Comment - Wine - EU to Uncork a Vine Old Mess

There are growing concerns that plans to liberalise vineyard planting across the European Union will hamper the bloc's attempt to rid itself of surplus, cheap wine. It's an issue that has yielded an entente cordiale between Chris Losh and the French Government. Things must be bad.

There are not, it must be said, many occasions on which I find myself agreeing with a French minister of agriculture, but reading the pronouncements of Bruno Le Maire at Vinexpo in June was one of them.

Mr Le Maire took advantage of his ‘welcome to Vinexpo’ speech to score a few political points against the EU’s plans to liberalise vineyard plantings in five years time; a scheme under which, by the end of 2016, there will be no restrictions on grape plantings across the EU.

“I am against this liberalisation,” said Bruno Le Maire. “It will not help European and French wine growers to achieve their aim of competing on a world scale with wines of the highest quality. We need a proper grape planting policy for Europe.”

Sure, he was preaching to the converted and doubtless harvesting a few votes in the process, but he had a point nonetheless.

The planting liberalisation that attracted Monsieur Le Maire’s ire is part of the wider reform of the wine sector – first mooted in 2006, redrawn in 2007 and still, I should imagine, likely to be prone to a thousand visions and revisions before finally being enacted. As it is, the deadline for vineyard liberalisation has already been put back a couple of years, from 2014.

In the early stages of the wine sector reform, this removing of the shackles on grape planting attracted little attention. The wine growers of France, Spain and Italy (the principal antagonists to EU Agriculture Minister Marian Fischer Boel’s proposals) were far more worried about the end of Crisis Distillation subsidies and plans to cut the vineyard area through subsidising voluntary grub-up schemes.

As a result of their concerns, the targets for grub-up were dropped from 400,000ha across the EU to 175,000ha. In other words, from a reasonably significant 9% of the continent’s vineyard total to a barely noticeable 4%. Funding for crisis distillation, meanwhile, has not been entirely abolished, but it has been severely cut back, from 20% to 5% of any member nation’s wine budget.

These elements of the proposals, in other words, are no longer quite the force for good that they once were, but they are, at least, a step in the right direction.

The same, however, can not be said for planting liberalisation.

The thinking behind it is, broadly speaking, in keeping with all the other wine sector proposals: a move towards market forces, and away from controlling bureaucracy. As the draft document explaining the proposals puts it, ‘Whilst restrictions linked to Geographical Indications make sense, preventing successful wine makers from expanding does not...’

So far, so reasonable. As far as I can gather, the plan is to keep geographical restrictions on GIs, but to let growers within those boundaries plant however much they think they will be able to sell.

Viscerally, I’m in favour of this. After all, it’s a nonsense that the EU throws money at supporting uneconomic producers and prevents successful ones from expanding. But it’s not quite as simple as that. Particularly at the moment.

The dangers of an unregulated free-market approach in the wine world are obvious. Commissioners only need to look at the current situation in Australia and New Zealand to see where unregulated planting can lead: massive oversupply, tumbling prices and bankruptcy.

Two points: firstly, these plans were probably drawn up eight years ago, when the wine world was a very different place. Then, loosening the bonds on successful producers would have seemed eminently reasonable. Now, though, the driving motive should be crisis management.

Secondly, the planting deregulation was meant to be the latter part of the overall reform, introduced after the earlier methods had cut supply sufficiently to bring it more or less into line with demand. But of course this hasn’t happened. The EU produces around 175m hl of wine a year, and consumes about 130m. Stocks are as high as any time in the last 20 years.

The last time there was a problem like this – the famous wine lake of the mid-1970s - the EU introduced a planting ban. And, broadly speaking, it worked. By the mid-1990s, 23m hl of wine a year had been taken out of the system, and supply and demand were far more closely aligned.

Since the ban was relaxed 15 years ago, however, the gap between supply and demand has increased once again. With the industry clearly much better at planting than it is at grubbing up, a time of market stagnation is not the time for the EU to take its hand off the tiller.

The growing rumblings of discontent across Europe are largely from growers unions, who are worried that liberalisation will mean the growth of cheaper areas, lower wine prices and their members going out of business.

Protectionism it might be, but since the best areas in Europe are planted now, you’d have to ask whether lots more cheap wine at a time of oversupply is in the interests of anyone apart from the supermarkets.

As the European Federation of Origin Wines puts it, ‘By allowing everyone to plant everywhere, the EU runs the risk of destabilising the entire market and the wine sector.’

They’re right – though my sympathy for them is somewhat tempered by the fact that many of these organisations are the same groups who dug their heels in over reductions in vineyard area in the first place.

We all know that Europe (as with most parts of the world) produces too much wine and this clearly needs addressing. In fact, it should be back on the table as the centrepiece of the whole reform package. But until this element is addressed, it’s madness to think about liberalising plantings.

As the New World has shown, it’s questionable whether unfettered planting is desirable in any situation. But to bring it in when production already massively outstrips demand is like trying to put out a fire with gasoline.