greater proportion of the former wine budget should be oriented
towards Rural Development measures.
Conclusion (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.
The Government strongly supports the Commission's
proposal to increase the range of optional information that can
be put on labels of wines, which we believe will help EU producers
to respond to the strong competition from imported wines which
are largely marketed on the basis of brand, variety and vintage.
The Government notes the Committee's concerns that the proposed
quality wine system is not sufficiently different from the current
arrangements to win back markets. However, we believe that the
process of re-registering Gls will contribute to a system of more
justifiable and recognisable Gls, which combined with the greater
flexibility on labelling, will help to re-establish EU wines on
the domestic and overseas markets.
Conclusion (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.
The Government agrees with the proposal
and the Committee's view.
Conclusion (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.
The Government agrees the proposal and
the Committee's view. Bringing grubbed-up areas within the ambit
of the Single Payment Scheme is consistent with the Government's
broader policy objectives in that it will extend environmental
conditions to former vineyards.
December 2007
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