The International Wine Market: Description and Selected Issues

The International Wine Market: Description and Selected Issues

Order Code RL32028
CRS Report for Congress
Received through the CRS Web
The International Wine Market:
Description and Selected Issues
August 7, 2003
nae redacted
Analyst in Agricultural Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

The International Wine Market:
Description and Selected Issues
Summary
Global trade in wine has increased rapidly during the past 25 years, steadily
rising from under $1 billion in 1977 to over $7 billion in 2001. Reports of health
benefits and rising global incomes have spurred increasing demand for wine,
particularly in mid- to upper-income countries. In 2001, the United States was the
world’s leading importer, just ahead of the European Union (EU). Together, they
accounted for over 60% of global imports.
The European Union has traditionally dominated global wine production and
exports. However, the United States, along with several Southern Hemisphere
producing countries — Argentina, Australia, Chile, and South Africa — are growing
in importance.
Several important issues have emerged in recent years with respect to
international wine trade, particularly between the EU and non-EU countries,
including oenological (wine-making) practices and the use of “semi-generic” names
for wines. The latter issue is encompassed under the debate on “geographical
indications” at the World Trade Organization. Ongoing bilateral negotiations
between the United States and the EU seek to resolve both of these issues. This
report will be updated as events warrant.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Defining Wine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Note on Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Global Wine Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Other Foreign Producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Global Wine Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Wine Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Wine Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Wine Trade Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Tariffs and Other Border Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Labeling and Geographic Indications . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Oenological Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Mutual Acceptance Agreement (MAA) . . . . . . . . . . . . . . . . . . . . . . . . . 9
U.S.-EU Wine Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
EU Wine Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Role for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
List of Tables
Table 1. Wine Production by Major Producers, Calendar Years
1998 through 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Table 2. Wine Export Volume, Value, and Market Share
by Major Exporter, Calendar Years 2000 and 2001 . . . . . . . . . . . . . . . . . . 13
Table 3. Wine Import Volume, Value, and Market Share
by Major Importer, Calendar Years 2000 and 2001 . . . . . . . . . . . . . . . . . . . 14
Table 4. Ad Valorem Equivalent Tariff Rates on Imported Wine,
Selected Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

The International Wine Market:
Description and Selected Issues
Introduction
Grape cultivation for wine production is nearly as old as civilization. Vitis
vinifera, the grape species most commonly used in wine making, has been adapted
to a wide range of soils, but generally requires long, dry, warm-to-hot summers and
cool winters for best development.1 Grapes have been successfully cultivated in
Europe and Asia Minor for thousands of years and were eventually brought to
California. Today, wine production occurs throughout the world, and wine is
increasingly entering international markets. The value of international wine trade has
risen from under $1 billion in 1977 to over $3 billion by 1989, and to over $7 billion
in 2001.
In the United States, wine — like most alcohol and liquor products — was
traditionally viewed as a luxury item in the consumer’s budget. As a result, the
average U.S. wine consumer was fairly sensitive to price changes, and most
expenditures on wine were made by higher-income households with larger shares of
discretionary income. However, wine consumption in the United States increased
dramatically through the 1990s, in part because of news about the potential health
benefits of moderate consumption, and in part because a strong U.S. economy
supported increased spending on wine at home and in restaurants.2
In Europe, wine has been a traditional staple in the household diet for many
families. As a result, wine per-capita-consumption rates and household expenditures
on wine have been substantially higher in most European countries than in the United
States or the rest of the world. In recent years, European wine per capita
consumption has averaged about 30 liters per year, compared with 7.4 liters per year
in the United States.3
Defining Wine. There is some disagreement among countries over what
constitutes “wine.” For example, the EU defines wine as only those beverages made
by fermenting grapes. In the United States, wine is defined more broadly to include
beverages produced by fermentation of any fruit (grapes, peaches, pears, etc.).
European table wine generally contains between 9% and 15% alcohol. In contrast,
1Encyclopedia Britannica, “Grape,” from Encyclopedia Britannica Online, at [http://
search.eb.com].
2U.S. Department of Agriculture (USDA), Economic Research Service (ERS), “The U.S.
Wine Market Uncorked,” Agricultural Outlook, August 1997, p. 12.
3United Nations (UN), Food and Agricultural Organization (FAO), FAOSTATS.

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U.S. table wine generally contains between 7% and 14% alcohol.4 Differences
related to source material and alcohol contents are, for the most part, identified by
their trade classification.
In accordance with the Harmonized Tariff Schedule (HTS) of the United States,
wine is defined at the four-digit level, 2204, as “wine of fresh grapes, including
fortified wines; grape must5 other than that of heading 2009.”6 Under heading 2204,
at the six-digit level, wine is broken into four principal groupings:
220410
Sparkling wine
220421
Other wine, in containers holding 2 liters or less (bottled wine)
220429
Other wine, in containers holding greater than 2 liters (bulk wine)
220430
Other grape must
In addition to wine as defined by HTS 2204, the United States also generally
treats the HTS categories 2205 (vermouth)7 and 2206 (other fermented beverages)8
as wines. The EU — the world’s leading producer, consumer, and trader of wines
— does not include 2205 and 2206 in its wine production and trade data.
For consistency across countries, the data presented in Tables 1-4 are restricted
to HTS code 2204 to the extent possible. In 2000 and 2001, the additional HTS
categories 2205 and 2206 represented only 2.5% of the value and 5.5% of the volume
of the more broadly defined global wine trade encompassed by HTS codes 2204,
2205, and 2206.9 As a result, their inclusion would not likely alter the rankings or
trade patterns described below.
Note on Units. The United States continues to measure wine volume in
gallons. In the EU (and most of the rest of the world), where metric measurements
4From discussion with USDA Foreign Agricultural Service (FAS) wine marketing expert
Yvette Wedderburn Bomersheim.
5Must is defined as “the expressed juice of fruit and especially grapes before and during
fermentation; also: the pulp and skins of the crushed grapes.” Merriam-Webster’s Collegiate
Dictionary, at Encyclopedia Britannica Online, (c) 2003 Encyclopedia Britannica, [http://
search.eb.com].
6U.S. International Trade Commission (USITC), HTS of the United States, 2003,
Supplement 1, Chapter 22, “Beverages, Spirits, and Vinegar,” p. 5. Note that heading 2009
is defined as “Fruit juices (including grape must) and vegetable juices, not fortified with
vitamins or minerals, unfermented and not containing added spirit, whether or not
containing added sugar or other sweetener matter.”
7 Vermouth and other wine of fresh grapes flavored with plants or aromatic substances;
USITC, HTS, Chapter 22, p. 6.
8 Other fermented beverages (for example, cider, perry, mead); mixtures of fermented
beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere
specified or included; USITC, HTS, Chapter 22, pp. 22-27.
9U.N., FAO, FAOSTATS.

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prevail, wine is measured in hectoliters (HL).10 Because the EU dominates global
wine production and trade, and because most international trade is reported in metric
units, this report adopts the HL for presentation of statistics, although gallons will be
reported parenthetically for U.S. data as appropriate.
Global Wine Production
Annual global wine production averaged nearly 280 million HL (approximately
28 million metric tons) during the 1998 to 2002 period (see Table 1). During that
same period, 67 countries reported commercial wine production to the FAO.
European Union. The EU dominates global wine production, accounting for
over 60% of the world’s wine produced during the past five years. France, Italy, and
Spain are the three principal wine-producing countries in the EU, accounting for over
85% of the EU’s wine production.
The EU’s internal wine policy has evolved significantly over the past three
decades. During the early years of the European Union, wine production had no
curbs on plantings and very few market regulations.11 This freedom on plantings was
eventually coupled with a program that virtually guaranteed sales, but which
generated a serious structural surplus that was partially addressed through export
refunds (subsidies). Since 1978, EU policy towards the wine sector has become very
interventionist. In addition to purchasing excess production and providing export
refunds, the EU implemented a ban on plantings and the obligation to distill surplus
production.12 By the late 1980s, aid for acreage reduction was reinforced. In 1996,
EU wine program outlays totaled $1.2 billion.13
In May 1999, the EU published Council Regulation (CR) 1493/1999 reforming
the Common Market Organization (CMO) for wine.14 The new EU wine regime,
which started in August 2000, is intended to enhance quality, increase market
orientation, and renew old vineyards. The new CMO’s strategy to improve domestic
quality was partly in response to the increasing availability of high-quality
international wine from non-EU producers. To do this, EU wine policy supports and
protects “quality wines produced in specified regions” by setting quality standards
taking into account “traditional conditions of production.” In addition, subsidies are
provided to support the upgrading of EU vineyards to more marketable varieties.
10A hectoliter (HL) = 100 liters; 10 HL is approximately 1 metric ton.
11Initially, the European Union (EU) comprised only six countries and was called the
European Community. The EU presently has 15 members, but plans to enlarge to 25
members in June 2004. For more information, see CRS Report RS21372, The European
Union: Questions and Answers.
12 European Commission, Agricultural Markets, wine, online information, at
[http://europa.eu.int/comm/agriculture/markets/wine/index_en.htm].
13USDA, ERS, “The U.S. Wine Market Uncorked,” Agricultural Outlook, Aug. 1997, p. 12.
14For more information, see USDA, FAS, GAIN Report #E21111, “EU Wine Reform 2001,”
Sept. 13, 2001.

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A significant portion of the budgetary expenditures under the new CMO still
covers many of the same intervention policies and controls that existed under the old
regime. Overall expenditures in the sector had declined to $616 million by 1999, just
prior to program reforms. However, with the addition of substantial new payments
for restructuring and conversion of vineyards to higher-quality varieties, budgetary
outlays have returned to the high levels of the mid-1990s. The new EU budget for
the wine sector for 2003 is 1.335 billion euros ($1.178 billion).
United States. The United States is the world’s second-largest wine-
producing region, and fourth-largest country, with an 8% share of global production
over the past five years. Commercial wine production occurs throughout the United
States. There are about 1,800 commercial wineries in the United States,15 and every
state in the Union has at least one bonded distillery.16 However, California dominates
the U.S. wine industry, typically accounting for over 90% of U.S. wine production.
New York, Washington, Pennsylvania, Missouri, and Oregon provide most of the
remainder.
The U.S. wine industry has experienced considerable growth since the mid-
1970s. In 2002, wine sales in the United States achieved both volume and value
records at 22.5 million HL (595 million gallons) and $21.1 billion.17 According to
a report commissioned by the Wine Institute and the California Association of
Winegrape Growers, wine is the top finished agricultural product in retail value in
California, and the state’s wine industry had a total annual economic impact of $33
billion in wages, revenues, and economic activity.18
Other Foreign Producers. In the past fifteen years, several nontraditional
wine-producing countries have experienced significant investment and growth in
their wine sectors. Several Southern Hemisphere countries — Argentina (5% global
production share), Australia (3.4%), the Republic of South Africa (2.8%), and Chile
(2%) — have emerged as important wine producers and exporters in recent years.
According to an Economic Research Service report, substantial foreign direct
investment (FDI) in foreign wine-producing regions by U.S. firms occurred in the
1990s, spurred in part by escalating land prices in prime U.S. wine-growing areas and
rising domestic market prices. Initially, most U.S. wine-related FDI was concentrated
in Chile and southeastern France, but in the mid-1990s U.S. investors turned their
focus to Argentina’s large, unused land capacity. Much of the wine produced with
U.S. FDI has been shipped back to U.S. markets.
15Wine Institute, industry statistics, “Commercial Wineries and Bonded Winery Premises,”
at [http://www.wineinstitute.org/].
16USDA, FAS, Wine Commodity Page, “Wine — A Graphics Presentation,” April 2003, at
[http://www.fas.usda.gov/htp/horticulture/wine.html].
17Wine Institute, industry statistics, “Wine Sales in the U.S.”
18Wine Institute, “Economic Importance of California Wine is $33 Billion to State.” The
study cited is Economic Impact of California Wine, by Motto, Kryla & Fisher, LLP, St.
Helena, Jan. 20, 2000.

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China (3.8%) also figures among the world’s leading wine producing countries;
however, internal demand for wine far outstrips China’s production capacity. As a
result, China is an important wine importing country.
Global Wine Trade
The value of world trade in wine averaged about $7 billion during 2000 and
2001. In volume terms, nearly 30 million HL, or over 10% of world production,
entered international markets during that period.
Wine prices vary significantly, both within individual countries and in
international markets, based primarily on grape varietal differences, the perceived
quality associated with those varieties, and marketing factors such as brand name.
For example, U.S. red wine production has increasingly come from three high-valued
international grape varieties — cabernet sauvignon, merlot, and pinot noir. In
California, wineries paid growers $1,012 per ton on average for these three varieties
in 2002, compared with $613 for all red wine varieties. Popular but lower-valued red
wine varieties included zinfandel ($476/ton) and Rubired ($170/ton). Growers of the
chardonnay variety — the top white wine variety grown in California — received an
average of $683 per ton compared with only $115/ton for the popular French
Colombard variety.19
Wine Exports. During the 2000-2001 period, the EU was the world’s leading
exporter of wine, even after excluding EU intra-trade (see Table 2). The EU
accounted for nearly 40% of the world’s export volume and about 54% of export
value. The United States is the EU’s largest external wine market, and 41% of all EU
wine exports abroad went to the U.S. during that period.
Australia and Chile ranked second and third in export value, but switched roles
in terms of export volume. Both countries sent about half of their wine exports to the
EU, with the United States and Canada also ranking as important markets.
The United States was the world’s fourth leading wine exporter during the 2000
to 2001 period. In 2001, 60% of U.S. wine exports went to the EU. Canada and
Japan took a combined 27% of U.S. wine exports.
South Africa was the world’s fifth leading wine exporter, targeting the EU for
over 60% of its wine exports. Argentina ranked sixth as a wine exporter. Unlike the
first five exporters, only about 27% of Argentina’s wine exports in 2001 headed to
the EU. Western Hemisphere markets such as Paraguay, the United States, and
Brazil imported most of Argentina’s wine shipments.
Wine Imports. In 2001, the United States was the world’s leading destination
for wine exports in value terms, importing over $2.3 billion for a 31% share of world
trade (see Table 3). The EU was a close second, importing over $2 billion for a 28%
import share. Japan followed a distant third with a 10% share and about $800
19Wine Institute, industry statistics, “2002 California Winegrape Crush by Variety.”

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million of imports. Switzerland, Canada, Russia, Norway, China, and Singapore
were also important importers.
Wine Trade Issues
Wine traded in international markets faces several impediments to easy
movement across country borders. These include tariffs, excise duties, liquor taxes,
and other related charges that, in sum, are generally higher than average tariffs and
charges on most other agricultural products. According to USDA’s Foreign
Agricultural Service (FAS), the average allowed World Trade Organization (WTO)
tariff on wine is 76%.20 In addition to tariffs and miscellaneous import charges, other
key issues that affect wine trade and are currently being discussed in various trade
negotiations include labeling and geographical indications, and the issue of mutual
recognition of oenological (wine-making) practices. Several of the major non-EU
wine exporting countries have joined a trade agreement to address many of these
trade issues. Also, the United States and the EU have been negotiating a bilateral
wine agreement to resolve differences related to wine trade.
Tariffs and Other Border Measures. Wine tariff schedules vary widely
across countries. Also, tariff rates often vary by alcohol content and whether the
wine is bottled or bulk. Licensing, certification requirements, and rigid labeling rules
are not uncommon in many importing countries. For example, in the EU, wine
imports require an import license, and must be accompanied by a certificate signed
by the competent authority in the exporting country to show that they meet EU
regulations as well as by an analysis report by an official laboratory recognized in the
exporting country.21 In Japan, all commercial wine imports are subject to the Food
Sanitation Law and import notification is required, with the possibility of followup
inspection.22 All of these procedures add to the cost of importing wine and detract
from the imported wine’s price competitiveness in domestic markets.
Several importing countries that have no or only small domestic wine
production often give preference in their tariff schedule to the importation of bulk
wine and grape must to provide incentives for domestic wine production and bottling.
Japan is a prime example of this. In Japan, the label “Produced in Japan” means the
product was bottled in Japan. Many of Japan’s domestic brands are made from
imported bulk wine, imported grape must fermented in Japan, or imported grape
juice. Often these imported ingredients are mixed with wine produced from locally
grown grapes. Approximately 90% of Japanese brands are made from imported bulk
wine and grape must, while only about 10% are produced exclusively from grapes
grown in Japan.23 Compared to Japan’s tariff for bottled wine imports (15% or 125
yen per liter, whichever is less), the lower import tariff for bulk wine and grape must
20USDA, FAS, Commodity Fact Sheets, [http://www.fas.usda.gov/itp/wto/commodfacts
.htm]. Note that the applied tariff rate may be substantially below the maximum allowable
or upper bound tariff rates limit agreed to under WTO negotiations.
21USDA, FAS, GAIN Report #E21111, “EU Wine Reform 2001,” Sept. 13, 2001.
22USDA, FAS, GAIN Report #JA2554, December 18, 2002, p. 4.
23Ibid.

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(45 yen per liter) gives Japanese manufacturers a significant advantage in the bottled
wine market.24 Countries with large or economically important domestic wine
production will often do the contrary and maintain higher tariffs on bulk wine and
grape must compared with bottled wines to protect domestic growers.
Table 4 presents the most recent information on ad valorem equivalent tariff
rates for wine imports for selected countries. In addition, several countries have
Value Added Taxes (VATs) and other taxes that are applied to imported wines.
Examples of miscellaneous charges for selected EU member countries include:
! United Kingdom: A VAT of 17.5% is applied. In addition, there is an excise
duty which varies by alcohol content that is applied to imports. See
USDA/FAS GAIN Report #UK2029, p. 25, for a listing.
! France: A VAT of 19.6% is applied. In addition, there is a transportation tax
which varies by wine HS code that is applied to imports. See USDA/FAS
GAIN Report #FR2090, p. 8, for a listing.
Examples of miscellaneous charges for other selected countries include:
! Chile: A VAT of 18% is applied. In addition, there is a 15% liquor tax. See
USDA/FAS GAIN Report #CI3012, p. 3, for details.
! China: A VAT of 17% is applied. In addition, there is a consumption tax of
10%. See USDA/FAS GAIN Report #CH3802, p. 5, for details.
! Japan: Wines are also subject to a volume-based liquor tax that varies by type
of wine and alcohol content. See USDA/FAS GAIN Report #JA2554, p. 14,
for details.
! Slovakia: A VAT of 20% is applied. There is also an excise tax that varies
across HTS codes but averages about 35%. See USDA/FAS GAIN Report
#LO3002, p. 4, for details.
! South Africa: There is an excise duty which varies by alcohol content that is
applied to imports. See USDA/FAS GAIN Report #SF2016, p. 10, for a
listing.
Labeling and Geographic Indications. In the United States, most wines
are labeled and marketed as varietals — for example, cabernet sauvignon, merlot,
chardonnay, etc. To use a variety on a wine label, regulations by the U.S.
Department of Justice’s Bureau of Alcohol, Tobacco, Firearms, and Explosives
require a minimum content of 75% of the indicated grape variety.25 Varietal labeling
has been a common marketing strategy targeted to less knowledgeable wine
24This tariff differential does not appear in the ad valorem equivalents comparisons of
Table 4. This is because the ad valorem equivalents were calculated from average unit-
values that are significantly lower for bulk wine and grape must. Japan’s average unit-value
for bottled wine imports during 2000-02 was $4.82/liter, compared with only $1.10 for bulk
wine and $1.82 for grape must.
25U.S. Deptartment of Justice, Bureau of Alcohol, Tobacco, Firearms, & Explosives (ATF),
ATF Ruling 85-14, at [http://www.atf.treas.gov/alcohol/info/revrule/rules/85-14.htm].

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consumers who associate consistency in taste and other product characteristics with
recognizable product labels. In the United States, the so-called D’Amato amendment
(Section 910 of P.L. 105-32) provides authority for the use of “semi-generic” names
of wines if the true place of origin also is indicated.26 This use is a main point of
contention in both multilateral and bilateral negotiations with the EU.
European wines, in contrast, have a long tradition of labeling based on
geographic origin. The EU’s new CMO identifies wine by its geographic indication,
and further defines quality wines as being produced in specified regions (PSRs). The
specified region is designated by its geographical name, and wine produced in that
region strictly adheres to well-defined quality parameters. The EU considers semi-
generic names to be EU-proprietary geographical indications.
The Uruguay Round Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS) defines geographical indications as “indications which
identify a good as originating in the territory of a Member, or a region or locality in
that territory, where a given quality, reputation or other characteristic of the good is
essentially attributable to its geographical origin.”27 The term is most often, although
not exclusively, applied to wines, spirits, and agricultural products. To facilitate the
protection of geographical indications for wines, WTO members agreed to negotiate
the establishment of a multilateral system of notification and registration of
geographical indications for wines eligible for protection in those members
participating in the system.28 The WTO Ministerial Conference in Cancun, Mexico,
scheduled for September 10-14, 2003, is the deadline for completing negotiations for
the multilateral system of notification and registration.
On May 2, 2002, the EU adopted new wine labeling regulations that were
initially intended for implementation on January 1, 2003. However, the
implementation was postponed until August 1, 2003, in response to harsh criticism
from EU trading partners.29 Specifically, the regulation prohibits or requires strict
regulation of the use of common terms on imported wine labels. The United States
and 10 other WTO members have raised concerns about the new regulations through
formal comments under the WTO Agreement on Technical Barriers to Trade, and in
informal consultations with the EU in Geneva.
Oenological Practices. Some regions, particularly the EU, have very strict
rules governing the fabrication and marketing of wine. The EU’s rules on
oenological practices deal not only with safety concerns, but also with process-based
quality standards and fair treatment of growers in different regions. The EU’s
26Names treated as semi-generic are Angelica, Burgundy, Claret, Chablis, Champagne,
Chianti, Malaga, Marsala, Madeira, Moselle, Port, Rhine Wine or Hock, Sauterne, Haut
Sauterne, Sherry, and Tokay.
27Article 22.1 of the TRIPS Agreement.
28For more information, see CRS Report RS21569, Geographical Indications and WTO
Negotiations.
29USDA, FAS, GAIN Report #E22106, “This Week in European Agriculture,” Nov. 18,
2002, p. 2.

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regulation sets out extensive rules on allowed practices, along with a complex set of
derogations from those same rules based on weather or growing conditions in
different wine-growing areas. For example, irrigation of vineyards is forbidden in
France. Some practices, which are considered “traditional,” are only allowed for
wines produced in certain regions.30 Regulation 883/2001 states that imported wines
may be subject to the same derogations as applicable in regions with equivalent
growing conditions to those found in the designated zones in the EU.31
U.S. authorities have approved some practices that are not currently allowed in
the EU. As a result, some wines produced with those prohibited practices are still not
allowed to be imported by the EU, leading to lost sales by U.S. producers. However,
some U.S. wines are permitted entry through temporary exemptions from EU wine-
making regulations. For example, this includes oenological practices such as use of
ionization in fermentation to smooth out taste of wine or differences in alcohol
levels. These temporary exemptions will expire on December 31, 2003.
Mutual Acceptance Agreement (MAA). On December 18, 2001, the
United States signed an MAA on oenological practices with Canada, Australia, Chile,
and New Zealand to prevent such practices from being used as trade barriers.32 On
July 3, 2002, Argentina committed to sign the MAA. The group refers to itself as the
World Wine Trade Group (WWTG). Signatories to the agreement permit the
importation of wine from each other as long as the wine is produced in accordance
with the exporting country’s domestic laws, requirements, and regulations on
oenological practices. The agreement recognizes that different countries use different
wine-making practices based upon different factors such as local conditions and
climatic variations. In addition, the MAA recognizes that grape producing and wine-
making practices are constantly evolving.
The WWTG also plans to discuss other issues central to the wine industry and
international trade in wine. Future activities will include work on provisions of the
MAA to establish transparency requirements, consultations and dispute mechanisms,
and labeling, as well as formation of a committee of experts.
U.S.-EU Wine Negotiations. Negotiations towards a new bilateral U.S.-EU
wine accord began in June 1999. Negotiations have focused primarily on differences
in oenological practices and the procedures to approve new practices, but are also
expected to address the issue of labeling. A principal U.S. objective is to gain
acceptance by the EU of U.S. wine-making practices. To this end, the United States
has proposed full mutual recognition of approval systems. The EU wishes to leave
open the possibility for opposition to any new practices approved by the other party.
Hardliners within the EU have argued that imports should conform to the approved
30See annexes of the European Commission’s Regulation 1493/1999 and implementing
regulation 1622/2000 for the detailed list of approved practices.
31USDA, FAS, GAIN Report #E21111, “EU Wine Reform 2001,” Sept. 13, 2001, p. 8.
32For more information, see USDA, FAS, International Agricultural Trade Report, World
Wine Trade Group (WWTG), August 1, 2002, at [http://www.fas.usda.gov/htp/horticulture/
wine.html].

CRS-10
and traditional practices as laid down in the EU wine regime.33 A principal EU
objective is to secure an end to U.S. use of “semi-generic” names in trademarks and
label information as allowed under the D’Amato amendment. The EU is also seeking
protection from what it calls traditional terms applied to wines such as “tawny” or
“ruby red,” among others.
EU Wine Trade Agreements. Since 1994, the EU has concluded several
bilateral trade agreements specific to wine trade with Australia (1994), Mexico
(1997), Switzerland (2002), and South Africa (2002), as well as a multilateral trade
agreement with Hungary, Bulgaria, and Romania (2001).
These agreements include several key provisions that might impact U.S. wine
trade with countries that are signatories of EU trade agreements. Two important
provisions in EU wine trade agreements are, first, mutual recognition of specific
oenological practices and, second, reciprocal protection of names (particularly the
semi-generic names referred to earlier in this report) used for wine labeling. By
being party to an EU trade agreement with these provisions, a signatory country may
be unable to accept wine from third countries such as the United States, that do not
adhere to the particulars of these two provisions, whether it be the use of semi-
generic names or unacceptable oenological practices.
Role for Congress
Given the growing importance of wine in the U.S. agricultural economy,
Congress will likely be closely monitoring developments in the U.S.-EU wine
negotiations. In addition, decisions about geographical indications will be on the
agenda of the WTO Ministerial Conference in Cancun. Congress will likely be
closely following the Doha negotiations. Should negotiations result in agreements
that require changes in U.S. law covering geographical indications, Congress may
take up legislation to implement such an agreement under expedited (fast-track)
procedures established in the Trade Act of 2002 (P.L. 107-210).
For Additional Reading
CRS Report RS21085, Agriculture in WTO Negotiations.
CRS Report RS21569, Geographical Indications and WTO Negotiations.
European Commission’s web page for information (statistics, related legislation, etc.)
on the EU’s wine sector: [http://europa.eu.int/comm/agriculture/markets/wine/
index_en.htm].
U.S. Department of Agriculture, Economic Research Service. “The U.S. Wine
Market Uncorked,” Agricultural Outlook, August 1997, pp. 12-14.
33USDA, Foreign Agricultural Service, GAIN Report #E21111, “European Union Wine : EU
Wine Reform 2001,” September 13, 2001, p.9.

CRS-11
U.S. Department of Agriculture, Foreign Agricultural Service, Horticulture and
Tropical Products Division. Wine commodity page, at
[http://www.fas.usda.gov/htp/horticulture/wine.html].
U.S. Department of Agriculture, Foreign Agricultural Service. GAIN Report
#E21111, “European Union Wine: EU Wine Reform 2001,” Sept. 13, 2001.
U.S. Department of Justice, Bureau of Alcohol, Tobacco, Firearms, and Explosives.
The Beverage Alcohol Manual (BAM): Basic Mandatory Labeling Information
for Wine. At [http://www.atf.treas.gov/pub/alctob_pub/bevalmanual/index
.htm].
U.S. Department of Justice, Bureau of Alcohol, Tobacco, Firearms, and Explosives.
ATF rulings for alcohol, along with other ATF rulings and IRS revenue rulings.
At [http://www.atf.treas.gov/alcohol/info/revrule/revrulex.htm].
U.S. International Trade Commission. Harmonized Tariff Schedule of the United
States, supplement 1, chapter 22, “Beverages, Spirits, and Vinegar.” At [http://
dataweb.usitc.gov/scripts/tariff/0310c22.pdf].
Wine Institute. “The Voice for California Wine,” website for information and
statistics. At [http://www.wineinstitute.org/].

CRS-12
Table 1. Wine Production by Major Producers,
Calendar Years 1998 through 2002
1,000 Hectoliters (THL)
Avg: 1998-2002
1998
1999
2000
2001
2002
THL
Share
%
EU
163,466
181,151
179,903
162,487
155,261
168,454
100.0
France
54,271
62,935
59,766
55,769
51,999
56,948
33.8
Italy
57,140
58,073
54,088
52,293
44,604
53,240
31.6
Spain
30,224
32,664
41,790
30,937
34,443
34,012
20.2
Germany
10,834
12,286
10,081
9,081
10,176
10,492
6.2
Portugal
3,580
7,859
6,694
7,426
6,265
6,365
3.8
Greece
4,536
4,333
5,000
4,277
5,000
4,629
2.7
Austria
2,703
2,803
2,338
2,531
2,600
2,595
1.5
Belguim/Lux.
160
184
134
160
160
160
0.1
U.K.
18
13
13
14
14
14
0.0

Other EU
0
0
0
0
0
0
0.0
Major Producers
EU
163,466
181,151
179,903
162,487
155,261
168,454
60.6
United States
20,500
20,750
26,600
23,000
25,400
23,250
8.4
Argentina
12,673
15,888
12,537
15,835
12,150
13,817
5.0
China
10,645
10,261
10,500
10,800
10,800
10,601
3.8
Australia
7,415
8,511
8,592
10,765
12,204
9,498
3.4
Rep So. Africa
7,830
7,790
7,620
7,610
7,610
7,692
2.8
Chile
5,475
4,807
6,674
5,652
5,752
5,672
2.0
Romania
5,071
5,661
5,453
5,500
5,000
5,337
1.9
Hungary
4,340
3,339
4,299
5,406
3,800
4,237
1.5
Brazil
2,182
3,190
3,000
3,200
3,200
2,954
1.1
Russia
2,180
2,560
3,090
3,430
3,430
2,938
1.1
Croatia
2,277
2,094
2,101
2,041
2,200
2,143
0.8
Bulgaria
1,955
2,026
2,099
2,100
2,000
2,036
0.7
Serbiaa
2,577
1,366
1,973
2,100
1,470
1,897
0.7
Moldova
1,511
1,332
2,500
1,400
2,100
1,769
0.6
Uzbekistan
1,140
1,080
1,782
1,884
1,884
1,554
0.6
Mexico
1,361
1,443
1,041
1,411
1,090
1,269
0.5
Switzerland
1,172
1,310
1,276
1,174
1,190
1,224
0.4
Japan
1,159
1,328
1,154
1,100
1,140
1,176
0.4
Ukraine
771
856
942
1,234
1,512
1,063
0.4
Georgia
1,250
1,300
1,138
800
812
1,060
0.4
Uruguay
1,030
1,020
900
850
920
944
0.3
Macedonia
1,227
912
1,000
1,000
447
917
0.3
New Zealand
606
602
601
530
890
646
0.2
Other
5,886
6,282
6,036
5,849
5,605
5,932
2.1
World Total
265,702
286,857
292,810
277,159
267,867
278,079
100.0
Source: United Nations, Food and Agricultural Organization, FAOSTATS.
Note: 1 hectoliter (HL) = 100 liters; 1,000 HL = approximately 100 metric tons. Wine is defined
according to HS code 2204; wine of fresh grapes, including fortified wines, grape must.
a Serbia includes Montenegro.

CRS-13
Table 2. Wine Export Volume, Value, and Market Share by Major Exporter,
Calendar Years 2000 and 2001
Volume
Value
Top markets:
Share of export value (%)
1,000 Hectoliter
Share (%)
Million US$
Share (%)
in 2001
2000
2001
2000
2001
2000
2001
2000
2001
European Union
49,261
47,227
100.0
100.0
9,768
9,732
100.0
100.0
EU(56%), US(24%), Switz(6%)
Italy
17,640
15,614
35.8
33.1
2,274
2,312
23.3
23.8
EU(59%), US(16%), Japan(7%),
France
15,162
15,217
30.8
32.2
5,034
4,828
51.5
49.6
EU(71%), US(8%), Switz(6%)
Spain
8,890
10,151
18.0
21.5
1,151
1,212
11.8
12.5
EU(60%), US(10%), Japan(8%)
Germany
2,479
2,420
5.0
5.1
361
372
3.7
3.8
EU(73%), US(9%), Canada(6%)
Portugal
1,887
1,606
3.8
3.4
464
433
4.8
4.5
EU(69%), US(8%), Switz(7%)
Austria
362
518
0.7
1.1
39
47
0.4
0.5
EU(82%), Japan(11%), US(3%)
Netherlands
153
391
0.3
0.8
73
174
0.7
1.8
EU(41%), US(31%), Japan(7%)
United Kingdom
199
164
0.4
0.3
157
153
1.6
1.6
EU(93%), Japan(2%), US(1%)
Belgium
230
212
0.5
0.4
85
79
0.9
0.8
EU(75%), US(11%), Canada(5%)
Greece
1,962
565
4.0
1.2
61
46
0.6
0.5
EU(95%), Iceland(1%)
Denmark
192
263
0.4
0.6
43
50
0.4
0.5
Other EU
104
106
0.2
0.2
26
27
0.3
0.3
Major Exporters
EU External
11,732
12,331
39.9
39.4
3,831
3,787
55.3
53.4
US(41%), Japan(14%), Switz.(14%)
Australia
3,109
3,762
10.6
12.0
904
998
13.0
14.1
EU(50%), US(28%), Canada(6%)
Chile
4,024
4,867
13.7
15.5
577
645
8.3
9.1
EU(50%), US(18%), Canada(10%)
United States
2,825
2,884
9.6
9.2
533
518
7.7
7.3
EU(60%), Canada(17%),
Rep So.Africa
1,700
1,651
5.8
5.3
245
228
3.5
3.2
EU(63%), Austral(6%),
Argentina
921
917
3.1
2.9
149
145
2.1
2.0
EU(27%), Paraguay(25%),
Moldova
992
1,368
3.4
4.4
88
124
1.3
1.8
Unavailable
New Zealand
383
219
1.3
0.7
90
97
1.3
1.4
Australasia, US(13%), others
Bulgaria
380
380
1.3
1.2
63
63
0.9
0.9
Unavailable
Singapore
29
30
0.1
0.1
70
59
1.0
0.8
Unavailable
Hungary
802
696
2.7
2.2
64
59
0.9
0.8
EU, others
Switzerland
13
14
0.0
0.0
40
38
0.6
0.5
Unavailable
Georgia
244
216
0.8
0.7
33
32
0.5
0.5
Unavailable
Macedonia
824
806
2.8
2.6
29
28
0.4
0.4
EU, others
Romania
254
394
0.9
1.3
18
20
0.3
0.3
EU, others
Ukraine
100
183
0.3
0.6
9
18
0.1
0.3
Unavailable
Other
718
233
2.4
0.7
128
176
1.8
2.5
World Total
29,428
31,330
100.0
100.0
6,932
7,098
100.0
100.0
Source: U.N. FAO, FAOSTATS; EU extra-trade is from the Global Trade Atlas. Note: 1 hectoliter (HL) = 100 liters; 1,000 HL = approximately
100 metric tons. Wine is defined according to HS code 2204; wine of fresh grapes, including fortified wines, grape must.

CRS-14
Table 3. Wine Import Volume, Value, and Market Share by Major Importer,
Calendar Years 2000 and 2001
Volume
Value
Top markets:
Share of export value (%)
1,000 Hectoliter
Share (%)
Million US$
Share (%)
in 2001
2000
2001
2000
2001
2000
2001
2000
2001
European Union
42,343
42,832
100.0
100.0
7,338
7,618
100.0
100.0
EU(87%), Chile(2%),
Germany
12,226
11,738
28.9
27.4
1,785
1,750
24.3
23.0
EU(54%), Australia(20%),
United Kingdom
9,034
9,993
21.3
23.3
2,550
2,771
34.8
36.4
EU(84%), Chile(3%),
France
5,551
5,158
13.1
12.0
435
432
5.9
5.7
EU(85%), US(25%),
Netherlands
2,631
3,010
6.2
7.0
532
627
7.3
8.2
EU(95%), So.Afr(<2%),
Belgium
2,608
2,589
6.2
6.0
655
640
8.9
8.4
EU(80%), Chile(8%),
Denmark
1,804
1,979
4.3
4.6
361
380
4.9
5.0
EU(78%), Chile(7%),
Sweden
1,223
1,352
2.9
3.2
256
267
3.5
3.5
EU(99%)
Portugal
1,985
1,703
4.7
4.0
98
72
1.3
0.9
EU(95%), Chile(1%)
Italy
623
722
1.5
1.7
184
162
2.5
2.1
EU(91%), Australia(2%),
Austria
499
593
1.2
1.4
108
126
1.5
1.7
EU(55%), Australia(15%),
Ireland
405
486
1.0
1.1
139
164
1.9
2.2
EU(86%), Chile(9%),
Finland
403
432
1.0
1.0
82
88
1.1
1.2
EU(93%), Chile(3%)
Spain
604
215
1.4
0.5
74
58
1.0
0.8
EU(99%)
Luxembourg
218
206
0.5
0.5
66
65
0.9
0.9
EU(99%)
Greece
169
269
0.4
0.6
14
15
0.2
0.2
Major Importers
United States
4,479
4,688
16.8
16.5
2,339
2,325
31.7
31.2
EU(69%), Australia(16%),
EU External Trade
7,543
8,822
28.2
31.0
1,702
2,094
23.0
28.1
Australia(32%), US(21%),
Japan
1,657
1,691
6.2
6.0
789
779
10.7
10.4
EU(82%), US(7%),
Switzerland
1,809
1,863
6.8
6.6
602
619
8.2
8.3
EU, others
Canada
2,358
2,388
8.8
8.4
579
582
7.8
7.8
EU(64%), US(14%),
Russia
1,623
2,566
6.1
9.0
164
225
2.2
3.0
Moldova, EU, Georgia,
Norway
468
623
1.7
2.2
111
123
1.5
1.7
EU, others
China (w/Hong
572
628
2.1
2.2
113
125
1.5
1.7
EU(58%), Chile(25%),
Singapore
97
103
0.4
0.4
110
110
1.5
1.5
Unavailable
Brazil
312
299
1.2
1.1
81
72
1.1
1.0
Unavailable
Mexico
164
226
0.6
0.8
52
63
0.7
0.8
US, EU, Chile
New Zealand
408
402
1.5
1.4
61
62
0.8
0.8
Unavailable
Australia
156
128
0.6
0.4
67
55
0.9
0.7
EU(70%), New
Argentina
52
57
0.2
0.2
13
10
0.2
0.1
Chile(70%), EU(20%),
Chile
18
7
0.1
0.0
4
1
0.1
0.0
Argentina(40%), EU(21%),
Rep So.Africa
78
43
0.3
0.2
7
5
0.1
0.1
Unavailable
Other
4,937
3,886
18.5
13.7
592
210
8.0
2.8
World Total
26,732
28,420
100.0
100.0
7,386
7,460
100.0
100.0
Source: U.N. FAO, FAOSTATS; EU extra-trade is from the Global Trade Atlas. Note: 1 hectoliter (HL) = 100 liters; 1,000 HL = approximately
100 metric tons. Wine is defined according to HS code 2204; wine of fresh grapes, including fortified wines, grape must.

CRS-15
Table 4. Ad Valorem Equivalent Tariff Rates on Imported Wine,
Selected Countries
Harmonized Tariff Schedule (HTS) Code
Country
Averagea
220410
220421
220429
220430
Percent
New Zealand
4.0
0.0
5.0
5.0
5.0
United Statesb
4.3
1.7
2.8
7.9
4.8
Australia
5.0
5.0
5.0
5.0
5.0
Philippines
5.0
5.0
5.0
5.0
5.0
Chile
6.0
6.0
6.0
6.0
6.0
European Unionb
8.9
6.7
3.9
16.2
na
Switzerland
10.2
8.7
8.8
21.0
na
Canadab, c
11.6
4.4
2.3
8.7
31.1
Jamaica
15.0
30.0
30.0
0.0
0.0
Japanb
15.6
13.3
15.0
15.0
19.1
Taiwan
16.7
20.0
na
10.0
20.0
Perue
17.0
17.0
17.0
17.0
17.0
Venezuela
17.5
20.0
20.0
15.0
15.0
Argentina
21.5
21.5
21.5
21.5
21.5
Brazild
21.5
21.5
21.5
21.5
21.5
Rep. South Africa
25.0
25.0
25.0
25.0
25.0
China
25.8
24.2
24.2
29.0
na
Columbia
30.0
30.0
30.0
30.0
30.0
Mexicoc
30.0
30.0
30.0
30.0
30.0
S. Korea
30.0
30.0
30.0
30.0
30.0
Slovakia
41.3
30.0
30.0
75.0
30.0
Thailand
60.0
60.0
60.0
60.0
60.0
Sources: Argentina — USDA, FAS, GAIN Report #AR2040, July 11, 2002, p.4; Australia, New
Zealand, Peru, Philippines, Switzerland, Thailand, and Venezuela — AMAD, 2000; Brazil —
USDA, FAS, GAIN Report #BR2613, Dec. 11, 2002, p.11; Chile — USDA, FAS, GAIN Report
#CI3012, June 10, 2003, p.3; China — USDA, FAS, GAIN Report #CH3802, Mar. 31, 2003, p.5
(according to China’s WTO entry agreement, wine tariffs will fall further in 2004 before stabilizing);
Jamaica — Agricultural Market Access Database (AMAD), 2001; European Union — USDA, FAS,
GAIN Report #FR2090, December 20, 2002, p. 8; Japan — USDA, FAS, GAIN Report #JA2554,
Dec. 18, 2002, p. 13; Rep. of South Africa — USDA, FAS, GAIN Report #SF2016, June 11, 2002,
p. 12; Slovakia — USDA, FAS, GAIN Report #LO302 Mar. 27, 2003, pp.4-5; United States — U.S.
International Trade Commission, Harmonized Tariff Schedule, Supplement 1, Chapter 22 —
Beverages, Spirits, and Vinegar, p. 5.
Note: na = not available.
a Simple, unweighted average across HTS codes.
bAd valorem equivalent created from specific “per unit” charges compared against average import unit
values for recent years.
cNon-NAFTA tariff rate; U.S. wine exports to Canada and Mexico enter duty free under NAFTA
provisions. Chilean wines have entered Mexico duty free since 1996. The 2000 Mexico/EU
trade agreement lowered the EU’s import tariffs on wine from 30 to 20%, with a gradual
reduction to 0% by 2008. See USDA, FAS, GAIN Report #MX3301, January 8, 2003, p. 2, for
details.
dTariff rate for countries outside of Mercosur or Chile. See USDA, FAS, GAIN Report #BR2613,
Dec. 11, 2002 for details.
eImport tariffs on Chilean wines are only 14%. See USDA, FAS, GAIN Report #PE2016, Oct. 1,
2002 for details.

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