The Hagstrom Report

Agriculture News As It Happens


New World wine coalition could be trade model

A little-known coalition of New World wine producing countries and producers has achieved major goals in liberalizing wine trade since 1998 and could offer a model for other agriculture groups, a panel of trade officials and experts said at a recent seminar at the Johns Hopkins University School of Advanced International Studies.

<br />Mike Moore

Mike Moore
“You can be a model,” said Mike Moore, the New Zealand ambassador to the United States and former director general of the World Trade Organization, at the seminar on Friday, part of the Johns Hopkins SAIS Year of Agriculture series.

Moore explained that New Zealand wine was once of low quality, but that the industry has improved and thrived and become a major exporter since his country opened itself to free trade and got foreign expertise and investment. Moore also said he has high expectations for the Trans-Pacific Partnership, which he called “heroically ambitious.”

Robert Koch

Robert Koch
Robert Koch, president and CEO of the Wine Institute, which represents 1,000 California wine producers, said the WTTG had been vital in creating the conditions for the U.S. wine industry's growth in recent years and expectations for the future. U.S. wine exports, which totaled only $25 million in the early 1980s, reached a new record of $1.39 billion in winery revenues in 2011, with 90 percent of those exports coming from California, Koch said.

“Our success in removing trade barriers and opening new markets as well as significant marketing investments by our wineries will allow us to reach our goal of $2 billion in exports by 2020,” Koch said.

The World Wine Trade Group was founded in 1998 when the U.S. wine industry was alarmed that the European Union was trying to convince other countries to sign agreements that would say wine could be imported into the European Union only if the exporting country used the same wine-producing practices as the EU countries.

Frustrated by these developments, the wine industry met with Jim Murphy, then an assistant U.S. trade representative, who asked whether the industry knew what bilateral discussions were taking place between the European Union negotiators and the negotiators from other countries. That led the U.S. industry to invite representatives of the wine industries from Australia, Argentina, Brazil, Canada, Chile, New Zealand, South Africa to a meeting in Zurich to discuss what they knew about their countries' negotiations and their mutual problems.

Reaching the conclusion that even though the wine industries of the New World countries were competitors, they had a lot in common and a lot to gain by opposing the EU campaign on wine making practices the representatives decided to form an alliance. They also recognized that since wine involves health standards and tax issues their issues went beyond the usual trade issue of tariff levels.

Instead of creating a formal organization of trade negotiators from either industries or governments, they created the World Wine Trade Group as an informal coalition of industries, trade negotiators and regulators that could share information and collaborate on issues of mutual agreement and create an environment for the free trade in wine.

The country of Georgia has since joined the group. To this day, the WWTG, as it calls itself, has no staff. JBC International, a Washington consulting firm, serves as the WTTG secretariat, with James Clawson, a longtime government official and consultant, in charge.

While many international trade negotiations, particularly in the World Trade Organization, have failed in recent years, the WTTG has had remarkable success. The group’s joint position convinced the European Union to back off on its contention that it would import only those wines produced in the same way as the Europeans produced them and since then the group has worked on establishing clarity between regulations needed for health and safety and non-health related requirements such as methods of production.

By 2002 Australia, Canada, Chile, New Zealand, the United States and Argentina had signed a mutual agreement on oenological practices that says wine made in another signatory country should be allowed to be sold in its market, despite differences in production practices.

In 2007 the countries also signed an agreement that enables wine exporters to sell wine into WWTG markets without having to redesign their labels for each individual market. It allows the placement of four items of mandatory information (country of origin, product name, net contents and alcohol content) anywhere on a wine bottle label provided they are presented in a single field of vision.

Clawson, who worked at the Treasury Department on wine negotiations, noted that wine remains a complicated, highly regulated product because there are health issues and because the taxes on it are also a source of revenue in most countries. But he said that wine rules are also a small business issue since most winemakers are small.

The biggest challenge for the industry is the liberalization of trade in the non-producing countries, particularly in Asia, where tariffs tend to be high and officials who are inexperienced with wine are concerned about food safety, the experts said.

The WWTG is now focused on the TPP negotiations, but there are issues that the group has not been able to address, particularly the Europeans' demands that wines achieve "geographical indicator" status, meaning that the names such as Champagne and Chablis cannot be used for wines produced outside their original areas of production. There are also battles over the use of the terms "vintage" and "reserve" and bottle shapes.