eunbil · GT0N1614 · 2006-07-14 00:00:00 — It some cases, e.g. in Castilla-La Mancha in , grubbed-up vineyards were abandoned, either immediately after grubbing-up or later, since, due to the arid conditions; the cereals that were often cultivated after the vines were not as profitable as expected. In general, vineyards were also rarely replaced by ; the removal of all distillation measures may have a positive impact on the environment, assuming residues/wastes from wine-making are dealt with in a proper . In Member States currently withdrawing by-products under supervision, no environmental concerns have been raised. Consequently, the proposed measure would imply no changes to the present system, which already applies environmentally-friendly methods. In Member States currently applying the compulsory distillation of by-products, wine producers (or cooperatives) that, under the proposed system, are not in a position to utilise their marcs and lees on the farm, e.g. as organic fertiliser after an appropriate composting or anaerobic process, should approach the problem as a waste management issue. From that angle, delivering the by-products to a distillery, even for free, could be economically reasonable. Nevertheless, particularly in regions where there are few distilleries, and the average distance between the wine holdings and the closest distillery is considerable, the risk of inappropriate disposal of by-products can not be neglected. Appropriate disposal and/or recovery options, in with EU legislation, would therefore need to be developed at national or regional level. Controls should be reinforced, and penalties for abuse imposed in accordance with the requirements of the environmental baseline; making the authorisation of new WMPs easier could enable faster approval of more environmentally friendly practices and processes and prohibit or restrict harmful ones. Environmental aspects should be decisive when considering whether to authorise the use of wine-making practices; the greater flexibility on labelling rules could be used to enhance the value of environmentally-friendly practices such as organic production. Option 3: Reform along CAP reform lines The main asset of this option is that the environmental baseline would be automatically covered by cross-compliance, adapted and extended as outlined above. However, using the entire budget to create SPS reference amounts would prevent funds being shifted to rural development to enhance environmentally-friendly production techniques, although the possibility of using part of the SPS envelope for measures for specific types of farming and quality production, as under Article 69 of Regulation (EC) No 1782/2003, would be still open. Concerning distillations, wine-making practices and labelling rules, the same remarks as under option 2 would apply. Option 4: Deregulation of the wine market Under this option, an environmental baseline would be very difficult to implement, since no support of any kind would be granted to vine-growers underof the wine CMO. The situation would be comparable to the status quo, in which only wine farmers receiving direct payments for areas other than vineyards are subject to cross-compliance. The only possibility would be to leave Member States to apply their usual statutory penalties for non-compliance with Community legislation. In addition, there would be no wine region-specific transfer of funds to the second pillar that could enhance environmentally friendly production techniques. specifically, lifting the ban on new could entail some risks to the protection of the environment: increasing environmental pressure due to possible expansion of the vine area in the short term. However, permanent expansion of vine area does not seem to be economically realistic, given that achieving market balance and absorbing market surpluses should lead instead, in the long term, to a reduction of vine area; possibility of production shifts towards areas where vine-growing has a competitive advantage. For example, vineyards could "move" from mountainous and hilly regions, where vine-growing is more costly but could play an important role for the environment (combating soil erosion, lesser diseases problems due to drier climate conditions and consequently lesser consumption of fungicides, etc.), to the plains. Concerning distillations, the same remarks as under options 2 and 3 would apply. Impact on trade and WTO conformity The impact of the four policy options on trade dynamics is essentially linked to their impact on the competitiveness of the EU wine sector, which are analysed in section 5.1.3. In addition, developments in international negotiations, both at multilateral (WTO) and bilateral level (trade agreements), represent another important exogenous factor. Given the importance of the Communitys export interests in the wine sector, it is essential to ensure full access to our export markets worldwide and to achieve better international protection for our geographical indications. A coherent domestic wine regime, fully consistent with our international obligations, is essential for a sound and credible position in international discussions, which would justify and strengthen a firm EU position on GIs and wine-making practices. For the wine sector, the main issues at stake in the WTO are: internal support: in 2005, of annual wine CMO expenditure was classified as , which is the most trade-distorting type of support. Basically all market measures fall into this category, namely distillations (including the taking-over of alcohol), must aid and private storage. While the EU is currently still below its ceiling, the pressure on this type of support is very great; export refunds: WTO negotiations have reached an agreement in principle on phasing out all export subsidies. Refunds currently granted under the CMO will have to be cancelled; quality policy/GIs: the existing quality regulatory framework is criticised by our international partners and does not allow optimal international protection of our geographical indications under the WTO-TRIPS Agreement; labelling provisions: our labelling rules are subject to severe criticism from non-EU countries, which consider them discriminatory. Option 1: Status quo, with possibly some limited adjustments In spite of the minor adjustments proposed, including the phasing out of export refunds already agreed in the current Round negotiations, in the status quo scenario almost all WTO problems of the existing wine regime would remain unsolved; therefore many provisions of the CMO would potentially be under attack in the future. All three options would be completely WTO-friendly, given that: all market tools, currently classified as support, plus export refunds, would be cancelled; almost all new measures proposed under the different options, such as the reinforced programme of permanent abandonment and the second-pillar structural measures in option 2, as well as the SPS in option 3, are classified as , which is the less trade-distorting type of support. The only uncertainty concerns the national envelope under option 2, whose status should be verified on the basis of the complete list, the exact definition and the actual use of eligible measures. Among the most important measures foreseen in the national envelope, the support to restructuring and reconversion of vineyards is currently considered as , whereas the classification of new measures, as risk and crisis management tools or green harvest should be established in the context of the WTO; the quality policy, the GI system and the labelling framework would be amended to make them WTO friendly; other rules at risk vis-à-vis WTO-TBT provisions, such as the ban on vinification of imported must and on blending Community wines with non-EU wines, would be abolished. Impact on wine quality, health and consumer protection Although wine quality is primarily the responsibility of wine producers, the regulatory framework should ensure quality and conformity with product definitions. WMPs have met those objectives, and European wines as a whole have a reputation for high quality. Apart from wine-making practices, other CMO measures can play an important role in gearing production improving quality. One example is the programme for restructuring vineyards introduced in the 1999 reform, which has supported the reconversion of vineyards with a view to adapting wine production to consumers demand for quality. Status quo, with possibly some limited adjustments In this scenario, there would be no new impact on wine quality compared to the existing situation, therefore the option can be considered to have neutral effects. In these three options, the main contribution improving wine quality is the abolition of market measures, which currently provide support mainly to lower-quality wines, thus encouraging continued production. The improved market orientation of the CMO proposed in these options should tend to favour the segment of higher quality wines, which are increasingly appreciated by consumers. The abolition of Community aid for distillation of the wine by-products, maintaining the prohibition on grape overpressing as wine-making practice, should not have any impact on overall wine quality. Appropriate controls could prevent any fraudulent overpressing practices which could otherwise jeopardise quality. Finally, the greater flexibility introduced with respect to wine-making practices should only enhance the scope for innovative techniques without giving rise to any risk of lower wine quality. Health and consumer protection policy Although a moderate alcohol consumption may be beneficial to health (reduction of coronary heart diseases and type II diabetes risks), any abuse is obviously harmful, both in terms of damage to health (liver cirrhosis and alcohol-related cancer), and because of the adverse impact on road safety. Moreover, the social costs of alcohol harm are also very high. In recent years concerns have grown about the increasing trend in alcohol consumption among young people, particularly of spirit-based mixed drinks. Recent studies appear to show a short-term relation between price and alcohol consumption, given that increased taxes on alco-pops have led to a drop in consumption. This link seems to be even more evident for young consumers, who tend to opt for low-cost alcoholic beverages, especially when their only intention is to drink to intoxication. In the existing wine CMO, some market measures have an adverse impact on public health. Potable alcohol distillation is a controversial measure, because it heavily subsidises the transformation of wine into a beverage of a higher alcohol content. Moreover, by allowing cheaper production of wine spirits, it encourages demand, which conflicts with concerns about the risks of damage to health. Secondly, the aid for must has led to an artificial expansion in the use of enrichment, which is intended to increase the alcohol strength of wine and allows higher yields, and hence lower wine quality and production costs. On the other hand, the restructuring scheme might have a beneficial impact on public health, because it aligns production with the demand for higher price quality wines, often consumed with meals and in moderation. Finally, the existing quality regulatory framework and the labelling rules seem to be geared rather to the producer consensus than to consumer protection. They lack clarity and transparency, and tend to confuse consumers, preventing them from appreciating the qualitative differences between products. Status quo, with possibly some limited adjustments Under this option, subsidies to market measures, particularly potable alcohol distillation and aid for must would be maintained or not sufficiently cut, thus leading to inconsistency with public health policy. The existing problems of quality policy and the labelling rules would remain unchanged. The abolition of subsidised potable alcohol distillation and of aid for must, and, more generally, the idea of reducing surpluses through gearing production to market, are likely to have a beneficial impact on public health. Option 2 would allow the most rapid absorption of the wine surplus and avoid a sharp fall in the wine price in the short term (see section 5.1.2). Moreover, the proposed simplification of quality policy, geographical indication system and labelling rules could rightly address concern for consumer information and health protection. Education and information campaigns proposed under option 2 could provide additional instruments to enhance consumer awareness vis-à-vis wine labelling. Impact on management efficiency Reform of the wine sector is expected to bring about improvements in management efficiency, taking into account the shortcomings of the current CMO in this regard. This can achieved by simplifying regulation, which would help to limit management and statistical monitoring costs, ease implementation and controls, and hence reduce the risk of fraud and misuse of public funds. Simpler and clearer rules are easier for operators to understand and obey, and also for national authorities to control. In addition, increased efficiency can be achieved by increasing subsidiarity giving to Member States more freedom to decide the type of measures they need to best suit their specific situation. Overall, option 1 would bring no improvements while the three others would have various advantages, depending on the option considered. Simplification is a major goal of all European legislation, particularly so in a sector where the regulations have become highly complex, in many ways hampering its efficiency. Option 1, the status quo, even with some improvements, would not allow this goal to be achieved, as all the complex measures currently applied would be maintained. In particular for the two acceding Member States, in spite of the efforts undertaken in the enlargement process to implement the acquis, the current system would certainly prove very difficult to apply. Option 2 (profound CMO reform), and particularly option 3 (new CAP-type reform), would allow far-reaching simplification in the following ways: under option 2, ending some complex measures (rights, distillations, private storage of wine and public storage of alcohol, etc.), in some case after a transitional period, improving the measures maintained (grubbing-up, restructuring) and carefully screening the types of measures to be introduced to ensure they meet simplification requirements, would guarantee a sound new legal framework which would be easier for the Member States to monitor; under option 3, incorporation in the single farm payment system and the corresponding abolition of crop specific measures would, in time, clearly simplify implementation. Option 4 (deregulation) would, by definition, allow the most radical legal simplification. Administrative and statistic monitoring One of the first consequences of simplifying of the wine legislation would be to improve the administration and monitoring of the sector, notably as regards data collection and statistical treatment. The current system of statistical monitoring, including the vineyard register, is rather cumbersome; consequently its implementation has been problematic and not always cost effective at Community level or at Member States level. It must be fundamentally reshaped. While option 1 (improved status quo) would not allow this goal to be achieved, options 2 (profound CMO reform) and 3 (CAP-type reform) would. Option 4 (deregulation of the wine market) would allow radical simplification of the data needed and consequently monitoring. The main improvements would have to include: a simplified EU system of information on wine and vineyards; a clear definition of the new statistical requirements in relation to other information and reporting requirements, to be decided upon in the framework of the EU statistical programme; improvement of vineyard registers and inventories as the main source of information to meet the new statistical requirements as well as other information and reporting requirements. Another consequence of a more straight-forward set of measures would be, through clearer rules, to allow a greater controllability and prevent frauds and misuse of public funds. Option 1, the status quo, even improved, would not allow this goal to be achieved, as all the complex measures currently applied which have evident shortcomings would be maintained. Option 2 (profound CMO reform) and particularly option 3 (CAP-type reform), would allow far-reaching improvements in the two following different ways: under option 2, withdrawing some complex measures (rights, distillations, private storage of wine and public storage of alcohol), in some case after a transitional period, improving the measures maintained (grubbing-up, restructuring) and carefully screening the types of measures to be introduced would prevent many problems (such as illegal ) and substantially limit the cost of controls (in particular with the end of the use of sucrose combined with the abolition of must aid). However, the implementation of new measures under the national envelop would probably require new provisions to control correct public spending and avoid frauds; under option 3, incorporation in the single payment system and the corresponding end of crop-specific measures would, in time, allow clear rationalisation of controls. Option 4 (deregulation) would, by definition, mean the most radical simplification of controls and limiting the risk of frauds. Option 1 (improved status quo) would not allow any improvement in subsidiarity, which is currently limited to the ban on grubbing-up and add some topping up of premia. Options 2 (profound CMO reform) and to a lesser extent option 3 (CAP-type reform) would increase Member States freedom to chose measures and ways to implement them, notably, in the case of option 2, in the framework of the rural development programmes. Option 4 (deregulation) would also increase subsidiarity but in the sense that very few measures would be retained at European level in the CMO and that funds would be made available for rural development measures to be decided by the under its rural development plan. Option 1 (improved status quo) would, with the severe deterioration of the market balance (see part 5.1), put the current budget devoted to the wine sector under pressure. Finally, a higher expenditure in the wine sector could also result in a general negative impact for agricultural producers in general, which would be penalised, in the context of the mechanism of financial discipline, through cuts in the direct payments. Options 2 (profound CMO reform) and option 3 (CAP-type reform) would be based on the principle of budget neutrality and achieve a better value for money use of community funds. Option 4 would, in the short term, reduce the budget needs for the sector. This would be the consequence of a rapid withdrawal of all the measures currently financed without the introduction of new measures. However, the severe socio-economic consequences of this option could have substantial indirect budget costs, notably in the long term. Table 3 summarises the various impacts of the different policy options. Option 1, slightly adjusting of the existing CMO, would not achieve the objectives of the reform. The status quo appears unsustainable in the long term, because it does neither tackle the problem of the structural imbalance of the wine market, nor enhance the competitiveness of European wine, nor improve consistency with other Community policies. Option 2, profound reform of the CMO, would address the problems of the wine sector in both the short and long term, by concentrating budgetary resources on measures to achieve smooth and rapid stabilisation of the market and the structural adjustment of the sector. Introducing national envelopes and transferring funds to rural development would leave Member States and wine regions scope to adapt the measures available at Community level to their specific conditions and needs, thus allowing greater subsidiarity. Option 3, the general introduction of decoupled support for wine producers, would also allow most policy objectives to be achieved in the long term, in particular market equilibrium in the wine sector. Moreover, it would address environmental concerns, since it allows direct application of cross-compliance to the whole vine area. However, as in the case of complete deregulation, albeit to a lesser extent, in the short and medium term the sector would undergo quite a tough adjustment process. Public intervention would mainly focus on supporting farm incomes rather than rapidly improving the market balance by providing help with structural adjustment. Furthermore, an even distribution of public support to the whole vine area would raise problems of political acceptability and of overcompensation of quality wine producers. Option 4, complete deregulation of the wine sector, would achieve a certain number of policy objectives in the long term, in particular wine market equilibrium and increased competitiveness of wine production. However, the serious adjustment that immediate implementation of this policy would require and the lack of structural measures accompanying this process would produce severe, negative short-term impacts on the sector and the rural economy of the regions concerned as a whole. Table 3: Summary table comparing the impacts of the options Monitoring and assessing the economic, social and environmental effects of EU public policies has become a standard element of the political process. Most EU legislative acts include monitoring of their implementation by Member States, and of their impact and effectiveness at EU level in order to propose further action or redirection of the measures, if necessary. Many of the actions needed to apply the common policy on wine to be developed by Member States and relevant stakeholders. Considerable experience in monitoring exists in the Commission departments and in the Member States. , there is scope for cooperation, sharing of information, and improvement of core indicators and enhancement of analytical tools used to monitor and assess policies. Existing statistical systems covering wine production potential, market trends, micro- and macro-economics, the evolution of regional patterns, and the environment provide a complex framework and need to be simplified, adapted and reshaped to provide sufficient information in this context. The reformed wine policy would need to be monitored and evaluated in relation to a whole range of potential impacts identified in this report. This needs an assessment of progress towards meeting the objectives listed in part 3 and of all types of impacts identified in part 5. The basis for reporting on progress should be a common framework for monitoring and assessment, to be proposed in the legal act. The new wine CMO will be included in the multi-annual evaluation programme for CAP policies. 1: Mandate of the 2: Mid-term forecasts for the EU-27 wine sector to 2010-11 3: Impact on prices - Regression analysis between average annual prices of table wine and wine stocks 4: Impacts on agricultural incomes - Summary results of a model-farm approach to table wine farms in some EU regions 5: List of acronyms When adopting its working program for 2006 , the Commission has envisaged a Communication on the reform of the common market organisation in wine . In accordance with the plan for better legislation and with the guidelines for the execution of Impact Assessments , a proposal for the reform of the wine CMO must be accompanied by an Impact Assessment directed by an () .