New challenges to the old wine order

Wednesday, 1. February 2017 - 14:30

The words ‘New World Order’ seem to be hanging over us all right now like an intrusive movie score. In less than two weeks, the new resident of the White House has made it clear that we can no longer take anything for granted. If he and his circle want to deny millions of people access to the US, or to build a wall, or to slap on a tariff, there is nothing to stop the – in the short term, at least. They can change the weather to suit their purposes.

In the UK, too, as it approaches the triggering of Article 50 and the consequent rupture from Europe, there is a similar – though far less muscular – impression that, by ‘taking back sovereignty’, the British will be able to do as they please without having to look to anyone else for permission or approval. The ‘Brussels Bureaucrats’ will no longer be able to prevent people in Birmingham from buying bendy bananas - to quote one of the erroneous totems that was treasured by the Brexiters.

In a matter of months, we have moved from a seemingly unstoppable trend towards the global removal of tariffs and non-tariff barriers, towards local deals and – if some pessimists are to be believed – all-out trade wars. Nothing is unimaginable. A US administration that seems to desire the break-up of the EU and which openly questions the raison d’être of NATO and America’s relationship with the UN, is perfectly capable of raising a finger to the WTO.

It is too early to imagine all of the implications this new order may hold for the wine industry, but it is worth giving a few of them some thought. Today, for example, a British importer who wanted to sell a blend of Argentine Malbec and Chilean Cabernet would be unable to do so – because of rules that allow the marriage of European wines but outlaw any such behaviour among ‘third countries’. Once the UK is no longer in the single market, unless a specific agreement has been made to cover such issues, no such ban will exist. How many other regulations that we now take for granted will be rendered optional rather than obligatory?

Across the world, denominations of origin have been increasingly respected. Australia has been bullied out of calling its sparkling and fortified wines ‘Champagne’ and ‘port’ and in Europe and among the sophisticates in New York at least, Canadian cheddar and Somerset Brie seem like old fashioned anachronisms.  But there is little likelihood of a ban being imposed on California ‘Champagne’ or ‘Hearty Burgundy’ while the Donald is in charge.

It is a rare European who’d admit to wanting to go back to the days when Torres’s Viña Sol was legally labeled as Chablis, but there are plenty who chafe against more petty European restrictions. Laws that banned any reference to Merlot or Cabernet on the labels of red Bordeaux on sale in France, for example, never seemed to apply to the same negociants’ exports to the US. In a fractured world, it will be a lot tougher to impose international rules and there will be an increased likelihood of the same wines being sold in different markets under different regional designations.

Another interesting argument could centre around genetic modification. The EU is resistant to any GM products, while the US and China have far fewer concerns, and the AWRI in Australia has conducted interesting research on GM yeasts. Who’s going to bet that when Britain has been forced to buy hormone-boosted beef and chlorine-washed chickens as part of a trade deal with the US, minor issues like GM will seem quite so important. 

Taxation will offer still more scope for deharmonization. Under current EU rules, Britain could not introduce a sliding set of excise duty rates based on alcoholic strength, thereby favoring wines with a strength of under 12%, or penalising ones with a strength of over 14%. The moment the UK turns its back on Europe, the British Chancellor can tighten or relax these fiscal screws in any way he chooses.

Then, of course, there are the famous Free Trade Agreements between individual countries on which Trump and Theresa May pin such high hopes. Anyone who has followed the recent evolution of the Chinese wine market will be familiar with the beneficial effect FTAs with Chile and, more recently, Australia have had on the market share of those two countries. If the EU really were to fall apart following electoral successes by France’s Marine Le Pen and the Netherland’s Geert Wilders, we could see France, Spain, Italy and Portugal all competing for specific countries’ special favours.

Add to that a far from impossible collapse of the Euro, and the currency fluctuations and crises that would engender and only one thing is certain: We are living in what Confucius called “interesting times”.

Robert Joseph