The success of the World Wine Trade Group and the New World Wines Alliance during the past few years demonstrates that using unity among competing countries is possible to carve out a way to penetrate the important emerging markets. In this light bilateral and multilateral agreements that facilitate wine trade are of immense importance in order to navigate a difficult international wine market.
The World Wine Trade Group’s invitation last year to Japan, China, Hong Kong and Brazil to participate in its meeting was a significant development since they are all important emerging markets in today’s new order wine commerce.
The World Wine Trade Group
Since the formation of World Wine Trade Group there seem to be better understanding between the member countries of global wine issues and enhanced wine commerce among the parties. Measures to diminish the effects of protectionism within the members were especially successful, since the Group achieved two major milestones in the form of two agreements with treaty status: The Agreement on Oenological practices and the Labeling Agreement implemented amongst the member countries. Other reasons which expedited the need to come together against a backdrop of rapid changes to the wine map included:
- Impressive increases in wine production volumes in New World countries, most of which were aimed at export markets since the lack of desirable spread in wine cultures in domestic markets.
- Inclusion of agriculture issues in the Seattle round of the WTO.
- Review of the agreement of the International Organization of Vine and Wine (OIV) with the objective of turning it into a more relevant organization.
- Proposed new EU rules regarding subsidy and other market regulation seeking to increase protection and recognition of EU geographical indications for wines.
WWTG Vision and benefits of cooperation in New World Wine order
The Groups eagerness to shares information between the members and collaborates to ensure the free trade of wine based on WTO rules and regulations led to huge economic benefits to the member countries. WWTG meetings are attended by both Government and Industry sectors to guarantee a free exchange of information. Issues relating to wine production, sales and trends; the state of bi-lateral and multi-lateral trade negotiations; the state of wine issues in the OIV, Codex Alimentarius, developments at the WTO; viti-vinicultural practices as well as labeling and intellectual property issues are regularly discussed at the meetings and differences are sorted out in most cordial manners. Presently the Group has expanded its vision to include issues such as improving the sustainability, reducing carbon footprints, promoting responsible consumption of alcohol and other trade requirements such as the European Union’s electronic export certification.
WWTG Strategy for embracing new entrants of Wine World
The Group is open to other countries; Georgia, for example, began the accession process in 2008 and by the year 2009, submitted its laws and regulations on winemaking practices and labeling for review. Opening up the meetings to non-member countries was assessed as a valuable tool to provide opportunity to the members to build export markets. Last year, China officially expressed its interest in becoming a member of the group. This is of particular relevance, since Japan is currently Asia-Pacific’s biggest wine importer. China is expected to equal them, and become the world’s seventh-largest wine consumer by 2013. If China becomes a member it will have to abide by the Group’s rules and agreements regarding wine practices and trade (e.g. Mutual Acceptance Agreement on Oenological Practices and Labeling Agreement). They will also have to work toward promoting free trade, a principle of paramount importance for the Group for which China’s credibility has always been under cloud. Although the group realizes and eye India as an emerging market of this new decade but India’s inability to form a uniform tax structure regime across its different states due to lack of interest in its own political brass and Indian wine industry’s own inability to form its wine regulations which is a prerequisite to join the group are keeping this valuable invitation of joining the group out of reach from India.
Growing Power of the Group
In the last decade the WWTG has become internationally relevant and its power is growing by each passing year because it represents almost a quarter of the world’s wine exports and since, it influences wine regulations through joint actions at the WTO and OIV by adopting integrated actions plans with respect to the environment, advertising and emerging markets.
The presence of the United States lends particular weight because it is one of the most important wine importers, yet it is not a member of the OIV, since its exit from the organization in 2006, citing reasons that OIV is Europe centric. Therefore, the Group provides a forum for members that are also members of the OIV to discuss wine issues with the U.S.
Group’s strategy of using joint action to gain access to the complex European Union is a particularly useful tool. E.U. barriers to entry such as labeling requirements, tariffs, duty increases, pressure on prices, the “community preference” (favoring EU made over imports) etc. are constant impediments to wine trade. Furthermore, the creation of European Federation of Origin Wines (EFOW) created on March 24, 2010 to “actively lobbying for a better protection and promotion of wines with an Appellation of Origin or Geographical Indication from the European Union” will likely increase the barriers and thus the collective efforts by the member countries to fight this effective lobbying within EU to discourage wine imports within its territory will go a long way in securing this valuable market within the folds of group.
Membership in the WWTG is important to different countries for different reasons. For example, due to declining domestic wine consumption, Argentina currently relies on international markets to sell its wines. Therefore, the country has adopted a strategic plan known as “P.E.V.I 2020.” The goal is to turn Argentina into a highly competitive wine exporter with a heavy presence in the Northern Hemisphere and Latin America. To accomplish this Argentina must maintain good relationships with its principal trading partners (United States, Canada and, Mexico) and needs the Group to expand its wine exports in order to avoid market concentration.
On the other hand New Zealand and Australian wine industry’s failure to spread a wine culture in domestic fronts has led to an export oriented growth and thus their dependency in new world’s wine markets. A deep look in to Australian wine industry’s strategy in becoming a part of the group will explain that Australian wine industry’s approach of making wine with technological innovations rather than age old traditional approach was a barrier in exporting their wine to European destinations because of the insistence and rigidity of EU to allow entry to wines in community only if it is made by using the same Oenological Practices as are permitted in EU, was the key reason to create a block or a Group to counter the EU and use the power of Group to negotiate a better deal in carving out a suitable Bilateral Trade Agreement for its domestic wine industry.
Compulsions behind Bilateral Trade Agreements for Wine
Furthermore it is to be observed that Australia and United States adopted deferent approaches while signing their Bilateral Wine Trade Agreements with EU since their positions were contrasting as the trade balance was in favor of United States as US was an important market for European Producers.
It is to be noted that the United States initiated the development of the TRIPS Agreement. As a leader of protection of intellectual property, the United States was firmly committed to the inclusion of intellectual property protection in Uruguay GAIT. Other entities that eventually supported the U.S. Position included the European Union, Japan, and Switzerland. This apparent coalition between the United States and the European Union faltered when the discussions moved to geographical indications for wines.
The United States, Canada, and Australia remained staunchly opposed to their inclusion of wines but the European Union insisted on protection. A compromise was eventually reached that provided a more forceful provision for wines and spirits than for other geographical indications.
On the other hand US wine industry has been wise in promoting the use of the phrase ‘semi-generic names’ to replace ‘geographical indications’ in its debate with the European Community over wine labelling and thus squeezed a better deal in the refuge of Grand Fathering Act.
The over jealousness driven by pure economic concerns was the key factor in giving twists to the TRIPS debate in which participants explored new horizons from Generic to Semi- Generic and from Traditional Expressions to protection of Geographical Indications only to guard their Economic concerns.
Relevance of new emerging Wine Groups
The formation of Groups for different causes like WWTG, EFOW, and CEEV does not end here. In 2009, displaying a significant expression of unity, five competing New World wine-producing countries collaborated to present a combined show at one of the most important international wine trade events in Germany (read ProWein). Argentina, California, Chile, New Zealand and South Africa are all members of this new grouping. The Group marks a world first in the wine industry for competitor countries to come and operate as a team under the same umbrella theme Down to Earth in this way.
The exclusion of other US states from the Group highlights the differences between different Groups operating within the domestic fronts in US.
The Group commonly known as New World Wines Alliance (NWWA) believes that by working in concert they stand a better chance of competing against the EU, whose own wine-producing members are supported by substantial subsidies in their international marketing initiatives. The group claims it has already benefitted from each other enormously by exchanging viticultural and cellar research as well as innovations in packaging, marketing and logistics.”
Australia, which is reportedly now focusing more on the East, has not joined the grouping perhaps their marketing bodies understands that their purpose of penetrating EU was met with the signing of Australia- EU accord.
Another important Group the Comité Européen de Entreprises Vins (CEEV) and trade in the European Union: still wines, aromatized wines, sparkling wines, liqueur wines and other Products of the vine. It brings together 24 national organizations. With over7000 companies, mainly SMEs, and more than 200,000 direct jobs in the EU, its members produce and market the vast majority of European Quality wines with and without geographical indications. They account for over 90% of European wine annual exports, which amounts to 6 billion € and contributes a surplus of 3 billion € to the EU balance of trade.
The Group which is quite vocal and sometimes violent while pressing their demands is said to be a major force behind demanding the European Union wine reforms now initiated by Wine CMO of the community.
Lessons for Indian Wine Industry
In the back drop of above Indian wine industry should learn that without joining a powerful group like WWTG or advising their Government to enter some kind of arrangement with other wine producing countries in the shape of Bilateral Trade agreements, it will not be possible for Indian Vintners to penetrate these important Markets which can show some encouraging results to perhaps embrace a new entrant but before that the domestic wine industry should spent some time in doing their homework in the shape of forming a legal status least in the shape of forming Indian Wine Regulations.
Rajiv Seth
 Rajiv Seth is a Wine Educator and an expert in International Wine legislation especially European Union. Presently he is the Chair of Oenology Committee of Indian Grape Processing Board. The views expressed in the article are his own.
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