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European Wine: a Better Deal for All

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European Wine: a Better Deal for All HOUSE OF LORDS European Union Committee 30th Report of Session 2006–07 European Wine: A Better Deal for All Volume II: Evidence Ordered to be printed 17 July 2007 and published 23 July 2007 Published by the Authority of the House of Lords London : The Stationery Office Limited £price HL Paper 144–II CONTENTS Page Oral Evidence Mr. Jeremy Cowper, Deputy Director and Head of Crops, Plants and Products Division, Mr. Robin Manning, Head of Cereals and Wine Branch, and Ms. Simone Pfuderer, Economic Adviser to Cereals and Wine Branch, Department of Environment, Food and Rural Affairs Written evidence 1 Oral evidence, 7 February 2007 6 Mr. David Statham, Director of Enforcement Group, and Mrs. Sarah Appleby, Head of Imported Foods Division, Foods Standards Agency Written evidence 22 Oral evidence, 21 February 2007 26 Mr. John Corbett-Milward, Head of Technical and Internal Affairs, Wine and Spirits Trade Association, Mr. Philip Goodband, Consultant to Constellation (Europe), and Mr. Patrick McGrath, Managing Director, Hatch Mansfield (SME importer) and Chairman, WSTA Wine Importers Panel Written Evidence 36 Oral evidence, 28 February 2007 45 Mr. José Ramón Fernandez, Secretary General, Comité Européen des Entreprises Vins (CEEV) Oral evidence, 7 March 2007 56 Ms. Eva Corral, Head of Wine Sector Division, COPA-COGECA Oral evidence, 7 March 2007 66 Ms. Katerina Batzelli, a Member of the European Parliament, EP Rapporteur for the Commission 2006 Communication, European Parliament Oral Evidence, 7 March 2007 76 Mr. Guiseppe Castiglione, a Member of the European Parliament, EP Rapporteur for the Commission 2007 Legislative Proposal, European Parliament Oral evidence, 7 March 2007 80 Mr. Lars Hoelgaard, Deputy Director General, DG Agriculture, Ms. Lene Naesager, Member of Fischer Boel Cabinet, Mr. Emmanuel Jacquin, Head of Unit and Mr. Dooley, Deputy Head of Unit of the Wine Reform Unit, European Commission Letter from the European Commission 85 Oral evidence, 7 March 2007 85 Mr. Zoltán Somogyi, Hungarian SCA Deputy Spokesman Oral evidence, 8 March 2007 100 Mr. Luigi Polizzi, Italian SCA Spokesman Oral evidence, 8 March 2007 108 Mr. Dietrich Guth, German SCA Spokesman Oral evidence, 8 March 2007 117 Mr. Bertrand Guillou, French SCA Spokesman Oral evidence, 8 March 2007 125 Mr. Michael Paul, Chairman, Wine Intelligence Written evidence 130 Oral evidence, 14 March 2007 132 Mr. Robert Beardsmore, General Secretary, Mr. Robert Lindo, Chairman, United Kingdom Vineyards Association, Mr. Michael Roberts, Proprietor of Ridgeview Wine Estate, and Mr. Owen Elias, Winemaker at Chapel Down Written evidence 141 Oral evidence, 21 March 2007 144 Mr. Julian Dyer, Senior Wine Buyer, Sainsburys plc, and Mr. Dan Jago, Category Director – Beers, Wines and Spirits, Tesco Oral evidence, 2 May 2007 159 Mr. Philip Gregan, Chief Executive Officer, New Zealand Winegrowers Written evidence 171 Oral evidence, 16 May 2007 175 Mr. Claude Magnier, Regional Director, Mr. Bernard Clarimont, and Mr. Jean François Solere, Regional Directorate of Agriculture and Forestry Oral evidence, 21 May 2007 185 Mr. Jean-Louis Alaux, President, Mr. Jean-Marie Fabre, Secretary General, and Mr. Jean-Luc Fabry, Director, FVIA Oral evidence, 21 May 2007 192 Mr. Alain Vironneau, President, Mr. Dennis Johnston, President of the CIVB Economic Commission and Member of the Board, and Mr. Philippe Casteja, Former President of the CIVB, President of the Federation of Exporters of Wines and Spirits, Conseil Interprofessional du Vin de Bordeaux Oral evidence, 22 May 2007 198 Senator Gerard Cesar, Member of the French Upper House Oral evidence, 22 May 2007 205 Mr. Claude Mailleau, Departmental Delegate, and Mr. Jacky Bonotaux, Economic Specialist, Agricultural Ministry Local Office, DRAF Oral evidence, 23 May 2007 210 Written Evidence Australian Wine and Brandy Corporation 217 New Zealand High Commission 219 World Wildlife Foundation 223 The Report of the Committee is published in Volume I (HL Paper 144-I) and the Evidence is published in Volume II (HL Paper 144-II) 3714281001 Page Type [Ex 1] 19-07-07 00:32:52 Pag Table: LOENEW PPSysB Unit: PAG1 Minutes of Evidence TAKEN BEFORE THE SELECT COMMITTEE ON THE EUROPEAN UNION (SUB-COMMITTEE D) WEDNESDAY 7 FEBRUARY 2007 Present Bach, L Palmer, L Brookeborough, V Plumb, L Jones of Whitchurch, B Sewel, L (Chairman) Moynihan, L Memorandum by the Department for Environment, Food and Rural Affairs General Introduction The EU is the world’s major wine producer, with over 45% of total growing area and 60% of production. This represents around 10% of the value of agricultural production in about a quarter of Member States, with as many again having an active industry interest. The EU also accounts for 60% of global consumption and is the leading exporter and largest import market. The EU wine regime was first established in the 1960s. Its aims are consistent with the objectives of the Common Agricultural Policy, in particular, to stabilise markets, ensure a fair standard of living for agricultural communities, and ensure fair competition within the Single Market. The regime contains all of the basic components of classic CAP support measures, including: — support of internal prices through planting restrictions, storage and distillation arrangements; — protection from low priced imports through a duty system; and — export refunds to facilitate external sales into markets with lower prevailing prices. In addition, the regime includes a complex set of rules on wine-making practices and labelling. The regime has been adapted several times since it was first introduced. For example, during the 1980s, the response to budgetary pressures and concerns about structural surpluses was a modification away from intervention by price support towards measures to better balance production and use, via the introduction of compulsory distillation and a ban on the planting of new vines. The most recent modification was brought about in 1999—and it is clear that substantial further reform is needed now in order to improve the sustainability of the sector. The relative competitiveness of the sector has been steadily eroding under strong price and quality pressure, particularly from so-called “New World” wines. EU stocks are now equal to a year’s consumption, despite “crisis” action in four of the last six years to aid disposal. Such actions serve to disguise but fail to address the underlying problems and the wine sector is now seriously out of line with other already reformed CAP sectors. The latest Commission forecasts put the budgetary cost of the present arrangements in 2007 at 1.5 billion euros, of which 500 million euros would be for further “crisis” measures. On 22 June 2006, the Commission set out its options for the reform of the European wine regime in a paper entitled “Towards a sustainable European wine sector”.1 The Commission intends that this consultation paper will form the first stage of the policy making process. The objectives of reform are to bring into being a wine regime that: — increases the competitiveness of the EU’s wine producers; strengthens the reputation of EU quality wine as the best in the world; recovers old markets and wins new ones in the EU and worldwide; 1 http://ec.europa.eu/agriculture/capreform/wine/index—en.htm 3714281001 Page Type [E] 19-07-07 00:32:52 Pag Table: LOENEW PPSysB Unit: PAG1 2 european wine: a better deal for all: evidence — operates through clear, simple and eVective rules that ensure balance between supply and demand; and — preserves the best traditions of EU wine production and reinforces the social and environmental fabric of many rural areas, and ensures that all wine production respects the environment. We expect that the Commission will present formal proposals for the reform of the wine regime this spring, 2007. Defra’s response appears in bold beneath each question A. The Need for a Regulation 1. What is the nature of the case for having a wine regime at all—ie as distinct from allowing the industry to adjust itself to competitive pressures (eg via increased efficiency, rationalisation, diversification, etc)? A wine regime has existed within the CAP since the 1960s, and producers have adapted to the current regime. However, the Government set out its overall position on the CAP in the 2005 document “A Vision for the Common Agricultural Policy”,2 including the elements which would need to be in place to comprise a sustainable CAP, and this applies as much to the wine production sector as to any other. It is clear that the existing support arrangements for wine do not deliver value for money to taxpayers, nor do they act to improve the sustainability of the sector. In discussions on the Commission’s options paper, Defra has argued that in order to achieve the long-term sustainability of the sector, a deregulatory approach along the lines of Options 3 or 4 should be the aim. However, we recognise that a rapid switch to one of these options carries certain risks and that there may be a need to continue to provide a regulatory framework, but one which will allow the market to operate freely and indeed encourage and facilitate it to do so more eVectively than might otherwise be the case. In the longer term we consider that farm incomes will be best maintained by the existence of a competitive, sustainable and subsidy free EU wine industry. Defra believes that there is a case for laying down rules on labelling and wine-making practices at an EU level to ensure the provision of consumer information and fair competition. But such rules should be aimed at the consumer, and wine making practices should be aligned with those set down at an international level through the OIV (International Organisation of Vine and Wine). 2. Why should wine quality—eg relating to Geographical Indication—be regulated? Why cannot consumers choose between wines as they do between other products—eg on the basis of brand names or other information which might provide a guide to quality? Defra believes that EU wine making practices should be aligned with the OIV, thereby establishing a baseline that meets international standards.
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