The challenge of defining wine
El Observator, a Uruguayan daily newspaper headlined on 21 February 2019: “Uruguay le declaró la guerra al vino importado con agua agregada” (In English “Uruguay has declared war on imported wine with added water”).
On 14 March 2019, Uruguay submitted a notification to the World Trade Organization and its members, followed by a revision of this notification on 25 March 2019. This notification concerns all wine products entering the Republic of Uruguay.
WTO notifications describe new regulatory measures that a Member intends to take to achieve a legitimate objective. They make it possible to carry out an initial assessment of its possible impact on trade. They allow other members and interested parties to become aware of the scope and content of the proposed measure. As provided for in the WTO Agreement, each country changing a regulation concerning a product is required to notify the WTO and its members.
The Uruguayan notification states that Uruguay has implemented an obligation, which stipulates, as part of the import procedure, that all wine products must be accompanied by a certificate stating that there is no exogenous water percentage in the products in question.
Uruguay justifies this new measure by the fact that the presence of exogenous water in wine is illegal in their country as it contravenes articles 2,3,4,5 of Law No. 2856 of 17 July 1903. This law, through its article 2, defines wine as the following: as an exclusive product of the fermentation of fresh grape juice, which has been subjected during the fermentation of the must to one of the correction methods determined by oenology for the sole purpose of improving quality due to the particular harvesting conditions. The definition coincides with the notion of OIV and MERCOSUR wine (Reglamento Vitivinícola del Mercosur chapter II 2.1).
No mention of a tolerance percentage or admissibility of the containment of exogenous water in the product exists in Uruguay’s legislation.
According to Uruguay, the notified measure has as its objective the prevention of practices likely to mislead consumers and their protection. It should be noted that the revision of the notification dated 25 March 2019, i.e. 11 days after the initial notification, extends the objective of the new provisions also to the Protection of Human Health and Life.
“In Uruguay, we have been working for a long time to guarantee the authenticity of our products. Wine is by definition only the result of the alcoholic fermentation of the grape. If we accepted the entry of wines with the addition of exogenous wine, we would be going against the essence of wine,” said José Nez, President of the Uruguayan National Institute of Viniculture.
Following this notification, several countries, as provided for in the procedure, sent comments on the nature of the new Uruguayan regulations. The United States, followed by South Africa, Chile and Australia did so to challenge the Uruguayan decision.
Use of wetting process in the United States:
Wetting consists of adding water to alcohol or wine to reduce its alcoholic strength.
The United States, unlike Uruguay, therefore uses the so-called “wetting” process during crushing, fermentation and to reduce the acidity of a wine.
According to the U.S. Code of Federal Regulations, there are several situations where exogenous water can be added to wine making. During grinding and fermentation, water can be added. Water can be used to rinse the equipment during the crushing process or to facilitate fermentation. Paragraph 24. 176 also states that at the beginning of fermentation, water may be added, in the same way as sugar, concentrated fruit juice. Water can also be used to rehydrate the yeast to a maximum of two gallons for each pound of yeast. Also, with regard to the acidity level , the volume of improving material, with the exception of wines produced from fruit (excluding grapes), may be up to 35 percent of the total volume of juice or improved wine. However, when the initial fixed acid content is 7.69 grams per litre or more, a maximum of 538.4 gallons of improving material may be added to 1000 gallons of wine (or juice). In California, where 80% of the wine exported to Europe comes from, the maximum permitted rate is 7%. Each state may decide on a maximum allowable rate within the limits of federal regulations. In Uruguay, as with the European members of the International Wine Organization, this type of practice does not take place. Regulation (EU) No 1308/2013 in Annex VIII, Part 2, paragraph 1, provides that: “All authorized oenological practices exclude the addition of water, except due to specific technical requirements”. It is through an argument based on such a second part of a sentence that American wine producers seek to justify the addition of water to their wine, under cover of specific technical requirements.
On the European Union’s side, in order to increase the acidity of a wine, adding tartaric acid is possible, and to reduce it, the use of malolactic fermentation is accepted. Techniques are thus used, other than wetting to regulate the acidity of the wine.
Economic issues of Uruguay’s decision
Uruguay’s notification to the WTO has clear economic implications. Both countries are wine producers with a significant wine-growing culture. Wine in Uruguay occupies an important economic and cultural position, and since 2014, for example, Uruguay has, by law, declared wine as a “national drink”. Each year, more than 100 million litres of wine are produced in Uruguay on more than 8,000 hectares. 250 wineries, 25 of which export mainly to Brazil and the United States produce these wines each year.
Uruguay consumes 90% of its wine production. Each Uruguayan inhabitant consumes on average almost 30 litres of wine per year.
Agriculture, which includes the wine sector, contributes to 5.6% of the national GDP each year. Uruguay’s decision to implement strict application of its 1903 law to imports effectively gives greater protection to Uruguayan wines from foreign wines.
The United States, for its part, is a major wine-growing nation, both a producer and a consumer of wine, with the world’s 6th largest wine-growing estate with 439,000 hectares under vine cultivation in 2018. In 2018, the country exported 350 million litres of wine (OIV, 2019) for a total value of USD 1.44 billion (Comtrade, 2019).
As for trade flows relating to Uruguay, data on imported wines from the OIV in 2017 show that more than 3,500,000 liters of wine were imported into the Republic of Uruguay. From 2013 to 2017, the latest available data, shows that there was an increase in imports into Uruguay. In 2017, the main wine supplying countries in Uruguay were: Argentina, with 60%, followed by Chile with 25%, then France with 5%.
United States procedure – Uruguay to the WTO:
In addition to the commercial issue, this notification highlights the divergence of views on wine and the possibility for a country, in this context, to implement its own regulations which, in this case, largely preceded the contractual agreement signed with the United States within the framework of the World Wine Trade Group (WWTG). One of the comments raised by the United States at the WTO regarding Uruguay’s notification is of a legal nature. According to the United States, Uruguay must respect its commitments as a member of the WWTG and, therefore, as a party to the WWTG Agreement on the Mutual Acceptance of Oenological Practices (MAA), which entered into force for Uruguay on 1 May 2018.
According to Articles 5 (2) and 5 (4) of the MAA, Uruguay’s new requirement should not apply to wine imports from the other eight WWTG members, including the United States. The United States also argues that it does not add water to its wines to produce more but only to dilute the sugar content of the musts, to reduce the acidity of its wines or the degree of alcohol.
In its response, on 22 July, the Uruguayan delegation to the WTO argued that the new rules had been implemented since 1 June 2019 and were justified in terms of the definition of wine applicable in its territory. Uruguay also underlines that its definition is part of the corpus defined by the International Wine Organization, an organization composed of 47 States representing 85 per cent of world wine production. The United States has not been a member of the International Wine Organization since 2001. They therefore no longer consider themselves bound by the OIV regulations for technical measures (yields, grape varieties, planting density, harvesting method, etc.).
As a reminder, on the side of the European Union, out of the 28 members 19 Member States are members of the OIV. Since 20 October 2017, the OIV has granted the Union the special status provided for in Article 4 of its Rules of Procedure, allowing it to participate in the work of committees, subcommittees and expert groups and to attend meetings of the General Assembly and the Executive Committee.
The European definition of wine dates back to 1999. It is the result of a codification drawn up at the Council meeting of 17 May 1999: Wine is “the product obtained exclusively by the total or partial alcoholic fermentation of fresh grapes, crushed or not, or grape must. “
Since 2014, (judgment of the Court of Justice of 7 October 2014) the OIV’s recommendations have been explicitly assimilated to rules of Union law. European legislation in the wine sector is therefore linked to the OIV.
Dispute Uruguay – United States: the issue of the definition of wine
In addition to the economic stakes of the wine sector, another issue, under the guise of two different visions, is at stake in this WTO procedure. On the wine production market, two visions are facing each other. One considers that wine is a cultural product, with listed oenological processes and guaranteeing a production method based on the quality of the grapes, their production and the characteristics of the production areas. This approach is the one that has consistently prevailed, defined in the framework of the OIV.
The other approach, preferred by the Americans in particular, develops an industrial vision of the wine sector that sees wine as a product of industrial technology. It should be noted that for the United States, production costs are quite high, due to high land prices and low water resources. The use of technical processes such as wetting is a means of compensating and redressing the pedoclimatic problems encountered by the United States in wine production. Ultimately, they induce a final volume of product greater than the volume of grape juice involved.
These discussions before the WTO are emblematic of what has been happening in the wine market since the 1980s. The 1980s symbolized the rise of the countries of the “New World”. The world of consumption is becoming multipolar, with the United States and Asia in particular consuming and producing more and more wine. Under the influence of trade liberalism, customs barriers as well as transport costs or time distances are reduced. Thus, the United States, like other countries, participates in competition in the wine sector. The US sees wine as a product not of a cultural, but as an industrial one. Production rules are reduced to a minimum with only the health of the consumer must be respected. This vision is in contrast to the one that sees wine as a product linked to a heritage of wine-growing traditions. In Europe, wine is experienced as a heritage and cultural heritage. Wine on the European continent has been present for thousands of years. The history of wine in Europe begins in the antiquity about 4000 years ago in Greece and was exported to the Romans. Wine production, vines occupy a special place on the European continent unlike the countries of the so-called “New World” wines, which do not have this wine-growing history.
Within these countries of the New World wines, the United States has tried to propose an alternative approach to wine production. The American influence consists of three elements. The influence is geopolitical. By choosing to withdraw from the OIV, the United States has sought to bring together around it wine-growing actors who are political allies and new wine producers. It is also intended to be prescriptive, and through trade agreements and protocols such as the WWTG agreement, it aims to impose recognition of its concept of wine production and definition of wine, based on fewer standards and the possibility of using technology to modify the characteristics of agricultural production in order to produce product wines that can meet consumers’ taste expectations. Finally, recently, the influence has been non-territorial, with the United States seeking to modify the codes governing wine: it is no longer the production region that prevails but the grape variety.
Wine definitions, trade agreements and transparency of markets: what are the challenges for European citizens?
In 2005, the European Union signed a bilateral agreement with the United States on the wine sector, which entered into force in March 2006. The issue of wetting (and other oenological practices used) came up several times during the negotiations.
As part of these trade negotiations, the question of the definition of wine (as well as the issue of IGSs) was set aside in order to allow wines produced in the United States to be marketed on the European markets and those of the European Union to be marketed in the United States. This mutual recognition of the healthy and commercial nature of wines from both areas has had the effect of avoiding getting to the bottom of the problem of what wine is and how it is defined. Through this agreement, each side of the Atlantic lives with its own conception and definition of wine. These differences being put by common agreement tacitly under the bushel. No information or distinctive element is required when selling these products to final consumers. In the European Union, wine labelling is governed by several regulations at national and European level.
The 2013 European regulations provide for mandatory information, such as the batch number, the name of the category of the vine product, or the words “Appellation d’origine contrôlée” or “Protected Geographical Indication” and the corresponding name, the actual alcoholic strength by volume or the origin.
Wines and alcohols also benefit from a derogation from Regulation No 1169 allowing them not to have to mention nutritional data or ingredients. Discussions on this point are urgent between stakeholders within the European Union. Last spring, the European Parliament’s Agriculture Committee took a position in favour of mandatory labelling of nutritional value and the possibility for economic actors to use dematerialized means to report wine ingredients. In this context, the question of informing consumers about the use of manufacturing processes such as wetting in order to substantially rectify grape juices whose characteristics are not compatible with consumer demands must be raised.
Buying a wine that meets the definition of EU and OIV wines or acquiring a wine obtained by adding 7% or 20% exogenous water (or even up to 35% of the volume purchased from exogenous elements in grape juice) should not be done without precise information for consumers in this regard.
At the very least, while the European Union advocates precise information for consumers on the composition of wines, it seems imperative and common sense that this information should necessarily include, for each wine marketed, whether or not to use the exogenous addition of water, what proportions and for what purposes.