12 May 1993

Doc. 6831

1403-11/5/93-8-E

REPORT

on the future of wine-production

(Rapporteur: Lord MACKIE OF BENSHIE,

United Kingdom, Liberal Democrat)

Summary:

      Along with other agricultural surpluses the over-production of lower quality wine in Europe costs tax-payers large sums of money each year for storage, distillation or destruction. Vine growers and wine producers are facing difficulties adjusting production to a diminishing demand. The adverse effect on health of over-consumption of alcohol has concealed the actual beneficial effects of moderate consumption to the detriment of the market. Many regions fear that their economy as well as their social and cultural traditions closely linked to the cultivation of vine and the consumption of wine may be threatened.

      Agricultural policies should aim at maintaining an economically viable and diversified wine sector by encouraging the production of high quality wines. Vine growers in regions with few alternatives should receive special assistance if needed. The production of wine, however, must be adjusted to demand. Consumers should be better informed of the quality and characteristics of ordinary and classified wines as well as of the health risks arising from the abuse of wine and the genuine benefits to health and happiness of sensible consumption. Labelling practices must be harmonised Europe-wide as well as world-wide to respond to consumer and trade interests.

I. Draft resolution

1.       The Assembly considers that vine cultivation, wine-production and the use of wine is an important economic, social and cultural sector of European society, particularly of course, in southern Europe.

2.       It is concerned that world production of wines is higher than demand and more specifically that the surplus production in Europe entails important costs to tax-payers.

3.       It is concerned that while abuse of wine can have adverse effects on the health of consumers, this ignores the genuine benefits to health and happiness of sensible consumption.

4.       Consequently, the Assembly call on governments of member states and the European Community:

i.       to adopt policies which will ensure a viable, quality-minded and diversified vini-viticultural sector in Europe, combining market-forces with market supply measures to control the over-production of low quality wines and thus eliminate storage, distillation and other surplus-costs;

ii.       to ensure that such policies will be environmentally friendly and sustainable;

iii.       to ensure that alternative measures are taken to avoid social disruption in areas where vine growing and wine production is no longer economic;

iv.       to stimulate technological developments and research which will enhance quality, but discourage techniques which raise volume at the expense of quality;

v.       to ensure consumers that complete and objective information is given on all factors of importance in the selection and use of wine, in line with the Assembly Recommendation 1142 (1991) on the labelling of quality food products, which in particular stresses the need to introduce a Europe-wide system of certification of origin;

vi.       to fully involve wine-producing regions (the European Conference of Wine-Producing Regions) and the wine trade in this work.

II. Explanatory memorandum

by Lord MACKIE OF BENSHIE

CONTENTS

Page

Introduction       4

The vitality of Europe's wine regions       4

The diversity of European quality wines - a cultural heritage       5

The problem of surplus production       7

Wine and Health       8

The art of vine cultivation and wine-making       9

Conclusions       10

Introduction

      Wine-making with its upstream and downstream activities is of major importance to many rural regions in Europe and has been closely associated with their cultural traditions. The best of European gastronomy is associated with its finest wines.

      The problem of surplus production in the world has confronted wine-producers with a serious problem of market adaptation. The European Community has spent more than 1 500 million ecus per year for the storage or distillation of surplus wine and for the grubbing-up of vineyards and other measures aimed at reducing the production of wine. New production methods and grape varieties can improve quality, but have often greatly increased production at the expense of quality, thereby negating the effects of grubbing-up.

      The fight against the abuse of alcohol has also increasingly concerned the abuse of wine, and important restrictions on the sale of wines through the limitation of outlets, taxation or the banning of advertising etc., have been introduced in many countries — mainly those which do not have any wine production themselves. Little attention has been paid to medical research proving the benefits to health of moderate and civilised use of wine.

      It is against this background that your Rapporteur proposed drawing up a report on the future of wine production. This work has been greatly facilitated by a valuable co-operation he has received from the European Conference of Wine-producing Regions and the Commission of the European Communities. The jointly organised Symposium "Europe and Wine" (Palais de l'Europe, Strasbourg, 23-25 November 1992) gave the Committee on Agriculture an excellent opportunity to have an in-depth exchange of views on the present report with the European Conference of Wine-Producing Regions. The main issues raised were of considerable value for the drawing up of this report.

The vitality of Europe's wine regions

      The history of wine goes back thousands of years and evidence that vines were cultivated in the Mediterranean area can be traced back to the Bronze Age (3000 - 1500 B.C.). Mythology, painting, sculpture, poetry, customs, eating habits, trade, medicine, even religion, in short the whole fabric of life of European Mediterranean peoples, bear the imprint of the vine and wine. The cultivation of vines has since developed to what it is today. Wine has become part of our general diet and occupies a central place in European gastronomy. Wherever vines were grown merchants in wine were also to be found. The wine trade has always been subjected to regulations and control, but frauds also happened in the ancient history of wine.

      Vine cultivation and the wine trade contribute in an important manner to the well-being of rural regions notably in southern Europe were the soil used for vine cultivation is often less suited for other agricultural productions. The Languedoc-Roussillon region in France, for example, has about 30% of its agricultural area under vines and many other regions in Spain, Italy and Greece follow closely. The wine regions of the European Community have a yearly production of between 170 and 200 million hectolitres which is roughly 60% to 70% of total world production. Other European regions account for an additional 10%. European Community viticulture accounts for about one million full-time employment equivalents, which represents more than 10% of the total agricultural work-force.

      In between producers and consumers come thousands of trading and distributive businesses, with bottling plants, cellars for storage and maturing, warehouses and land and see transport. Some enterprises manufacture special wines such as vermouth, aromatised wines and wine-based aperitifs. Others produce wine vinegar and distillates of wine and marc or alcohol for use in the food industry. Downstream by-products (tartrates, grape seed oil etc.) are a major sector and there is also the manufacture of machinery and equipment, bottles, other recipients, corks and wine labels.

      Thus, the vitality of many European regions depends on the wine-sector. These regions therefore, on the initiative on the former french Prime Minister, Mr Edgard Faure, decided in 1987 to create a European Conference of Wine-producing Regions (closely linked to the Assembly of European Regions which was created in 1985, also on the initiative of Mr Edgard Faure). The conference brings together politicians and representatives of the vini-viticultural sector for debates on common problems and issues of interest. The third plenary session of the conference (Vilafranca del Penedès, Catalonia 20-23 October 1991) adopted a Wine Charter as a common basis for future action. In the introduction to this Charter one can read: "The Europe of wine-producing regions as a whole, in support of the wine-producing profession, has a duty to affirm, confirm or define, for the attention of the competent authorities and the politicians heading them, the principles of collective and individual professional and institutional conduct which they undertake to respect and ensure are respected if necessary through joint supervision, for the protection and promotion of wine and its culture".

The diversity of European quality wines — a cultural heritage

      A wine's appearance, its smell, taste and character as well as the introduction of special processing techniques and the selection of grapes have identified the most famous European wines with their region of origin. Examples such as Champagne, Port Wine, Madeira Wine and Greek resinated wines, or wines from the famous wine regions of Bordeaux, Burgundy, Chianti, Mosel and Rioja, well illustrate this fact. The regional character of a wine is often further emphasised by the choice of grape variety or the mixture of these. The quality wines of the European Community ("vin de qualité produit dans une région déterminée", v.q.p.r.d.) represented in 1987-88 26% of the total production while table wines amounted to 67,5% and other wines to 8,5%. The Community accounts for some 75% of world trade in wines — mainly quality wines. It is expected that the production of quality wines will continue to grow and be around 60 million hectolitres in 1997. The EC Commission has since 1976 given aid for the reconversion of obsolete vineyards to stimulate quality production from certified regions of origin.

      The principle of a certified region of origin of wines was introduced in Portugal in 1756 by the establishment of the first official limits for the original port wine zone, in the mountains above Regua in the upper Douro valley. Later, other European countries followed suit. In addition to the region of origin classification was also added a classification of quality. This was the case for Bordeaux, Burgundy and also for German wines ("Auslese", "Spätauslese"). The most famous classification system is that of the châteaux of the Medoc, finalised in 1855 and based on the prices the wines had fetched in the previous period of one hundred years or more. Its first, second, third, fourth and fifth "growths" (crus) to which were added "crus exceptionnels", "crus bourgeois supérieurs", "crus bourgeois" and later "crus artisans" and "crus paysans" is the most ambitious grading of a product from the soil ever attempted. An example of the importance of origin and quality certification of wines can be found in the French "appellation d'origine contrôlée" (AOC) wines which in 1988 accounted for a sales volume of 40 000 million French francs. A relatively new feature in wine-growing in Europe is organically produced wines, which is steadily gaining importance on the market.

      The idea of English wine is usually greeted with mockery and disbelief. Your Rapporteur, however, would like to underline the fact that in the early Middle Ages the monastic vineyards of England were extensive and by all accounts successful. Had it not been for England's acquisition (by the marriage of Henry II to Eleanor of Acquitaine in 1152) of Bordeaux — an easily accessible source of better wine — they would probably have continued to this day. A revival is however underway and new vineyards are registered in both England and Wales.

      The Commission of the European Communities and the European Conference of Wine-producing Regions both stress the importance of quality and uniqueness for the European wine-production. The Wine Charter has formulated this ambition as follows: "Like man, wine has a name, which is that of its place of origin, or of its grape variety, and that of its grower or growers. The fruit of man's labours and of the soil of a region, wine is proud of its origins and its creators and displays their names. An anonymous wine is a wine ashamed to say its name. Ordinary wines also have their dignity, and should reveal their place of origin or their identity, albeit without creating a confusion with 'appellation' wines from the same region. This will raise them to a higher status where diversity of quality will quite naturally stand alongside diversity of origin. Plurality of origins is not an unmentionable fact. An honest wine must reveal them candidly. The label of a blended wine shall name the regions of origin and the proportions of its constituent parts".

      And the Wine Charter continues: "Approaching the problems of wine through the region, in an inter-regional structure, is a means of ensuring loyalty to the culture and civilisation of wine. Wine is like men and regions: relationships are conceivable only through respect for the personality and nature of each. Each region, with respect for its traditions, must identify and define those local and long-established practices that have yielded the appellations within its purview and the characteristics of its products. Maintenance of the quality and specific characteristics of the product, protection of the regional heritage, protection against possible usurpation and consumer protection are all dependant on suitable rules being laid down. To this end, each region, each production or appellation area, must have its own organisation structure in keeping with its local, regional or national tradition, which could be an inter-trade structure bringing together the principle partners in the wine-producing chain".

      The Wine Charter contains the suggestion to create a wine register (European or even a world-wide), the latter within the framework of the International Vine and Wine Office (IWO — the official body to which almost all countries in which vine is cultivated belong). In this connection it may be recalled that the Assembly, in its Recommendation No. 1142 (1991), on the labelling of quality food products, proposes that the Committee of Ministers and the European Community examine the possibility of setting-up a European system of quality food labelling and draw up a European Convention regarding labelling, presentation and advertising of raw and processed quality agricultural and food products from certified regions or countries of origin.

The problem of surplus production

      In the Treaty of Rome, wine, must and grape juice were included in the product's list for which a "Common Agricultural Policy" was to be established. The production has since long been higher than demand and this has resulted in the use of Community Funds for the payment of storage and distillation of wine as well as for the grubbing-up of vineyards and other measures to reduce the area under vine and the produced volume of wine, in particular table wines. The amount of wine distilled in 1990-91 was more than 33 million hl and in 1987-88 it was 50,6 million hectolitres. The level of total support for the wine sector amounted in 1988 to 1 580 million ecu.

      The estimate made by the Commission of the European Communities for 1992-93 foresees production at 187 Mhl (184 Mhl for wine 3,3 Mhl for juice). The stocks at the beginning of the campaign will be 119,5 Mhl which gives a total of 303 Mhl excluding imports (2 Mhl). Consumption is estimated at 127 Mhl, distillation 28 Mhl and other transformation 4 Mhl.

      The Commission in its "Medium Term Forecasts of Supply and Demand of Selected Agricultural Products in the European Communities" states that "the trend observed since 1977 suggests a slight increase in the yield, overcompensated by the decrease in the surface. As a result, production would slightly decrease, to expected level of 170 million hectolitres in 1997. Several factors may alter this trend in the medium-long term. The current stabilising mechanism discourages high yields (penalising farms producing close to and more than 100 hl/ha). Moreover, the surface reduction scheme, rather unsuccessful in its first two years, is giving its first results, and may work better in the next few years, thanks to a better implementation, in particular in Spain". The reduction in the area under vines in 1992 was about 92 000 hectares.

      In parallel to encouraging a reduction in volume, the Commission is also financing the renovation of obsolete vineyards which, of course, contributes to increase the yield. It is evident that market signals are not allowed to guide production to a sufficient degree. In those zones where the vine is the only possible crop or where environmental concerns (soil erosion) motivate further vine cultivation, a deviation from the principle of letting market forces guide production may be necessary. However, greater efforts must be deployed for the reduction in volume to the level of demand. This effort must be undertaken not only at the European but also at the global level.

      World production in 1987 was 316 million hl whereas world consumption was only 257 million hl. This imbalance has existed since the 1950s and an important expansion of wine-production has taken place in North and South America (a 43% increase in the last twenty-five years), South Africa (a 50% increase in the last twenty-five years) and Australia (a 191% increase in production but also a 485% increase in consumption).

      Direct consumption of wine in the European Community has steadily decreased from 55 litres per head in 1974-75 to 38 litres in 1989-90 with a forecasted 32 litres per head in 1997-98 with important variations among countries. Total consumption in the Community in 1997-98 is forecasted to be some 106 million hl whereas production is estimated to be 170 million hl. Intervention will therefore still be necessary for the table-wine sector. Quality wines, however, have so far been market-driven, and price and production have followed demand. The area under vine in the Community has diminished only by 1,1% the last twenty-five years whereas production has increased 50% and consumption has increased only 7,55%.

      Many of the wine growing areas already have quotas for their well-known quality wines in order to maintain the market. It may well be that national schemes, with the administration delegated to the regions, for restricting the supply of wine would be of great benefit in controlling the surplus. It is quite obvious that, while production of low quality wine must be discouraged by low prices paid for distillation, controlling the supply by means of quota would be very useful. Indeed, it might well be far cheaper to pour the wine into the sand than it is to distil it. Such schemes would, of course, be complex, but might well save a great deal of money.

      The creation of the Internal Market by the end of 1992 coupled with the creation of the European Economic Area will affect the wine trade as will the ongoing GATT negotiations on trade in agricultural commodities.

      With a view to creating homogeneous conditions of competition by the end of 1992, the Commission of the European Communities suggested in 1987 a unique tax of 17 ecu/hl. This proposal has been modified by the so-called Scrivener proposal which suggests a minimum of 9,35 and a maximum of 18,7 ecu/hl for normal wine (still under discussion at Council level).

Wine and health

      The Wine Charter of the European Conference of Wine-producing Regions states that a joined effort of wine-producers and all others involved in the vine and wine-trade is needed so that "the honour of wine be protected against a civilisation which might no longer be able to distinguish between the use of wine and the abuse of alcohol. To prohibit indiscriminately the promotion of wine is no doubt to repudiate a culture and, indeed, a civilisation rooted in Europe's very origins. It is, in any event, to exclude the great majority of men, by reserving wine for an elite and for a minority of connoisseurs. It is to point humanity towards a false and uniform civilisation, foreign to Europe, of a universal industrial beverage".

      The fight against alcoholism in many countries has also included measures to restrict or control the consumption of wine. Some countries (in particular those which do not produce wine) have introduced high taxes and restrictions on outlets and in some cases restrictions on advertising.

      There is an increasing volume of medical evidence that moderate consumption of wine is actually beneficial, particularly in heart disease. It has been shown that both coronaries and strokes are reduced in people who drink wine in moderation as against those who are abstainers or who drink too much.

      A Europe-wide public debate on the theme Wine and Health should be encouraged for the clarification of this issue to the benefit of consumers as well as for the vini-viticultural sector.

The art of vine cultivation and wine-making

      Vine cultivation and wine-making are as any other sector subject to technological development. Biotechnology has allowed the production of great numbers of copies of an original plant by using tissue culture techniques. Such copies were introduced on the market in the 1970s and have gained importance ever since in new plantations. The most popular clones on the market are high-yield plants which will allow the production of quality wines in increased volumes. The clones selected for plantation are also those which give a higher sugar content.

      Since the popularity of these "vins de cépage" is increasing, development of plant bio-engineering will become more important. Your Rapporteur would like to remind you of the famous maxim of Olivier de Serres, the celebrated French agronomist of the end of the sixteenth century, who said: "The genius of a wine lies in the grape variety". A maxim which could have no better echo than in the very concept of the "vins de cépage". Needless to say that the introduction of high-yield clones is not without problems on a market which already experiences serious surplus production.

      An increase in production can also result from irrigation of vineyards — in particular in semi-arid regions where a warm, sunny climate ensures maximum production potential. The irrigation with warm waters in colder climates will have a similar effect. The potential for increased production volumes is considerable.

      Many other input factors can also increase volumes. Among these should be mentioned a better preparation of the soil before planting, the use of fertilisers, improved phyto-sanitary treatment and other improvements in vine cultivation methods. In Luxembourg the average yield in the period 1981-88 was 134,4 hectolitres per hectare whereas in Spain it was only 26,3 hectolitres per hectare (1985-88).

      The determinating factor for the quality of a northern vintage is the ripeness of the grapes. As the grape ripens its acidity decreases and its sugar increases. The sugar content may in unfavourable climatic conditions be inferior to what is needed to reach the desired alcoholic content. In such situations producers have, legally or illegally, added sugar to the must to increase alcoholic strength. This has been a normal practice in England but other methods can also be used. Grapes from warmer regions can be mixed into the must or reverse osmosis can be used to reduce the water content of the must thereby increasing the sugar concentration. A similar effect can be obtained by letting the grapes dry a little before making the must.

      These few examples serve to illustrate the scope for increasing volumes but also for improving quality. They also underline the importance of fully involving the profession in the control of quality and in the design and implementation of policy measures aimed at reducing quantities in line with demand.

Conclusions

      The wine sector constitutes an important part of European agriculture. It has contributed in an important way to shaping the beauty of the European countryside and is an important part of our cultural heritage. Social, economic and agricultural policies must protect this heritage and make sure that the sector can be a viable one in the future and benefit the European economy and rural regions. The best way of ensuring this is to foster the production of quality wines as part of Europe's contribution to world gastronomy.

      While complete free trade in wine might well be disastrous, market forces must influence policy decisions, while structural adjustment programmes are implemented to benefit the wine growing regions during the transition period. However regions with few other alternatives may still benefit of support measures. The use of input factors and biotechnology should aim at enhancing the quality of production. The market should dictate the quantity to be produced.

      Certified region of origin and quality labelling as well as the promotion of specific production methods, for example organic production should be pursued through legislation on labelling. Strict rules on quality control must be adopted, in particular with a view to avoiding the use of additives or processing equipment that may have negative effects on consumers' health.

      The effect of the European Conference of Wine-Producing Regions to promote the sale of wine through encouragement of tourism in wine-growing regions, through labelling, quality control and advertising should be assisted as part of the general programme.

Reporting committee: Committee on Agriculture.

Budgetary implications for the Assembly: none.

Reference to committee: Doc. 6149 and Reference No. 1652 of 29 January 1990.

Draft resolution: Unanimously adopted by the committee on 30 April 1993.

Members of the committee: Mrs Gjørv (Chairperson), MM. van der Linden, Sipos (Vice-Chairmen), Anthopoulos, Mrs Anttila, MM. Bühler (Alternate: Müller), de Carolis, Crowley, Goerens, Gonzalez Laxe, Granstedt, Gunnarsson, Hansen, Howell (Alternate: Alexander), Jeambrun, Kiratlioglu, Lagorce, Lanner, Lord Mackie of Benshie, MM. Mannino, Michels, Ottenbourgh, Pirinski, Pizzo, Rodrigues, Roger, Scheer, Seiler, Smolarek, Jack Thompson, Vella.

N.B.       The names of those members who took part in the vote are printed in italics.

Secretary to the committee: Mr Lervik.