Wednesday, July 25, 2007

EU subsidies...and reform thereof...

I've got to hand it to the social commentary of Berke Breathed's Bloom County back in the late 80's...still as acerbic and hypocritical as it was then.
( I believe the cartoon was penned when the massive Farm-Aid concerts were being put on all over the country...of course there's a subsequent panel where Opus accounts for all his expenditures and realizes he's spent $37.75 million dollars to produce "two pounds chemically fattened tomaters"[sic], one-half bushel of corn, and a yam, and then proudly exclaims "God help me, I'll NEVER give up this distinctly American way of life!"...yet another panel elapses and then the ridiculously excessive Gov't handouts arrive...).

Anyways, it seems we ALL love our subsidies regardless of where in the world we reside...and we ALL resist having any strings put on them via performance requirements, production quotas, legislation, etc...
We hate to see those subsidies stop so much that we sometimes find ways to try to keep collecting after we die! (MSNBC: Dead Farmers get $1.1 Billion from USDA)
Indeed, one of the biggest problems with any subsidy program is attempting to apply it with a semblance of equity, and then to ensure that those monies are no longer spent when relief's no longer needed.

For the EU there are tough times ahead given the need for reform and the position it finds itself in currently. Those choices they need to make and the sacrifices they will entail, while fairly obvious on the whole, are painful to all.
But do nothing, and you commit yourself to continually spending 1/3 of your collective budget to bail out the wine sector by distillation of surplus products when that money would be better spent on programs increasing quality or marketing. How does one assign areas to be "grubbed up" (removed) - look at yearly excesses? Look at the ratio of production to revenue, and keep only the vineyards with the best returns? Certainly, the vineyards with the least revenue and most yearly excess not turned to table wines would be candidates...but the vignerons with such are not REQUIRED to grub up, unless the vines planted are NOT of approved varietals for that area.
In fact they're trying to be a little too egalitarian in their approach: designate vineyards that produce little revenue (and absorb subsidy money), and leave them the option to grub-up or not, but cut off the subsidies if they choose not to after a short period.
The EU is looking to "grub-up" ~200,000 ha (~494,200 acres) in total.

And where would that leave whole regions like Spain, which produces ~25% of the EU product, but claims only ~8% of the EU revenue monies. See the problem here?
Many of the Spanish wines, sound but without the prestige of the French & Italians, don't garner the same amount of cash (which is good for consumers who continue to look to Spain for great bargains...).
Also unfortunate for Spain is that it just lost its place in the UK to Chilean wines, who can use newer fermentation methods than those allowed in Spain....
Hopefully, the Spanish will be behind the reforms and use those changes to help regain competitive position in the market.

Now, there are detractors to the plan within the EU -namely the biggest names in the game, who have some of the best reputations - and misinformation about the proposals abounds. Many articles I've read in the past few months claim the proposals will end chaptalization (adding sugar to must for alcohol & body).
In fact it will not end the practice of adding sugar in the form of must (up to 2% by volume for cooler areas, 1% for warmer areas in France, Spain, Italy, etc) the vignerons will still have some relief for cooler years with less ripe fruit.
It WILL end the use of beet sugar (& other non-grape source sugar) for that purpose.
Many claim that it will lead to "a loss of tradition", which is dubious...I mean, if your "tradition" no longer garners you much respect in the marketplace, and your sales tank, then what's the point?
Besides, as I said back in September, 2004: tradition sometimes sucks!

The reforms look to help codify geographic place names along the lines of the WTO policies...something the well established AOC & DOC producers don't see as being needed (for them). [see this from the EU's website: Reform of the wine sector- Commission proposal]
Also, see this site from the EU with a summary fact sheet regarding the reforms.
Several variants of the proposals exist, and hopefully the member states of the EU will be able to get something together which serves their common interests.

Personally, if they don't get this reform going now, I feel they'll continually lose market share on the whole, and perhaps even be too far behind the curve to really catch up in the next decade - which is really scary.

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Blogger Jeff said...

Very good and clever post, Vini. Always the voice of reason.

July 25, 2007 7:56 PM  

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