For the second year in a row, the European Union's agriculture commissioner has proposed a radical reform plan to help Europe's struggling wine producers and grapegrowers by pulling up vines and putting government funds toward marketing rather than subsidies. Is the plan more likely to pass this time around? Judging from the reaction of critics, it doesn't look promising.
Europe currently suffers from a huge wine surplus--each vintage the continent produces about 1.7 billion bottles more than it sells, and the EU spends almost 500 million euros ($680 million) a year distilling excess wine into industrial alcohol. While premium wines from top properties continue to enjoy growing sales, small growers and co-ops are slashing prices for their everyday table wines, sometimes selling them below cost. Several factors are to blame, including overplanting during better times, decreasing consumption by younger Europeans and increasing imports of low-cost wines from Australia and South America.
"We are losing market share to dynamic producers in other parts of the world, consumption is falling and imports increasing 10 percent a year," said Denmark's Mariann Fischer Boel, the European commissioner for agriculture and rural development, as she introduced her latest proposal to the European Parliament's agriculture committee on Wednesday. "We have been spending the money in an inefficient and indefensible way." Her overall goal is to decrease production so that wine prices can go back up, while also making the wines more competitive with New World offerings and more appealing to consumers.
Under the plan, which would take effect in 2008, the EU would pay farmers to rip up their vineyards and transition to other crops, in hopes of eliminating almost 500,000 acres of vines. (Last year's version of the plan called for almost a million acres to be ripped out.) The plan would also end distillation subsidies and devote 120 million euros of that money to promoting European wines in overseas markets. Boel also proposed several changes in winemaking regulations, including banning chaptalization (adding sugar before fermentation to raise final alcohol levels), making labeling rules simpler and allowing the use of oak chips to flavor wines rather than expensive oak barrels.
"I'm not naive," Boel said at the outset. "I realize that the wine sector is very emotional and that many will obviously have objections to my ideas." The most severe reaction came from southern France the night before Boel even presented her plan. Explosions rocked two co-ops in the Languedoc: the Hérault and Aude Cooperative Wine Producers Federations in Montpellier and Narbonne. No one was hurt, but both buildings were badly damaged. An anonymous caller to authorities said that "the ultimatum's" deadline was over, referring to a threat by a faction of the CRAV (Comité régional d'action viticole) on May 16 to new French president Nicolas Sarkozy that he had one month to provide support to the wine industry or to create economic conditions that would allow for increases in the price of wine. Various French news sources report that the two co-op unions were singled out because they had not taken part in a protest against Boel's plan on Monday.
Leading groups of French wine merchants and large producers support the plan, but several EU officials and wine-industry members have more measured criticisms. Some worry that pulling up vines is akin to surrendering to Chile and Australia. A French member of the committee, Jean-Claude Martinez, asked Boel, "When a vineyard is grubbed up, they plant villas and housing estates. Why do that when the world needs wine?"
Others worry that the vine pull, combined with loosening of production rules, will end traditional small-scale winemaking. Jean-Louis Piton, official with Copa-Cogeca, a European farmers association, told reporters, "The commission's reform wants to introduce the New World's agro-industry model in the EU and do away with the age-old European model of traditional vineyards." Critics point out that the plan ends restrictions on planting new vineyards in 2014. By then, they allege, small vignerons will be off their land and big companies can swoop in.
The other issue is that many of the EU's member countries believe the problem is their neighbors' fault. "The European Commission should take hard a look at the 150,000 hectares of illegal vines planted throughout Italy and Spain"--meaning vines planted without the permission of the appellation--"before telling us to pull out 200,000 hectares," said Jean-Marie Fabre, president of the Independent Winegrowers Association of Languedoc-Roussillon.
But the human impact of reforms may be the hardest medicine for Europe to swallow. Boel's report estimates that if the plan is implemented, jobs in wineries and vineyards will drop 5 percent in 2009 alone. Wine prices will fall 7 percent, and then begin to rise again.
The European Parliament will have several months to debate Boel's latest proposal. But it could be that the industry will have to suffer more financial pain before it is willing to swallow her medicine. That might mean a lot more wineries closed and vineyards torn out in the long run, but some are willing to take their chances without the government's help.
"I am against the interference of the state or EU, and I strongly believe in the market, but most Europeans are waiting for solutions from the state when they have problems, and they are never responsible," said Jérôme Caillé, comanager of Château Robin in the Bordeaux region of Côtes de Castillon. "The state is often taking economic decisions that are not good in a long term and create perverse effects."
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