Opinion on the Commission communication to the Council on the development and future of wine sector policy (94/C 133/07)

On 11 August 1993 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Economic Community, on the Commission communication to the Council on the development and future of wine sector policy.

The Section for Agriculture and Fisheries, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 3 February 1994. The Rapporteur was Mr Kienle.

At its 313th Plenary Session (meeting of 24 February 1994), the Economic and Social Committee adopted the following Opinion by 87 votes to 16 with seven abstentions.

The Committee welcomes the Commission's presentation of a discussion paper on the reform of the Community wine market organization. It thinks that a reform of Community wine legislation is long overdue for a variety of reasons. It therefore calls on the Commission and the Council of Ministers to submit concrete proposals for a comprehensive reform of the wine market as soon as possible with due regard to this Opinion.

1. The Committee agrees in the main with the analysis of the present situation

1.1. However, the Section deplores the fact that the political and social aspects of the market situation are given short shrift in the brief macroeconomic analysis. No account is taken of the effects on rural incomes and the wine industry, since the results of microeconomic analyses have been omitted.

1.2. The seriousness of the social problems besetting the Community wine market is made crystal-clear by the analysis of trends in structures, in the industry's workforce and in the areas under vine. Over the last thirty years the number of agricultural holdings growing wine in the European Union has halved to approximately 2,5 m. The area under vine has fallen by some 1 m. ha to less than 4 m. ha.

1.3. The Committee thinks that the Commission should take greater account of the wine sector's infrastructure (e.g. alternative sources of income, openings for alternative crops) so that future market organization measures do not fail.

1.4. The Committee would emphasize wine-growing's pre-eminent importance for employment in many regions of the Community. Other sectors of the economy are dependent on the existence of the wine sector. If wine-growing were to cease, many regions' economies would crumble. Wine-growing is not only an economic but also a socio-cultural factor. This is demonstrated by the wine sector's close ties with the catering trade, tourism and craft industries. Human lifestyles and traditions and regional images are shaped to a large extent by the sector's existence. As a result, the danger of the sector's decline or demise leading to the erosion of economic, social and cultural life cannot be emphasized enough. The Committee regrets that the Commission document does not consider the adverse effect which a reduction in, or elimination of, wine-growing will have on the processing industry.

1.5. The Committee thinks that the Commission report paints a far too negative picture of wine-growing's effects on the environment.

1.5.1. The Committee would point to the great services performed by wine-growing in conserving the environment. Wine is grown in the Community in areas with unique features which have been traditionally cultivated by man. Because of their importance for the environment and also because of their richness, beauty and unmistakable features wine-growing areas form a particularly cherished part of the rural landscape. It is not by chance that they exert a particular charm as tourist areas. On slopes and hillsides in particular, the growing of wine prevents soil erosion and desertification. If wine-growing were to disappear, mankind and nature would suffer on a massive scale.

1.5.2. Environmentally-compatible wine-growing practices have become a matter of course in the Community. Wine-growers are guided by the principle that they must apply sustainable soil-conserving techniques which fit in with the geography of the area. Usually the use of fertilizers and herbicides/pesticides is tailored to needs and environmental considerations, on the basis of scientific recommendations. Conservation of the environment and natural resources by wine-growers' activities must continue to be furthered, and this must also be the aim of policymaking and scientific circles and of advisory and information services.

2. The Committee considers the analysis to be deficient on marketing and consumption

2.1. The Committee notes that the Commission can document its market analysis with a good deal of precise data about production, ranging from the areas under vine, to the yields per hectare and details about varieties of vines.

2.1.1. Wine-growers have considerable work to do satisfying the extensive notification and reporting requirements laid down in the common market organization. The Committee therefore regrets that the Commission's analysis of current market organization measures does not mention the need to vet these requirements' effectiveness as means of carrying out checks and administering the market and, if need by, to simplify them by reducing the red tape.

2.2. Unlike the comprehensive collection of data on production potential, there is a clear shortage of information and market analyses on the complained-of fall in consumption.

2.2.1. There are no studies on marketing and trade structures in the countries where wine is produced and drunk, on consumers' drinking and purchasing habits (consumer panel) or on how the places where wine is purchased and drunk are changing (trade panel, gastronomy panel).

2.3. The Commission's scenario for the year 2000 is based on an annual fall in wine consumption of some 2 m. hl; it clearly assumes in this connection that no action will be taken to reduce sales barriers and give sales a boost. However, the Committee thinks there is an urgent need for such action and would ask the Commission to also develop and analyze a second scenario for the year 2000 in which effective measures are taken in the production, distribution and marketing fields in order to achieve the desired market balance.

2.4. The Committee agrees with the Commission that the high excise duties in some Member States hamper an increase in sales.

2.5. The Committee would ask the Commission to investigate what further obstacles exist to the marketing of wine products, particularly those arising from the laws of the European Union and the Member States.

2.6. Brand marketing has become established worldwide for rival alcoholic drinks and many non-alcoholic beverages. In contrast to this, there is an almost bewildering array of wines on sale. This is to some extent natural, given the rich variety of regional specialities. But it may also post problems of consumer information and communication in some sales outlets, e.g. in general food stores. The Committee would ask the Commission to take this into account in considering the future orientation of European wine-growing policy.

3. The Committee considers that the Commission's account of the situation on the world market needs to be amplified

3.1. The Committee thinks that it is important for the analysis to also take into account the development in production potential (areas under vine, yields per hectare) in third countries. Whereas the areas under vine in the Community have been reduced considerably in recent years, the wine-growing areas elsewhere have mostly shrunk only slightly. Recently some of these areas have even been expanded (United States, Morocco, Chile) or replanted with high-yield varieties (Eastern Europe). The Committee would also point out that some third countries permit techniques for increasing yields (e.g. irrigation) that are banned in the EU. The Commission is asked to indicate which of these third countries grant production subsidies.

3.2. The Committee also thinks that the Commission's market analysis must take account of trends in consumption in third countries. This is a matter which directly affects the Community's wine-growing countries because of the size of their exports (10 m. hl.). In addition, if consumption falls in wine-producing third countries (e.g. Australia, New Zealand, Chile, Eastern Europe), they will make a bigger effort to export to the EU and will thus threaten the balance on the EU market.

3.3. The Committee stresses that the implications of the GATT decisions for the EU's wine market reform must be taken into account in order to assess the chances of achieving a market balance in the future. There is a danger that the effects of the GATT agreement will to some extent nullify the EU's attempts to stabilize the market. The phasing out of external protection via the abolition of reference prices and the dismantling of import restrictions and customs duties will lead to rising imports. It is unlikely that this effect will be offset by rising exports, as some major, non-EU wine-producing countries apply no measures to limit production. The EU is urged to continue to pay due regard to the requirement for Community preference.

4. The Committee agrees to a large extent with the Commission's sceptical assessment of the present system for controlling the market, but considers that a more differentiated approach should be adopted

4.1. The Committee would also point out in connection with trends in per hectare yields that older, lower-yield vineyards are often the target of the extensive grubbing-up operations whereas replanting operations frequently involve new varieties with higher yields.

4.2. With regard to the effects which the enrichment with sucrose and concentrated grape must has on yields, the Committee has taken note of the study entitled 'The enrichment of wine in the European Community', which the Commission has commissioned from independent experts under Article 20 of Regulation No 822/87. The Committee notes the Commission's statement that it has not yet drawn any conclusions from this study. The Committee assumes that a distinction should be made when considering the effects between wines for which maximum yields per hectare have been laid down and wines free of any such limits.

4.3. The Committee notes the Commission's list of the inadequacies and malfunctionings of the present market organization and its application. It would be easier to draw conclusions for a new policy if each point's effect on the market was quantified at least approximately.

5. What orientation for the future ?

5.1. The Committee welcomes the in-depth consultation of all interested parties, in line with the policy of making Community decision-making as transparent as possible. It supports the Commission's aim to restore market balance within a foreseeable period (5-10 years).

5.1.1. However, it will be necessary to bear in mind not only the Community's international obligations - as referred to by the Commission - but also the international obligations of third countries and market developments in those countries.

5.2. The EU's wine producers cannot be expected to accept a policy which requires a unilateral programme of adjustment by the European wine industry. The Commission is therefore asked to enter into discussions with the non-Community wine-producing countries with a view to the gradual elimination of worldwide wine surpluses on the basis of international solidarity. Non-Community countries, too, should be seen to be limiting production.

5.3. All future EU wine-growing policy measures should be aimed at improving the European wine industry's competitiveness on the world market.

6. Adjustment of production potential

6.1. The Committee agrees with the Commission that the programmes and provisions adopted so far to adjust production potential have not met with the desired success and in some cases have even had a negative effect on wine-growing regions' environment and infrastructure. Therefore if there is to be an orderly adjustment of production potential, bearing in mind the need to preserve and promote regional economic structures, new avenues will have to be explored and concerted action taken by the Community and its regions on the one hand, and administrations and trade associations on the other. Multiannual regional adjustment programmes may be of assistance in this connection if they are not overburdened with too much bureaucracy and thus made impractical.

6.2. Ordered adjustment of areas under vine

6.2.1. The programmes should therefore be limited to a few essential points. Above all, steps should be taken to prevent erosion and desertification and the movement of production away from traditional wine-growing areas.

6.2.2. The Committee supports the proposed promotion of grubbing-up within the framework of regional land-use planning. The grubbing-up premiums will have to be increased if they are to provide the necessary incentives.

6.2.3. The Committee welcomes the placing of a ceiling on EC funds and the use of national and regional aid to top up these EC funds. However, extra funds should be provided by the Community for its poorer wine-growing regions.

6.2.4. The need to reduce production potential means that the ban on new plantings will have to remain in force for a limited period. In order to make allowance for legal doubts, exceptions should be allowed, where necessary, in individual cases.

6.2.5. The Committee thinks that the Commission's paper does not go far enough on the question of replanting rights and proposes that the possibility be considered of extending these temporarily beyond the current eight years. This would improve soil quality, benefit wine-growing structures and help to reduce yields.

6.3. Control of yields

6.3.1. The Committee regards the Commission proposals as an interesting start in the right direction. However, these proposals will have to be spelt out in greater detail before they can be finally assessed.

6.3.2. The promotion of more extensive wine-growing can undoubtedly serve the aforementioned objectives. However, care must be taken to ensure that monitoring is possible and that abuses do not occur.

6.3.3. The Committee supports measures on both the production and marketing sides which are designed to preserve wine-growing on hillsides.

6.3.4. The planned marketing aids should be used to create proper production and sales structures under the responsibility of the wine industry. The Committee regrets that the improvement of marketing structures plays only a secondary role in the Commission's paper. This aspect must be at the heart of the proposed amendments, and an overall plan must be presented.

6.3.4.1. The aim must be to improve the general conditions governing the marketing of European wine products. In this connection the Committee welcomes the Commission's plan to establish a Community legal framework for trade associations. The organization of production, trade and marketing structures could be delegated to the wine industry's bodies so as to give them greater responsibility for management of the industry.

6.3.5. A properly functioning vineyard register is vital if measures are to be taken to adjust production potential. The Committee is shocked to see that the 1986 provisions on the introduction of vineyard records have still not been fully implemented or satisfied in all regions. However, for the sake of cutting costs and reducing red tape, the notification/bookkeeping requirements should be kept to an absolute minimum. Steps should be taken to ensure that the procedures used in all Member States are equivalent.

7. Additional measures to secure market balance

7.1. The Committee agrees with the Commission's introductory remark that any comprehensive reform must embrace common measures to restrict yields and to boost outlets. The Commission's failure to come up with more details about these measures in its paper is therefore all the more regrettable.

7.2. The Commission's proposal for regulating the maximum yields per hectare for quality wines psr must be extended to all wines and the necessary checks carried out. The fixing of maximum yields for table wines would help to effectively combat the production of table wine surpluses.

7.3. The Committee agrees with the Commission's demand that the downgrading of quality wines psr to table wines must lead to these wines being excluded from all voluntary market support measures. This is necessary to ensure that the strict rules on yields applicable to quality wines psr are not circumvented and surplus quality wine does not benefit from the market-support measures. These measures should be reserved for table wines that have been properly produced.

7.3.1. The Committee calls for more precise criteria for determining whether table and quality wines are subject to the compulsory intervention measures of the market organization or exempt from them, and whether or not they may participate in voluntary measures.

7.4. The Committee would emphasize that when production conditions are laid down and oenological practices (e.g. minimum natural alcoholic strength, enrichment, acidification) are authorized, account must be taken of the varying geographical, climatic and weather conditions within Europe's wine-growing regions.

7.5. Therefore the Committee does not agree with the Commission that the number of wine-growing zones can be reduced from seven to two or that there can be a levelling-out of natural minimum alcoholic strengths and oenological practices.

7.5.1. Instead it advocates that consideration be given to the classification of wine-growing zones on the basis of objective criteria (cf. the Committee's Own-initiative Opinion of 27 October 1988 on the demarcation of wine-growing zones in the Community) (1).

7.6. The Committee considers oenological practices to be important for the promotion of a policy aimed at improving quality.

7.6.1. The use of oenological practices to increase wine production rather than to improve quality runs counter to the market organization's objectives, and should therefore be restricted to a minimum. Such practices should be permitted only when a vintage suffers from the weather.

7.6.2. To prevent enrichment methods from being misused, they should be permitted only for wines for which maximum yields per hectare have been laid down.

7.7. The Committee is aware that traditions, experiences and opinions differ considerably with regard to the various enrichment methods.

7.7.1. For example, chaptalization is completely scorned in wine-growing areas where enrichment is unnecessary and banned, or is only performed with concentrated must, whereas areas where chaptalization is authorized prefer this method to enrichment with concentrates.

7.7.2. Given the varying traditional practices and climatic and geographical conditions, the Committee does not advocate extending the use of chaptalization to the whole of the Community. The existing ban on chaptalization should remain in force as hitherto. The use of sucrose should continue to be permitted only in wine-growing areas which traditionally practised chaptalization before the establishment of the European wine market organization.

7.8. The Committee calls for new initiatives to promote the sale of wine products.

7.8.1. The Committee welcomes the fact that the Commission discussion paper considers that 'a carefully thought out vine-production policy is possible'. However, it thinks there is an urgent need to spell out this policy. It would recommend the following in this connection:

7.8.1.1. A comprehensive overall programme for promoting the sale of wine products is necessary. This programme must cover: market research, communication strategies, an active product and sales policy, and the removal of legal, economic and tax barriers to sales.

7.8.1.2. The Committee calls for adequate research funds for the study of sales trends and trends in consumers' habits as purchasers and drinkers of wine. This is because knowledge of the market and consumer habits is required before the sale of wine can be promoted.

7.8.1.3. Most consumers prefer wholesome foods from environmentally-aware producers. This should be borne in mind more by wine producers, who should act in accordance with scientific findings. Consumers should likewise be provided with more information on this matter.

7.8.2. The Committee calls for campaigns to inform and educate consumers on the benefits of moderate wine consumption and the dangers of alcohol abuse.

7.8.3. The Committee points out that the rules governing the labelling and presentation of the various categories of wine vary at Community level, and that in some areas responsibility still rests with the Member States. The multifarious rules currently in force should therefore be re-examined and a common legal framework established for the labelling and presentation of all categories of wine. The requirements of consumer information and modern marketing also dictate a re-examination of the rules currently in force. The rules still to be adopted under the labelling Directive on the identification of ingredients are a case in point in connection with the provision of consumer information. One question needing particular attention is whether the rule that the wine label cannot specify anything which is not explicitly allowed could be relaxed by introducing a rule similar to the one applicable to sparkling wines which states that - in addition to the obligatory information - the label can specify anything as long as it is not misleading.

7.8.4. A uniform EU labelling framework is also needed for wine products which are alcohol-free or have a reduced alcohol content.

7.9. The Committee sets great store by the fact that fair competition is guaranteed between Community and non-Community products on the Community and world markets. It would refer to the new GATT provisions on the protection of intellectual property (TRIPS). The European Commission, acting in concert with the International Vine and Wine Office (IWO) in Paris, should press even harder than in the past for the international harmonization or mutual recognition of the main production provisions and oenological practices and the protection of registered designations.

8. In-depth reform of distillation arrangements

8.1. The Committee agrees with the Commission that until such a time as the market is brought into balance, distillation measures will be required to eliminate surpluses.

8.1.1. However, the proposed policies, which are based on reference quantities for national production (quota scheme), are emphatically rejected.

8.2. The Committee is worried that the Commission proposal (quota scheme) will:

- create new tensions between wine-growing regions;

- generate considerable resistance to the new bureaucratic burdens and compulsory measures;

- necessitate even more checks on the quota system; and

- fail to accommodate the wish for more regional responsibility.

8.2.1. The Committee is convinced that experience with such quota systems in other market organizations argues against their use in the wine sector. The producer should be the direct target of the policy of intervention without the Community having to introduce a bureaucratic superstructure in the form of a quota scheme. The aim should be to make the adaptation of production to market openings a more attractive proposition than the production of surpluses.

8.3. The Committee would refer in this connection to its recommendation that maximum yields per hectare be laid down for table wines, too. It thinks that in the transitional period (1994/95 - 2004/5) voluntary distillation should be instituted at the beginning of the wine year for table wines which do not exceed the per hectare yields. The distillation price should amount to 60 % of the guide price in the first three years and then be reduced gradually up to the year 2004/5.

8.4. Table wine quantities exceeding the maximum yields per hectare are to be sent for compulsory distillation during the transitional period. The distillation prices should be low and should be reduced to ECU 0 by the year 2004/5. No aid is to be paid on surplus quantities of quality wines psr which are sent for distillation, even during the transitional period. The Committee thinks that these proposals make the introduction of national reference quantities (quota scheme) superfluous.

9. Increased monitoring

9.1. The Committee agrees in the main with the Commission proposals. However, it is always easier to make monitoring more effective if the rules and regulations are not too complicated. Therefore the Committee thinks that the question of checks should be dealt with in conjunction with the simplification of the legal provisions. In this context the question of whether notification or bookkeeping requirements, etc., are reasonable for monitoring purposes should also be checked so as not to place an undue burden on firms which are acting within the law.

10. Concluding remark

10.1. The Committee reserves the right to issue another more far-reaching Opinion, especially once the Commission has submitted concrete proposals for a Regulation.

Done at Brussels, 24 February 1994.

The Chairman

of the Economic and Social Committee

Susanne TIEMANN

(1) OJ No C 337, 31. 12. 1988.

APPENDIX to the Opinion of the Economic and Social Committee

Defeated amendments

The following proposals for amendments were defeated in the course of the discussions:

Point 7.6.1

Put a full stop after the word 'objectives' in the second line, and replace the rest of this point by the following sentence:

'Such practices should only be permitted when they are vital for the production of a quality wine.'

Voting

For: 30; against: 70; abstentions: 4.

Point 7.7.3 (New)

'Two changes in the Wine Regulation would reduce need for Community financial support while increasing consumer choice and thus consumption:'

Point 7.7.3.1 (New)

'No support has to be paid for quality wines. However at present these may not be made from interspecies crossbred grapes which give particularly good wine in certain regions including the new Länder of Germany, Madeira, England and Wales.

This outdated prohibition therefore should be abolished to increase consumption and decrease the amount of support needed.'

Point 7.7.3.2 (New)

'For table wines the need for enrichment and for Community support could be reduced considerably by eliminating the 8.5 % and 9 % minimum actual alcoholic contents prescribed by point 13, Annex I of the Wine Regulation.

This would both increase consumer choice and also consumption by increasing the total market. There is a consumer demand for lower alcohol wines which currently cannot be satisfied.'

Reasons

The aim of any reform should be to reduce subsidies (called 'support' in EU terminology) and while freeing the wine grower to serve the consumer to the maximum. There is a good potential both for quality wines and lower alcohol ones.

The latter is partly due to the increasing impact of drink-and-drive rules in some Member States. At present this has been almost entirely to the benefit of beer because the rigidity of the Wine Regulation has prevented wine from sharing these market developments.

Voting

For: 32: against: 67; abstentions: 5.