EU reform of the wine market

04 July 2007
by eub2 -- last modified 04 July 2007

The European Commission on 4 July adopted proposals for a wide-ranging reform of the EU's Common Market Organisation for wine. This aims to increase the competitiveness of EU producers, win back markets, balance supply and demand, simplify the rules, preserve the best traditions of EU wine production, reinforce the social fabric of rural areas and respect the environment. Under the proposals, all the inefficient market support measures – various aids for distillation, private storage aid, export refunds – would be abolished from day one. The addition of sugar to enrich wine – chaptalisation – would be banned, and aid for must for enrichment, introduced to compensate for the higher cost compared to chaptalisation, would also be abolished. Crisis distillation would be replaced by two crisis management measures, paid for from national financial envelopes. Much more money would go into promoting EU wine, particularly on third country markets. For a five-year transitional period, planting restrictions would be kept in place and uncompetitive producers would have the possibility to leave the sector with attractive financial support. After 2013, restrictions on planting would be lifted to allow competitive producers to expand their production if they so choose. Labelling rules would be made simpler, certain wine making practices accepted by all producer countries in the International Organisation of Vine and Wine would be adopted by the EU and quality policy would be based on a geographical origin approach. EU Member States would receive a national financial envelope and a menu of actions to allow them to take measures best suited to the local situation. More money would go into Rural Development to fund measures including the setting up of young wine producers and environmental protection.

Details of the proposal:

Abolition of market management measures: from day one of the entry into force of the reform, the following measures will be abolished: crisis distillation, support for by-product distillation, potable alcohol and dual-purpose grape distillation, private storage aid, export refunds, aid for must for enrichment of wine.

Ban on sugar for enrichment: the use of sugar for enriching wine will be banned from the day the reform comes into force. This process is not in line with OIV or EU definitions. Ending chaptalisation and the aid for must will enable the balance to be maintained between north and south. All producers will then make wine purely from grapes and unsubsidised must.

Grubbing-up scheme: Growers who wish to leave the sector will be offered a voluntary grubbing-up premium. In year one, the premium will 30% higher than current levels and, to encourage uptake from year one, it will decrease over the five years of the scheme. To avoid social or environmental problems, Member States will be allowed to limit grubbing-up in mountains and steep slope vineyards and in environmentally sensitive regions and stop grubbing-up if the total reaches 10 per cent of country's area under vines. The total amount of grubbing-up should be about 200,000 hectares. The budget for this will fall from EUR 430 million in year one to EUR 59 million in the fifth and final year, and the average premium will decrease from EUR 7,174/hectare in year one to EUR 2,938/ha in year five.

Single Farm Payment: all areas under vines will be eligible for entitlements for the Single Farm Payment, and those that are grubbed up will automatically qualify for the payment, thus ensuring that they are maintained in good agricultural and environmental condition.

Ending planting restrictions: the system of planting rights will be extended until the end of the transitional period in 2013 and then abolished from 1 January 2014, to allow competitive wine producers to expand their production. The decision to increase production will depend on the producers' ability to sell what they produce.

Oenological practices: responsibility for approving new or modifying existing oenological practices will be transferred to the Commission, which will assess the oenological practices accepted by the OIV and incorporate them into the list of accepted EU practices. The EU will authorise practices agreed internationally for making wine for export to those destinations. Bans on imports of musts for vinification and on blending EU wines with imported wines will be maintained.

Better labelling rules: The concept of EU quality wines will be based on geographical origins (quality wine produced in a specified region). Wines with Geographical Indications will be divided into wines with Protected Geographical Indications and those with Protected Designation of Origin. Labelling will respond to consumers' needs by being simpler and, in particular, for the first time allowing EU wines without GIs to indicate variety and vintage on the label to answer consumer demand for single variety wines.

National financial envelopes: these will allow Member States to adapt measures to their particular situation. The overall budget will vary from EUR 634 million in 2009 to EUR 850 million from 2015. The amount available for each country will be calculated according to vine area, production and historical expenditure. Possible measures include: promotion in third countries, vineyard restructuring/conversion, support for green harvest, new crisis management measures i.e. insurance against natural disasters and the administrative costs of setting-up a sector-specific mutual fund.

Rural Development measures: many measures in the RD regulation could be of interest to the wine sector, not least setting-up young farmers, improving marketing, vocational training, support for producers' organisations, support to cover additional costs and income foregone in maintaining cultural landscapes, early retirement. To allow this, money would be transferred to the RD budget, rising from EUR 100 million in 2009 to EUR 400 million from 2014. This money would be ring-fenced for wine-producing regions.

Promotion and information: the Commission intends to pursue with rigour a responsible promotion and information campaign. This will include a budget of EUR 120 million out of the national envelopes for promotion measures outside the EU, 50 per cent co-financed by the EU. There will be new information campaigns within the EU on wines with Geographical Indications and responsible/moderate wine consumption, with an increased co-financing rate of 60 per cent for the latter.

Environmental protection: the eligibility of all wine-growing areas to qualify for the Single Payment Scheme means that environmental standards under Cross Compliance will be applied more widely. Cross Compliance will apply for all grubbed-up areas. There will be minimum environmental requirements for grubbing-up, restructuring and green harvesting, and increased funds for agri-environmental schemes in Rural Development programmes.

The EU wine sector

The EU has more than 2.4 million holdings producing wine, covering 3.6 million hectares, or 2 per cent of EU agricultural area. Wine production in 2006 represented 5 per cent of the value of EU agricultural output. EU wine consumption is falling steadily, although sales of quality wines are increasing. Over the last ten years, imports have grown by 10 percent per annum, while exports are only increasing slowly. On current trends, excess wine production will reach 15 percent of annual production by 2010/11. The EU spends around half a billion euros every year just getting rid of surplus wine for which there is no market.

EU reform of the wine sector - European Commission website