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Europe and America in wine ferment

Transatlantic trade war threatened over use of 'chateau', speeding up ageing and 'bioterrorism'
By Abigail Townsend
Independent on Sunday (London)
Published: 03 July 2005

A trade war is in danger of breaking out between the US and Europe over wine.

The Office of the United States Trade Representative and the European Commission are currently attempting to thrash out a new wine agreement covering what the countries will accept from each other. The existing deal expired two years ago but the commission has granted the US dispensation as the two sides seek to arrange the new deal.

However, the EC is understood to be reluctant to sanction various US practices. At a special agriculture committee last week, concerns were raised about three areas: wine-making methods, geographical indications and alcohol content.

US wine-making processes differ from European methods in various ways. The EU is understood to be concerned, for example, about the American practice of adding water to "must" - the unfermented juice taken from the grape - and adding oak-wood chips to barrels to speed up the ageing process. In Europe, wine is aged in oak barrels without the chips over a longer period.

There are also concerns about language, with various EU member states understood to disapprove of the American use of words such as "vintage", particularly in relation to port, and "chateau". There are also disputes over geographic regions, such as Champagne, and brands that are particularly associated with specific countries, including Tokaji in Hungary and Retsina in Greece.

In turn, the US is believed to have become frustrated with the talks and was reported to have set a mid-July deadline, after which it would tighten the application of the Bioterrorism Act if a suitable deal was not agreed. The Act covers the importing of all food and drinks.

It is understood that the US believes the EC's stance against American wine-making practices falls foul of World Trade Organisation rules. It also disagrees with the geographical indicators that allow only food and drink made in specific areas - such as Parma ham or champagne - to use the regional names.

A spokesman for the Office of the United States Trade Representative denied a 15 July deadline had been set, though he conceded it was hoped the discussions would be concluded "as soon as possible". He added: "We have not asserted the Bioterrorism Act," but declined to discuss the matter further.

An agricultural spokesman for the EC was also unable to discuss the talks. But he confirmed: "We think that the best result for the EU and US is a wine agreement. We're still talking. There are some very difficult issues, but we're optimistic of a satisfactory outcome."

The US is one of the fastest-growing drinks markets in the world, with demand for both spirits and wine beginning to outstrip that for beer.

Any trade sanctions would hit Europe hard. French wine producers are enduring a particularly tough time at the moment, and there has been a spate of protests recently about the collapse of wholesale prices and a glut of cheap, lower-quality wine. Domestic consumption is also on the wane.

In addition, for all European wines, the strength of the euro has hit hard, while old world wine has suffered from the surging popularity of the new world over recent years. These wines - predominantly from the US, South Africa, New Zealand and Australia - have lured in a new generation of drinkers, who are opting for easily recognisable brands rather than concentrating on grape variety and region.

Some of the world's biggest wine companies are building substantial portfolios. Last year, leading American group Constellation Brands snapped up Robert Mondavi, the respected California-based wine maker, for $1.03bn (Ј582m), while Diageo is expected to buy New Zealand's Montana from Pernod Ricard following the Allied Domecq acquisition.

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