The wine industry and a preference for things foreign!

Conrad de Aenlle wrote this article for the International Herald Tribune last August. He states that, with EU membership, Malta finds it's wine industry under assault. One quirk of the Maltese character which many Maltese lament even as they display it, he observes, is a preference for things foreign:

The Maltese have been successfully repelling foreign invaders since they teamed up with the knights of the Order of St. John of Jerusalem to turn back the Ottoman Empire's formidable navy in 1565. The latest menace is a deluge of foreign wine, which, while less serious a threat, may prove harder to resist because the European Union has forced the islanders to let their defenses down. Malta's long-cosseted wine industry was given a brutal introduction to free-market economics when Malta entered the EU on May 1. That was also the day the government stopped assessing a levy of 1.5 liri, or $4.31, on each liter of imported wine.

That may be barely noticeable on a 1987 Petrus. But for many shoppers considering an Italian or Spanish alternative to a typical Maltese wine, which retails for about 2 liri, the markup was a deal-breaker. With the tax burden lifted, importers have easily been able to undercut prices on Maltese wines of similar quality, and have sought to press their advantage. It is hard to make it through a Maltese supermarket without being buttonholed by an importer's agent offering foreign wines at deep discounts, even by low post-levy standards. It has not been a difficult sell.

One quirk of the Maltese character, which many Maltese lament even as they display it, is a preference for things foreign ­ except hostile navies. ''You practically have to burn their fingers with a foreign wine before they'll pick up a local one,'' said an executive at one Maltese winery. He declined to be identified for fear of insulting his customers. Despite efforts by major Maltese producers to adjust to the end of the import levy by cutting prices, sales have still fallen. ''People are buying more foreign wine than ever before,'' said Georges Meekers, sales manager at Emmanuel Delicata Winemaker, the country's largest vintner. He declined to say whether sales were down since May, compared with a year earlier, but Tony Cassar, chairman of Marsovin, Delicata's main rival, said Marsovin's sales were down about 25 percent. Cassar may have been less reticent to discuss such a sensitive subject because the company has a division that imports wines: Sales there have been up about 200 percent, he said.

Although the elimination of the levy has given foreign producers a sharp price advantage, they are also competitive with Maltese vintners thanks to economies of scale and superior production technology. Economy of scale is one thing that Malta, the EU's smallest state, will never have: The largest of Malta's three islands is an amoeba-shaped slab of granite and limestone measuring roughly 14 by 27 kilometers, or nine by 17 miles. A mere 320 hectares, or 800 acres, is devoted to growing wine grapes in Malta, a figure that has shrunk over the past several centuries, ever since the knights sampled the local grape varieties, gellewza and ghirgentina. They declared the grapes good for eating ­ but not for wine. The acreage continued to decline under British colonial rule, from the turn of the 19th century until 1964. Many vines were uprooted as the Maltese were encouraged to grow cotton to supply textile mills in England. More recently there was little incentive to plant new vines, even using international grape varieties, because the import levy made it more economical to bring grapes in from abroad. The wine produced from them was cheaper than wine made from locally grown grapes or than heavily taxed foreign wine.

Today 70 percent of Maltese wine is produced from imported grapes. The government hopes to help local producers compete against the cheaper foreign wines by tripling the amount of land used for winemaking in the next few years, to about 1,000 hectares. The task may be difficult to achieve because of an EU regulation limiting the planting of new vineyards, even though Malta was granted a reprieve through 2005. It was also allowed to delay a mandate requiring that wine made from imported grapes be labeled table wine and not the product of a particular variety. Moreover, the government was also permitted by the EU to subsidize new plantings to the tune of $1,000, or $1,220, a hectare, with additional payments permitted for land improvements like irrigation systems.

Such dispensations are common for new EU members, especially to prop up agriculture, said Gabriel Stein, an international economist at Lombard Street Research in London. ''They say, 'Of course we favor free trade but not for this sector,''' Stein said. One exception granted to Malta has infuriated the likes of Mark Miceli-Farrugia, managing director of Meridiana Wine Estate, which produces about 100,000 bottles a year of premium wines from grapes grown in a vineyard in Ta' Qali, a hamlet just below the hilltop town of Mdina, Malta's medieval capital. Malta was also allowed to hang on for a much longer period to subsidies on imported grapes and sugar, which is used to make some lower-quality wines. ''When we joined the EU, we were voting for standards after years of a system that protected everybody as long as they produced locally,'' he said. ''We lived in a fool's paradise.'' Malta's arrangement with the EU ''is giving them an opportunity to make more money and compete against me,'' Miceli-Farrugia said of Marsovin and Delicata. ''I'd be crazy to support it.''

He is taking advantage of the subsidies for new vineyards, though. He said Meridiana hoped to double its fields to about 40 hectares in the next few years. He added that, unlike his rivals Marsovin and Delicata, neither his prices nor sales fell after the import levy was lifted. This is evidence, Miceli-Farrugia argued, that winemakers should focus on quality, not quantity. Cassar, at Marsovin, agrees, although he is hedging his bets. He expects to expand his fields, now about 90 hectares, by 10 to 15 hectares a year to make premium wines. But he suggested he would also respond to EU rules by importing fewer grapes, while raising wine imports under the Marsovin label. ''The right to plant new vines is good,'' he said. ''Whether we're going to produce wines to justify the new plantings is another question. I have my doubts.''

EU-Malta negotiations on Agriculture (including wine industry)

Cross purposes - Simon Jeffery for the Guardian