Global competition prompts reform in EU wine sector

The European Commission, the executive body of the European Union (EU), unveiled plans on Thursday for "profound reform" of the continent's crisis-bound wine sector to fend off competition from so-called New World wine-makers.

Wine consumption is falling by 750,000 hectoliters a year in the EU and New World wines are making inroads into the EU market.

"If the trend continues, the EU could soon become a net importer," EU agriculture commissioner Mariann Fischer Boel told a press conference on Thursday. Boel warned the industry was heading for a crisis.

Although the EU remains the world's largest wine producer and exporter, it faces stiff competition from the New World, notably the United States, Australia, South Africa, Latin America.

In the past 15 years, EU wine exports increased by 20 percent, while U.S. exports have risen fourfold and Chilean exports, 19-fold, according to Boel.

The EU also produces wine for which there is no market. Excess production is forecast to reach 15 percent of total output by 2011 if nothing is done, she said.

"Stocks are already the equivalent of a year's production. I'm afraid to say that the 'wine lake' is a reality."

The EU's wine sector is also plagued by rigidity in wine-making practices, such as restrictions on planting rights, as well as inflexibility in labeling.

"How are we supposed to compete with the entrepreneurs of the New World if we continue to shoot ourselves in the foot?" asked Boel.

The EU is also spending a lot of money, 500 million euros a year, to distill surplus wine into ethanol for cars and factories, a huge waste of money, according to Boel.

The commission is expected to table a draft legal proposal in January 2007, which might be applied in 2008 or 2009.

The commission wants to cut wine production surpluses by luring the least competitive producers out of the business.

Incentives of 2.4 billion euros would be given in a five-year period for producers to opt out on voluntary basis, reducing 400,000 hectares of vines.

The EU has 3.4 billion hectares of vines, almost half of the world total.

The commission expects the grubbing-up scheme would restore market balance.

Restrictions on planting rights, which are a heavy burden for wine producers, would be abolished, allowing producers to concentrate on quality so that they can compete with the New World.

Market support measures such as distillation are also to be scrapped, according to the commission plan.

Labeling rules, which are confusing and not in line with international rules, are to be simplified.

The plan aims to increase the competitiveness of EU wine producers, strengthen the reputation of EU wines and win back market share, said the commission.

Source: Xinhua