WORKING DOCUMENT "Outcomes of the Working Groups' discussions" 3 rd meeting of the High Level Group on wine planting rights 21 September 2012 Directorate General of Agriculture and Rural Development Directorate C Economics of agricultural markets and single CMO
This report gives an account of the main outcomes of the Working Groups' (WG) discussions that took place during the third meeting of the High Level Group (HLG) on wine planting rights (2& September 2012), as reported by each of the Chairmen at the end of that meeting. The topics of discussion and respective Chairmen were: 1 st topic Administrative simplification Chairman: José Manuel Silva Rodriguez 2 nd topic - Impact on wine production, prices and land values Chairman: Hermanus Versteijlen 3 rd topic - Competitiveness and restructuring of the EU wine sector Chairman: Jesus Zorrilla N.B. Due to lack of time during the meeting, the working groups on the 1 st topic did not take place 2
Outcomes on the 2 nd Topic: "Impact on wine production, prices and land values" The 2 nd topic, chaired by Mr Hermanus VERSTEIJLEN, was centred on those concerns with the end of the planting rights (PR) related to overproduction, resulting in lower prices due to an excessively high increase in supply linked to uncontrolled plantations. I. The 1 st question "Why would the end of the PR regime bring along a general wine overproduction, a fall in prices and a devaluation of patrimony?" called for a broader reflection on what are the factors that may lead to overproduction and whether the PR system is or not a main factor. The general opinion was that abandoning the PR could give rise to overproduction, reduction of margins and even lead again to the need of distillation measures. There were also members who disagreed that there is a direct link between PR and market balance or the risk of overproduction. II. The 2 nd question looked at "What differentiation could MS make among different wine regions in each country regarding risks of quick expansion of surfaces". An important point made was the specific situation of small producers or those who are producing under more difficult circumstances on steep slopes and the importance of the vineyards for the environmental balance in certain areas. Those arguments were opposed by other members who intervened to question to what extend that specific situation should determine the overall policy of the wine sector in terms of competitiveness and to what extent those specific problems could not be addressed in the 2 nd Pillar. 3
Outcomes on the 3 rd Topic: "Competitiveness and restructuring of the EU wine sector" The objective of the 1 st topic was to discuss what possible effects would the end of the planting rights (PR) regime have on the competitiveness of the EU wine sector. The discussions, chaired by Mr Jesus ZORRILLA, were guided around a series of key questions: I. The 1 st question asked was whether the current PR regime has certain restrictive effects on the competitiveness of EU wines and the outcome was that PR system has no impact on the competitiveness of EU wines, however certain instruments for the management of plantings need to be improved, made more flexible. The hypothesis that the loss of market shares of EU wines onto the US and the UK markets may also be related to the PR regime was rejected by the participants. According to the latter, the main causes have to do with other factors like fashion, exchange rates (e.g.: Chile and Argentina have benefited from the fact that their currency is linked to the US dollar) etc. Concerning whether the PR had an influence on the fact that 41 EU wine enterprises have invested in Chile, the opinion expressed was that there was no link with PR, but with the low labour and land costs. It was mentioned that competitiveness of EU wine should not be linked to low cost products, but to the specificity and quality of the products. Wine is not a commodity, but the EU wines are more focused on quality. It was also hinted that there are certain segments of the wine sector (low price segments) where Europe can not and should not try to compete. On whether the sector easily allows the young farmers to enter, the reply was that it was not difficult, at least in certain countries. The difficulty to enter in the sector is not linked to PR, but to the high cost of the land and other further costs of production. PR have an influence on the structure of the wine sector, but not on the market. The necessity of more cooperation among the actors in the food chain (grape growers and wine makers) was also emphasized by some of the participants. 4
Concerning the current prohibition of transferring PR for wines without GI or for varietal wines, it was acknowledged that this problem should be addressed and that more flexible rules in this respect are needed. Flexible rules on the management of PR through the reserves and the possibility to increase the reserves were also mentioned. Among the elements that hinder competitiveness of the sector were mentioned the non-tariff barriers, production costs and the fact that in certain cases the EU products are not adapted to the market. II. The 2 nd question tackled "Which kind of wines and regions would benefit from a more flexible regulation of plantings?" and the general opinion was that no region would benefit from liberalisation, because regions that already have high priced wines would anyway be able to increase their area. The conclusion was that, in general, the PR system does not affect competitiveness. However, the members expressed the need to have more flexibility concerning the PR system and reserves, which would lead to reduction of costs and bureaucracy. At the same time, the historical and territorial values of EU wines need to be protected and the promotion measure should be used to attract consumers and to explain the differences and specificities of the EU wines. ENDS 5