After 20 years, EU still hunts elusive US wine deal

Jul 2005 Reutters, Jeremy Smith, posted by Henry Thompson

BRUSSELS (Reuters) - Can you turn water into wine? Or woodchips? The United States says yes, Europe says no. For 20 years the row has kept the two sides from deciding what wine is.

Brussels and Washington have been struggling to negotiate a reciprocal wine deal since 1983 but always found it easier to roll over temporary arrangements than to compromise too much.

The talks have usually snagged on deep-seated differences over which winemaking methods should be recognized for exports, and whether labels like "port" or "sherry" can be used by U.S. winemakers miles from the areas where their names originated.

For EU producers, the United States is their largest export outlet, valued at nearly 2 billion euros ($2.38 billion) in 2003 and about 30 percent of the EU's total wine exports by volume.

U.S. wine exports to Europe have also been rising in recent years but are worth around a fifth of that revenue.

But EU producers are highly sensitive about some U.S. winemaking methods that include adding water, fruit flavor concentrates and certain acids not used in Europe, and using woodchips for flavoring instead of storage in oak barrels.

While Brussels lets U.S. wines into Europe despite some of these production methods, which do not comply with EU rules, the exemptions expire at the end of 2005. Either a deal is struck or EU ministers will probably extend the exemptions -- again.

For the Europeans, a particularly difficult U.S. demand is that their wine exports may contain added water, a production practice that many EU winemakers say is unacceptable.

"There's a lot of opposition to that among producing member states. They don't want any water added," one diplomat said.

"The intention is to get it (agreement) adopted so the derogations (exemptions) are no longer needed," he said. "But we've said that every year and it's always been rolled over to the next year. The hope is to reach agreement this time."

Making matters more complicated is a long-running battle over protected labels, mainly those known as "semi-generic" in Europe. These include names like Champagne, Chablis, sherry and various grades of port such as "tawny," "ruby" and "vintage."

For Brussels, for a non-European market to use these names as general descriptions undermines the market value which might otherwise attach to the original European product, for which it says the producer should reasonably be able to demand a premium.

Portugal, the home of port production, is particularly concerned about non-EU producers using the label "vintage" port.

But Washington disagrees, taking the view that such labels have become general descriptions over the years and do not deserve special protection in the U.S. market, or elsewhere.

The result is a conflict which is being expressed not only in the bilateral wine talks, but also in wider negotiations on liberalizing global trade at the World Trade Organization.

"It's looking more and more difficult," another diplomat said. "The Americans refuse to define these (names) because they're words commonly used in English," she said.

At the moment, diplomats say the idea is to reach a two-stage deal, where the EU would first accept various U.S. winemaking practices not allowed in Europe.

Later, in theory, U.S. authorities would stop permitting EU-protected semi-generic labels in the U.S. market, leaving Europeans free to use such descriptions.