Genesis of problems of viticulture-wine making and directions of their settling

Paata Koghuashvili, Doctor of Economic Sciences, Professor, Corresponding Member of the Georgian Academy of Agriculture. Giorgi Zibzibadze, Candidate of Economic Sciences

The culture of vine is irreplaceable for Georgia not so much economically as from the viewpoint of our historical culture and consciousness. It is associated with Georgia and Georgian nation. Vine has always been and will remain a symbol of a Georgian’s national consciousness.

“Georgia is a country of vine and bread”, the great Ilia said, though he pointed out that “it is a sin for a man to use the blessed Kakhetian land for grain-crops. …We just have to try to grow the amount of bread that is sufficient in order not to import it and have enough of it on the domestic market.”
We shall not speak here about the difficulties, through which Georgian people carried vine throughout the centuries, but we shall remind you of several episodes from the recent past:
1. At the end of 1990 the movement for unjustified increasing of vineyard areas started, the main purpose of which was not the expression of love for wine, but getting of the all-union challenge banner. As is was expected, it was followed by corresponding negative processes. In particular:
– Vineyards were laid out in unsuitable or less suitable places, mainly on saline, brackish and erosive soils. Traditional zone and micro zones of placing and specialization were violated.
– The obligatory character of fulfillment of vineyards’ laying out plans stipulated for a rather poor quality of implementation of works envisaged by agrotechnics, some technological operations related to laying out and care of vine were altogether excluded, which, in the long run had a negative effect on productivity and vital capacity of vine.
– Neglect for historically formed traditions and zonal principles in laying out of vine and its specialization contributed to degeneration and disappearance of some unique sorts of vine. It is noteworthy that out of thousands hectares of vineyards laid out during that period, only single hectares have been retained in some places. They passed out of use and were discarded.
2. In 1980s a considerable blow to the country’s viticulture was delivered by the all-union campaign for the struggle against alcoholism. During that period a secondary importance was attached to grapes and grapes products production. Alcohol was announced the enemy of the communist society, and the process of viticulture’s degradation started, which was expressed in cutting down of vineyards and their substitution for other cultures. It is true that later the antialcoholic position of Gorbachev and Ligachev changed, but the first rift in the attitude to vine already appeared. The government promptly passed a decision with the purpose correction of the situation. Measures related to administrative and criminal responsibility for cutting down of vineyards were determined, but the situation did not change. It was necessary to enable more effective economic levers. For this purpose the government took another decision on growing of unique and high quality sorts of vine, which, at the same time, envisaged different stimulative measures. The main purpose of the decision was substitution cheap sorts of grapes for unique ones and production of high quality wine (the equivalent price of which was high even then). An intensive movement in this direction started, but the subsequent well known events in the country put an end to it.
3. Further aggravation of the situation in viticulture in 1990s is related to the extremely unstable political and economic situation that shaped in the country. In particular, losing of the traditional consumer wine markets after gaining of independent statehood, implementation of inconsistent government policy, worsening of criminogenic situation and other undesirable social-economic processes inflicted a considerable damage to viticulture and wine-making along with other branches of the national economy.
In the recent years, in spite of certain resistance (which is basically related to monopolistic position of wine enterprises), the situation in viticulture has become stable, the prospects of improving of vine’s sort specialization and its age-specific structure, the emphasis was rightly placed on increasing of the share of red and pink sorts of vine in the total area of vineyards, but as they say “the devil was not asleep”. On one fine day the traditional Russian market, on which 85-90% of export fell, turned out to be closed for Georgian wine. That is why the issue of retaining of vine was put on the agenda again. Before restoration of political and economic stability in our country no one cared for vine and wine. Only in summer 1998 the Georgian parliament passed the Law on Vine and Wine, the basis of which is French wine legislation (at that time no one thought if we were ready for realization of such a strict law). The hope appeared that in case of fulfillment of the law’s requirements both viticulture and wine-making would rise to a new level and that Georgian wine would pay itself the way to the European market and occupy its place on the world wine market (the unique conditions the country has give a real basis from the viewpoint of production of high quality, i.e. competitive wines).
Eight years have passed since the law came into effect, and today we can say that it has not fulfilled any f the main tasks. It did not provide for the progress of viticulture and wine-making branches, production of competitive products and protection of the consumer markets against falsified products. The main reason for the aforementioned is that the law’s requirements and norms have not become obligatory for fulfillment by vine-growers and wine-makers. This law was as if non-existent for the controlling and supervising services. The regulations on vine seed grain, laying out of new vineyards as well as protection of vine sort purity envisaged by the law were broken without permission. Elementary terms concerning registration of wines’ places of origin, certification of grapes products as well as export and import were not observed. All this contributed to retaining of the status quo existing in viticulture and wine-making branches, as well as continuation of work in the old manner that is unacceptable for market conditions. The result was not long in coming. Falsification of not only wine but wine products as well (production of vodka on spirits of dubious quality, liqueur and other strong drinks) reached unprecedented scale, and the state machine not only precluded it but contributed to it by means of its passive position and indifference. Let us analyze only one fact as an example. In particular, according to Subparagraph B) of Article 334 of the Georgian Law on Vine and Wine, import of grapes products is admissible only if they do not require additional processing and intended directly for consumption. In other words, import of wine materials, wine concentrates, spirit liqueurs, grapes juice, wine spirit and other products is prohibited in the country if they require additional technological or other kind of processing prior to their delivery to customers.
In spite of an absolutely clear determination by the legislation of this requirement, in 2005, according to rough estimates, different descriptions of grapes products (grapes juices, wine materials, etc) in the amount of the equivalent of 29-30 thousand tons of grapes were imported from the following countries (Germany, Russia, Netherlands, France, Spain, Thailand, etc). For comparison we shall point out that 78 thousand tons of grapes was purchased with the purpose of industrial processing out of 250 thousand tons of grapes produced in the country in 2005. This volume would have been increased but for the import of grapes products implemented in defiance of the law, by which not only Imeretian or Kakhetian grapes producers but the state budget as well would have benefited in the form of direct and indirect taxes received from wineries.
Among other things, the aforementioned practice of importing grapes products is successfully lasting to present day. Violation of the law has become a rule. The subparagraph of Article 334 of the Georgian Law on Vine and Wine has one load only – contribution to the development of local production and minimizing of falsification of wine and wine products in the country. Against this background it is difficult to qualify this kind of violations of the law and appraise them. It is an ordinary result of corruption, Georgian carelessness, disrespect for the law or sabotage against viticulture. A natural question suggests itself: who benefits from violation of the law? One thing is undoubtedly clear – in the recent period grapes have not been attractive for wine-makers any more. Wine produced out of them requires more labor and material expenses. It is much easier to produce falsified products with less expenses and in a shorter period of time. The corresponding data confirms this assumption. It is a fact that the volume of purchasing of grapes in the country with the purpose of industrial processing was decreasing year by year, and import of wine and wine products was gradually increasing.
“Samtrest”, as the state regulator of viticulture and wine-making branches, did not provide for fulfillment of the functions given to it. Let us start with the fact that, according to the order of the Minister of Agriculture dated 11 February 2003, the name of the mentioned service was changed and instead of the Department for the State Regulation of Viticulture and Wine-Making it was named the Department if Vine and Wine. Correspondingly, its functions, objectives and tasks were changed. In particular, in Subparagraph 2 of Article of the regulations approved by the aforementioned order we can read that “the Department of Vine and Wine – “Samtrest”, within the framework of its competence, is authorized to implement state supervision and control over the branch with he purpose of protection of the requirements envisaged by the current legislation and standard acts and take decisions on administrative offences concerning applying of corresponding sanctions”. After conferring of this kind of authorities, the content of Subparagraph 3 of the same article sounds improbable and incompatible, in accordance withy which the main subject of “Samtrest’s” activities is “regulation of Georgia’s viticulture and wine-making branch and implementation of the corresponding supervision and control”. From our point of view, the word “regulation” is mentioned in this subparagraph rather for conscience` sake, since no essential levers or mechanisms (administrative, economic, indirect and other ones) for the regulation of the branch are shown in “Samtrest’s” functions. Thus, the branch’s regulatory body was turned into a supervisory and controlling service, and more than a half of 27 functions given to it, according to their content, imply contribution to the branch’s development. Including “contribution to maximal use of the branch’s export potential”, “contribution to the arrangements aimed at eradication of use of fake names of places of origin, geographical indications and trade marks”, “contribution to implementation of technical-technological and other programs”, and many other functions, which envisage not prevention or eradication of breach of the law (e.g. falsification of wine, revelation and eradication of facts related to use of trade marks and certificateless young plants of vine) but only “contribution to arrangements aimed at their eradication”.
However, it would be fair to point out that realization of the rights and obligations of any department, including “Samtrest”, requires corresponding financial provision, without which the fulfillment of the given rights and conferred functions is just impossible even with all the good will. If we take into account “Samtrest’s” scanty budget in the recent years, it is no wonder why many of its direct functions have been limited to “contribution” only, the expression of which in qualitative and quantitative indicators is practically impossible. On the other hand, the social or economic damage caused by disregard for the requirements of acts of different normative-legal character that are currently in force in the country can be well measured, and it, with violation of legal norms and rules, falls on the shoulders of producers of agricultural products, ordinary consumers and the state budget. A vivid example of the aforementioned is the so called embargo imposed by Russia on the products, which is, of course, a result of a political decision, but our carelessness, illegal attitude to the requirements of the law, etc is not less significant in this matter, and with all this we prepared a certain legal base for banning of Georgian products on the Russian market. We imply the declared struggle against wine falsification (though with a delay) that has actually started.
Today rather high-ranking representatives of the governmental circles believe that banning of wine export to Russia will reduce the country’s GDP by 1-2% only, and that is why there is alarming in it. This kind of attitude is not serious and absolutely wrong if we take into account the fact that the wine problem only has to do with 150 thousand families in the country, and if we add fruit, citruses, vegetables and other products to wine, then we can easily draw a conclusion that the embargo will affect more than a half of Georgia’s population.
However, the result of our carelessness is not expressed only by reduction of percents in the country’s GDP. It is accompanied by negative consequences. It has a direct or indirect effect on each citizen of the country and, in case of retaining of the present day status quo in the country, specialization of the agricultural production may become a subject for a serious reconsideration. The ground for the aforementioned is the situation that shaped on the world wine market where 1-1.5 million tons of wine annually seeks for its consumer. Two or three years, during which the government promises to find an alternative market for wine, may be enough for the country’s viticulture at best to turn into a branch producing products for domestic consumption only. At the same time, if we take into account the fact that most part of the wines intended for domestic consumption falls on wines produced out of white sorts of grapes, then it is possible that black and pink sorts may disappear, and several future generations will have to make great efforts for compensation of the damage inflicted to high quality viticulture. It arises from the above stated that settling of the problem related to vine retention should become the key task of the country’s authorities.
In this article we tried to show the genesis of the problem that has no essential objective reasons. It is stipulated by subjective factors only. We should acknowledge that everything what has happened to us took place through our fault, and this time we shall not be able to blame others for this problem.
What should be done in the country with the purpose of retaining and development of industrial viticulture and retention of competitive branches of wine-making?
– The authorities should realize that there is no more or less famous wine-making country in which the state does not play the main part in regulation, control and development of wine production. Energization of the state’s role in this matter should be expressed in elaboration and implementation of a purposeful program aimed at the state support of the development of viticulture and wine-making as the export-oriented branch, since without the state support the development of the material and technical basis necessary for production of competitive wine, exporting of wine to the world market and searching of the place in competition with the firms having a great authority is practically ruled out.
– The vital space (territory) of our country is not that big, but a lot of unique components of its nature, in particular various natural-climatic conditions, a wide range of crops, etc give a possibility to effectively compensate for lack of land in case the mentioned resources will be used for production of high quality and ecologically clean (i.e. products having a comparatively high cost). This axiomatic thesis should be applied in relation to vine as well, which means that the course taken in the country from the viewpoint of optimization of sort and age structure of vine, that is course aimed at increasing of production of wines that are in great demand on the world market, should be continued, with the purpose of which the corresponding stimulatory mechanisms should be applied (aimed at growing and care of vine’s unique sorts and carrying out of other arrangements envisaged by the law).
– During the next 2-3 years, till the markets for selling of wine are found, the government should provide for purchasing at beforehand fixed prices of grapes produced by small farms (40-50%), contribution to production of brandy spirit at wineries, production of various natural products out of grapes (juices, concentrates, etc), as well as purchasing and selling of produced nonalcoholic products at schools, hospitals, catering and other public establishments.
– Taking into account the experience of other countries, the management system of viticulture and wine-making branches should be elaborated in accordance with the international standards. Creation of the wine quality control system should be accelerated, so that only the wines meeting the international requirements should be allowed for exporting. The strategy of the branch’s development should be based on production of high quality and unique wines in order to make possible overcoming of all the obstacles at the expense of Georgian wines’ quality.
– Exporting of Georgian wine and its selling on the local markets without a conformance certificate and consent of the owner of the mark registered in “Sakpatent” should be prohibited.
– With the purpose of avoidance of fake trade marks’ using and facts of falsifying of Georgian products, we consider it necessary that the list of geographical names and the firms using them on legal ground should be specified and handed over to the CIS controlling bodies.
– Proceeding from the Georgian Law on Wine and Grapes, with the purpose of eradication of the practice of falsification of names of the controlled wines and illegal use of others’ trade marks, enabling of corresponding control mechanisms should be accelerated, including:
1. Adoption and enabling of the rules of attestation, production and quality control of the wines having the controlled names;
2. A representative body for certification of Georgian wines should be set up (with participation of representatives of the Ministry of Agriculture, entrepreneurs, as well as scientific and nongovernmental organizations of the corresponding type). Its statute and procedural rules should be adopted.
– Bringing of the rules and practice of certification to conformity with the international standards, rationalization of the accreditation system of the certification bodies, clear differentiation between obligatory and voluntary certification, development of independent (internal control at enterprises) systems of quality control, gradual transition to a voluntary system of certification, etc is necessary.
– With the purpose of energization of the struggle against falsification, the state should provide for privatization of intellectual property, names of origin places and trade marks having geographical indication, which will create a legal base for a struggle against falsifications.
– The Agreement on Cooperation and Partnership between Georgia and the European Union envisages rapprochement and harmonization of legislations. We consider it necessary to timely reconsider the Georgian Law on Vine and Wine from the viewpoint of its correspondence to the EU’s wine legislation. At the same time it is necessary to toughen the sanctions envisaged by the Georgian Administrative Offences Code and the Criminal Code for violation of the norms and requirements of the Law on Vine and Wine.
– The statute on the Vine and Wine Department needs reconsideration taking into account the real mechanisms of the state regulation of the branch envisaged in it, since only with implementation of an effective state control it is possible to produce competitive high quality wine and grapes products, protect the consumer market against falsified and low-quality products, and develop viticulture and wine making as the priority branch of the national economy in accordance with modern requirements.
– We should learn to respect and observe the law whatever bad it may be. It is clear that the problem related to vine and wine would not have become so acute in conditions of complete observance of the requirements of the standard acts by the corresponding regulatory and controlling bodies. They do not say it in vain: “Each nation should observe the law as if it were a fortress wall protecting it”.