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Pact prevents disruption in wine trade before final agreement goes into effect

WASHINGTON, DC - 11/27/05 - The US and the European Union (EU) have signed an interim pact that ensures the transatlantic trade in wine will not be disrupted before a broader wine agreement reached in September takes effect.

Under the interim agreement, the US and the EU will continue to accept each other's wine-making practices, and EU wine can be exported to the US without a certification attesting that the wine is made in accordance with US wine-making practices.

In September, US Trade Representative Rob Portman announced that Washington and the Brussels-headquartered EC reached agreement on wine-making practices and labeling of wine.

The agreement is aimed at facilitating bilateral trade in wine valued at $2.8 billion annually.

The interim agreement is a "precursor" to the signing and entry into effect of the broader wine agreement, according to the Portman's office.

California winemakers applauded the announcement with Robert Koch, president and CEO of the San Francisco-based Wine Institute, saying the agreement "promises US wineries a level of certainty that our wines will have long-term access to European markets such as the United Kingdom where consumers have embraced wines from California and other states."

For European wine producers, who exported $2.3 billion worth of wine to the US market last year, the agreement ensures continued access to its top destination and a major growth market - the US is on course to become the world's largest wine consumer by 2008.

Among the key provisions of the new agreement of interest to California wine exporters is "full recognition of US winemaking practices which previously required renewed approval or 'derogations' on a regular basis in order for US producers to ship to Europe," said Koch of the Wine Institute.

Winemaking practices around the world "differ somewhat based on climate, history and culture," he said. "Most of the practices covered by this agreement are currently permitted in Europe for wines from countries such as Australia and South Africa that currently have trade agreements with the European Community."

Also of importance to US producers is a provision in the agreement that calls for a new system to recognize US wine place names.

While the US has a stringent label approval process through the Department of the Treasury's Tax and Trade Bureau (TTB) that ensures recognition of foreign names for wines imported here, Europe has no central system to recognize US place names.

The agreement calls for the EU to recognize the names of US wine-producing states, AVA's (American Viticultural Areas), and counties with AVA's.

In addition, the agreement addresses a long-running discussion about the use of place names of concern to some European producers.

Names - chablis, burgundy, port, and champagne, or so-called semi-generics - have been in use on wine labels in the US since the 1800s and US winemakers have been legally permitted to use a group of 16 specific semi-generic terms on labels if accompanied by an adjacent appellation of origin.

The September agreement allows for the continued use of these terms on existing brands but not new brands, thereby addressing European concerns without diminishing the rights and investments that current US brand owners have made in these terms over many decades.

According to the Wine Institute, overseas sales of US wines have grown dramatically in the past 10 years, increasing 300% in value since 1994 with total US wine exports - a vast majority of which is produced in California - reaching a record $736 million in revenues last year.
 
Interestingly, some 66% US wine exports valued at $487 million were shipped last year to countries in the European Union - the largest market for American wines - with the United Kingdom remaining the top European market for US wine exports.

In fact, more than one in every seven bottles of wine currently sold in the UK comes from California, the trade group said.

Rounding out the European market are The Netherlands, Germany, France, Ireland, and Denmark, all of which rank on the list of the Top 10 US wine export markets.

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