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Delhi Wine Club

Posted: Thursday, 17 June 2010 10:31

Feature: EU Wine Diplomacy and Indian Exports

Recent participation of some of Indian wineries in London wine Fair LIWF was a step in right direction but it must be understood that in the international wine business a lot of wine diplomacy is required to gain access to the target markets and this access can only be achieved by entering bilateral trade agreements writes Rajiv Seth.

Very often these bilateral trade agreements in wine industry are driven by economic and political concerns and require a careful study to knit the web so that to extract the best deal for Domestic wine industry and this can only be achieved through seasoned wine diplomacy.

Speaking for the International wine business Indian wine industry is just in its infancy and due to its newly born status each wine group will try to lure us to the way best suited to their business interests.

A careful study of these bilateral trade agreements will reveal that it takes a lot more then just to produce a good wine from a good harvest and winning a high score from a manipulated wine testing and having best wine critics on your side to talk about it in acclaimed wine circles but what needs to be understood is how far the compounded interests of both the negotiating parties be best served.

The Case of Canadian Icewine and EU

As long as established international trade agreements are observed, the EU has the undeniable right to set its own regulations about what may be imported. In fact history tells us that EU has mastered the art of wine diplomacy and got away with whatever it eyed. Take the case of Canadian Ice Wine. In the 1990s ice wine, a new product produced in Canada, became a sensation in the wine world and won major awards in competitions in Europe. Canadian exports of ice wine to Japan and other Asian countries increased quickly, and the prospect of breaking into the European market seems bright.

Despite years of trying, Canada had never been able to gain free access to markets in Europe. A major obstacle was the EU's insistence that only wines made by specific "traditional" winemaking practices be allowed to enter their markets.

One of the barriers to international trade has often been "enological practices." Technical wine making requirements and regulations vary from one country to another, due to many factors including climate variations, local conditions and tradition. Insisting that imported wines meet another nation's standards was a convenient way of restricting access to wines from abroad.

It is a fact that all these discussions are more of economical than of oenological importance. But it is also a fact that the global wine world will have to make up its mind if new oenological practices are to be treated in the same way as traditional techniques. If this decision is a negative one, the very successful “New Wine World” will challenge the traditional “Old Wine World”. The already existing conflict initiated by the USA in leaving the OIV can spell disaster for the world wine trade.

In 2001, it was announced that the EU's Wine Management Committee was granting Canadian Ice wine access to the EU as a first step in furthering Canada/EU cooperation. Bilateral negotiations began and lasted until 2003, when a trade agreement was finalized and Canada signed the treaty in September 2003.

EU has its way with nomenclature

The trade agreement resolved not only enological practices issues, but also gave European winemakers exclusive right to use certain "traditional" names in the Canadian market. Names such as Bordeaux, Chianti and Madeira were prohibited immediately, while names such as Burgundy, Rhine and Sauternes were to be banned at the end of 2008, and other names such as Chablis, Champagne, Port and Sherry could no longer be used after Dec. 2013.

The EU knew exactly what it was doing, and one of the provisions in the agreement stated that after the effective dates, Canada could not allow wines with these names to be imported from any non-EU country, including the U.S., which at that time was supplying one of every six bottles of wine consumed in Canada. As a result of the agreement, Canada lost the right to use the term Champagne, but gained free access to ship Canadian wines to EU countries.

The US wines and EU

The EU also wanted a bilateral agreement with the U.S., which had withdrawn from the OIV in 2001 due to its insistence on adhering to specific traditional winemaking practices and its refusal to recognize new winemaking techniques. For the U.S., an agreement would help create a marketing certainty for exporters. Bilateral negotiations between the U.S. and the EU concluded in 2005, with a trade agreement providing for the mutual acceptance of winemaking practices .

The U.S. agreed to prohibit the use of 16 semi-generic names on wine labels, such as Chablis, Champagne, port, Sherry and Chianti. The EU had tried for many years to have these names prohibited in the U.S., and now it had largely succeeded.

Further the agreement has the provision that the EU would permit the use of a number of terms including Chateau, Clos and late-bottled vintage for a period of three years, after which permissions would be reviewed. The three-year period expired in 2009 and the EU advised the U.S. that the permission to use these names was being withdrawn

The result of the latest EU action has been to call off the use of these names on wines entering the EU countries. Clos and Chateau are used in brand names of many wineries in the United States, and the damage to those wineries has been considerable.

Protectionist Policies of EU

It is one thing to protect the wine from a specific winemaking district such as Champagne; protecting geographical indicators such as Port and Sherry but trying to protect such terms as chateau, vintage and classic has more to do with an obsession for protectionism than preserving the economic value of a product. And this may not be the end of it. The EU has indicated that it would like to restrict the use of certain winemaking terms as well. The use of the term ‘Methode Champenoise’, for example, would be limited to the area of France (Champagne only) where the process originated.

The history of French and EU protectionism is instructive, for the EU should be pleased with the results it has achieved and its flag of protectionism is flying high.

Mutual Trade Agreements

There are number of other bilateral, multilateral and free trade agreements in wine industry and a few notables of them are Mutual Acceptance Agreements MAA between world wine trade group WWTG, the purpose of which is to explore options to facilitate the trade in wine and to minimize potential barriers to the trade, Agreement between Australia and European community, Australia –China free trade agreement and US – Korea free trade agreement.

India must lower duties to sell to EU

So it is evident that at its present juncture in the absence of any political initiative Indian vintners will find it difficult to have its footing in European and UK markets because until and unless EU is given its way in Indian markets by reducing a desired level of custom duties and a uniform tax structure across all Indian states, it seems highly unlikely that India will be able to export any considerable quantity of wine.

On the contrary it must be understood that in India alcohol as a major source of indirect tax revenue has always been the centre-point of the policy makers thinking and alcohol policies especially those relating to production, consumption and taxation have varied widely across the states. Alcohol policy and legislation in India is based on political compulsions rather than Industry driven approach.

Rajiv Seth

Rajiv Seth is a wine educationist, Author and an expert in International Wine Legislation especially European Union. In 1987, he became the first Indian to be awarded a gold medal from WSET, London. He also writes for DelWine. Contact him at




Niladri Dhar, AIWS Says:

Europe (or the 'Old World', for that matter) calls the shots in the international wine trade solely based on the legitimacy of its brands, superior appellation/labeling laws and regional characteristics based on the concept of 'terroir', which the 'New World' tries to label as a French marketing gimmick. Instead of finding a fault in their 'over-protectionist policies', it will help if the wider wine world takes a more empathetic approach. In addition to the examples in your article, there are plethora of other instances where established brands have been misused outside Europe for decades. Can we forget that the great Australian icon Penfolds Grange started its famous journey as 'Grange Hermitage'? Wine and some of the key sectors related to it like natural cork and the cooperage industry, are a vital contributor to the GDP of many old world countries and it makes quite natural business sense for them to be proactive against any attempts that may result in diminishing their longstanding vinous influence.

Posted @ June 22, 2010 13:07


Zithulele Balindlela Says:

Trade agreements create loosers and winners, in this case EU has won all these agreements, surprisingly enough all of them have been done in its own terms and objectives. Anyway are the ones with a hughe market so that gives them an advantage of deciding the outcome of the agreement or diplomacy.

Posted @ June 18, 2010 14:10


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