From the Economist: Charlemagne | In vino veritas

[Guy Berger]

Charlemagne

In vino veritas

Jun 14th 2007

From The Economist print edition

Europe's belief in the market wavers when it comes to viticulture

DO EUROPEAN politicians trust the market? Surely they must. For all the bleating in parts of the continent about the beastliness of capitalism, Europe is good at business, spawning global firms that cut and thrust with the best of them. Yet if you look at an industry that is of special local pride to Europeans, such as wine, you wonder if their leaders truly believe in such concepts as risk and reward or profit and loss.

Next month the European Commission will announce a modest proposal to reform the heavily subsidised, minutely regulated European wine business. Even battle-hardened Brussels officials have been taken aback by the adverse reaction of national governments. Although each has specific gripes, the general response from Europe's wine belt has been to dig in and resist calls for liberalisation, in the name of tradition and high culture. Nor is the opposition about money—not least because the commission has made it clear that it is not cutting a cent from the wine budget. Mariann Fischer Boel, the (Danish) agriculture commissioner, concludes that “there is more tension in wine than I have seen in any other agricultural product.”

Some fuss was to be expected. Wine has always mattered to people. Not for nothing is it the stuff of parables, and the preferred gift of one ruler to another. Consumers in vine-free bits of Europe hop around the world as they browse supermarket shelves for wine (70% of wine drunk in Ireland is imported into the European Union, and the union may soon be a net importer of wine by volume). But head into Europe's wine belt, and shelves groan loyally under local wines, regardless of their quality and price. When Charlemagne visited the vineyards of the Moselle valley on the German-Luxembourg border, Luxembourgeois vintners boggled in horror at the idea of serving wines from the German side of the river. A generation back, stubborn farmers would not even drink wine from the next village, confesses Jerry Scheuer, of the national wine-marketing agency.

Not all the tussle over the commission's plan is ideological. There are differences over the use of sugar in the north and centre of Europe to increase the oomph of wine in bad years. But the biggest battle is over liberalisation: the bold idea of making wine that customers actually want to buy. At present, the rules for wine are among the most complex for all agricultural products. Grow grapes for eating, and the EU offers no subsidies (barring help with packaging and promotion via producers' organisations). Grow grapes for wine, and officials must approve everything, from where and when you plant new vines to what information goes on the label you put on the bottle.

Too many wine subsidies are, moreover, a reward for failure. Currently, about half a billion euros are spent annually distilling unwanted wine and by-products into industrial alcohol, out of a total EU wine budget of €1.3 billion ($1.7 billion) a year. Some wine is produced more or less exclusively for destruction, complains Mrs Fischer Boel (herself a farmer's wife). That is “not sustainable”, she says. Under her plans, the budget would be steered towards promoting European wines in new markets overseas, and fostering a wider range of businesses in winemaking regions (lots of museums and tourist wine routes).

The commission also wants to grub up 200,000 hectares of vines (about 6% of the EU total) and to pay farmers who cannot sell their wine to leave the industry. That done, it plans to lift restrictions on new planting of vines in 2014, to allow successful producers to expand. But there is “huge opposition” to grubbing up. The German farm minister, Horst Seehofer, last month invited Mrs Fischer Boel and his fellow farm ministers to an abbey near Mainz, where he plied them with 50-year-old Riesling and proceeded to describe the commission's grubbing-up plans as “not very reasonable”. Farmers might be paid to pull out their vines—but what would they do then, he wondered, with vocal backing from Portugal and others.

Plant management

France and Luxembourg are more fussed by the scrapping of planting restrictions. After all, runs the French line, if farmers are able to plant vines wherever they like, they will have an incentive to plant where the costs are lowest. Such vineyards may produce mediocre wines that need treating with “industrial techniques” to become tasty, say French officials, in a swipe at mass-market wines from the new world. One explains his country's view that the wine industry is so complex that it requires state oversight to be “properly managed”.

In Luxembourg, meanwhile, officials fret that, if planting restrictions are lifted, farmers will be tempted to abandon the steepest slopes overlooking the Moselle, which require four times as much labour as flatter regions. To an outsider, this is a puzzling fear: the slopes produce more valuable wine, and there are special premiums to compensate for the extra costs of farming the steepest ones. Justifying such slope premiums, officials note that the terraced landscape dates back at least two millennia (at one point, Charlemagne is handed a Roman poem about Moselle vineyards, as proof of their antiquity). “Wine is different, it has a soul,” says Ferdinand Hoffstetter, who is a big wheel in the grand duchy's ministry of agriculture and viticulture. At dinner, guests may discuss a wine they are drinking. “One does not discuss cauliflowers.”

The odd thing is that France and Luxembourg are both rather good at making money from wine. Growers in both countries already earn more, on average, than any others in Europe. Luxembourg, in particular, is almost never left with unsold wine. Liberalisation could allow the more successful growers to profit handsomely. But something stops European governments from embracing the prospect. Perhaps it is that “soul” inside a bottle of wine. Once something has a spirit of its own, it is hard to trust the market to decide its fate.

[J Larsen]

I'm as much for free markets as anyone, but the idea of easing or eliminating planting restrictions does not sit well with me. I'm sympathetic to the French on this issue.

[The Magnificent Goldberg]

There's been a wine lake for decades. The whole of the EU's Common Agricultural Policy stinks.

An interesting technical point for you, Guy, is that the GVA of the agriculture industry includes subsidies. If you subtract the value of the subsidies from the GVA of the industry in Wales, you get 0.

MG

[Guy Berger]

I'm as much for free markets as anyone, but the idea of easing or eliminating planting restrictions does not sit well with me. I'm sympathetic to the French on this issue.

Out of curiosity, why?

Guy

[Guy Berger]

There's been a wine lake for decades. The whole of the EU's Common Agricultural Policy stinks.

I shouldn't complain; as a non-European, non-farmer I possibly benefit from subsidized produce.

Guy

Edited July 3, 2007 by Guy