Freedom from protectionism – the EU wine market in the 21st century

It sounds strange to the ears of an Australian vintner that the wine industry (because of its complexities) would need the protection of the government. I think we in the Australian wine industry enjoy a maximum of freedom from government intervention. European vintners are not that lucky. But is seems that finally they might be getting some more freedom, if the European Commission carries through with its proposal to reform the heavily subsidised and regulated wine market.

However, if one expected a hearty welcome and praise for this effort, one would be utterly mistaken. There is some fierce criticism from some of the EU member countries which object to this “too much” of freedom. Doomsday scenarios are then usually invoked to scare reform minded policy makers. “The end is near”, “our culture and traditions are dying” and other similar slogans are shouted out by lobbyist of various persuasion. Of course consumers would ultimately benefit from deregulation and liberalisation. In the non-wine producing countries, there seems to be no problems but in the wine belts of the EU a storm is being stirred.

According to the Economist of June 16th, 2007, the EU wine budget amounts to € 1.3 billion a year. Some wine is produced more or less exclusively for destruction. The reform plan includes the pulling of about 200,000 ha of vines (about 6% of the total area) and transfer payments to vintners who cannot sell their produce so that they can leave the sector and find some new employment. The restrictions on new planting are scheduled to be lifted from 2014 onwards so that successful wineries can expand. Especially French and Luxembourgian officials oppose these moves and invoke the fears of inundation by cheap, mass-produced, “industrial technique” dominated wines from the new world. Both countries are rather successful in making money from wine production. Their vintners earn more than others in Europe, says the Economist. Ever since the debate of the Corn Laws in Britain in the House of Commons in 1813 and the enactment of the importation act in 1815, mercantilism has raised its ugly head from time to time, always with the ever same line of argumentation (foreign grown products would be dangerous to rely on, prices and wages would be diminished and producers and manufacturers would lose out). Empirical evidence is overwhelmingly just to the contrary. Europe would not be that prosperous without free trade and the healthy competition it bring with it.

On a more personal note, I believe there is another aspect usually overlooked: the dignity of a producer who can survive in the market without government handouts. Isn’t it a beautiful feeling if your wine flies out of the farm into shelves of supermarkets and grocery stores, and you don’t have to beg government officials for charity? I hardly make any money with Two Hills Vineyard at the moment, but so far I survived as a free but responsible man. If I should be forced to pack up and sell, I can say that I at least tried. No government to blame, I have only myself to blame which is neat.

I wish my European colleagues well in their efforts to become more independent and sucessful.

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