When I lived in Bordeaux, there were castles and vineyards everywhere, even in town. I noticed how dynamic was the area, one of the most charming in France. It was, without a doubt, on the way to be the new heart of France’s economy. I ignored, however, that the wine industry would be the scene of the next global crisis.
Protecting a French Heritage
There is no equivalent for the French word “Terroir” in other languages. Le Terroir is the relationship between men and the lands they fiercely protect. It is the vineyard characteristics that make a bottle of good wine: the geographic area, the climate, the soil, and the topography. A wine of Saint-Emilion doesn’t have the same properties as a Pessac. The prestigious reputation of French wines would be nothing without terroir.
Le Terroir is also a knowledge, the famous “savoir-faire” transmitted through generations for centuries. The French wine industry employs about 500,000 people: winegrowers, specialized merchants, oenologists, and other highly qualified professionals.
Of course, the coronavirus crisis threatens the industry. Surprisingly, the United States too.
The Pandemic Ravaging the Industry
The Covid-19 crisis has a terrible impact on the world wine market. According to IWSR CEO, Mark Meek, global wine sales could decrease by 13% in 2020.
French people consume wine mainly in restaurants, cafés, and pubs, all of which were closed during the quarantine. They have reopened under strict hygiene measures since June. France also holds international wine festivals every year, but most of them were canceled. Some organizers replaced them with online events. Unfortunately, it’s not enough to compensate for the damages.
Bottles stand forever on shelves of supermarkets. The profession estimated 2 to 3 million bottles in losses.
At the Paris International Agricultural Show, Jean-Marie Barillère, the president of the CNIV (an association protecting winemakers), said that 100,000 jobs were in danger.
The Cold War Against France
The United States is the first foreign market for French wine, representing 18% of the exported value.
In October 2019, President Trump obtained authorization from the WTO to apply duty on European goods to recover damages in the Boeing vs. Airbus conflict. Among the products touched by the tax were French wines.
“What does wine have to do with airplanes” you’d ask.
It all started in 1992 when the United States signed a convention with the European Union to allow repayable launch investment for aircraft building.
In 2004, a conflict broke out. Boeing’s CEO, Harry Stonecipher, complained about Airbus’ subventions. He considered that the E.U. allowed unfair advances to the manufacturer, permitting a business that would be impossible in normal market conditions.
I’ll make it short: The WTO gave reason to the U.S. and sentenced Airbus to pay damages. Airbus decided to sue Boeing as it disagreed with the verdict.
In October 2019, facing Airbus inaction, the United States received permission to impose 15% tariffs on European aircraft and 25% on other goods, to recover 7.5 billion dollars.
The volume of French wine exported to the U.S. decreased by 16%, and the value by 36% compared to 2019.
On July 24, France officially agreed to modify the terms of the convention to reflect market conditions. The European Commission wants the tariffs removed.
“Unjustified tariffs on European products are not acceptable and, arising from the compliance in the Airbus case, we insist that the United States lifts these unjustified tariffs immediately.” Phil Hogan, European Commissioner for Trade.
The context was tense. Boeing has issues with its medium-haul plane, the 737 Max. Following a series of crashes due to technical malfunction, most countries have suspended flight authorizations, waiting for safety inspections. Meanwhile, thousands of planes stay on the ground, unused. Many orders were canceled, leaving the market to Airbus’ favorite, the A320. Last year, the French company sold 863 airplanes against 380 for Boeing. The American manufacturer has never been so far behind its rival.
The taxes could pay for the losses, and Trump understood that. But there is more. Indeed, tariffs affect France’s most exported goods: wine, cosmetics (mainly luxury products), and digital services. This relentless move was Trump’s answer for France starting a fight against the GAFAs.
Who Benefits from the Crime?
“Airbus is not our problem!” said Jérôme Baueur, president of a French association for Alsacian winegrowers.
Professionals are angry. They claim the international conflict should not interfere with their business. It happens in a context of increasing distrust from the Europeans against the E.U. They perceive European institutions and administrations as elitist and anti-democratic.
Meanwhile, China wants its medium-haul airplane to enter the competition with Airbus and Boeing. However, the C919 didn’t pass the tests, and the launch was delayed. Comac, the manufacturer, said it should be ready around 2021 or 2022. Chinese companies already ordered 305 planes, with a substantial financial incitement from the government. No one can tell if the C919 will challenge the market.
Russia and China also joined their efforts in the “China-Russia Commercial Aircraft International Corporation”. The purpose is to create the new CR929 to compete with the A350 and the B797 for the years 2030’s.
The war only begins.
I didn’t forget our wine fields, though. The industry was well just before the crisis. Would you believe me if I told you that the Chinese were partially responsible for the success?
Wealthy Chinese investors bought 166 vineyards, especially around Bordeaux. Among them were the actress Zhao Wei, Jack Ma (creator of Alibaba), and the Hongkongese billionaire Peter Knowk. They work together with the French to preserve the wine reputation.
I will leave you with the weird idea found in France to deal with the unsold bottles: transforming the leftovers into hydroalcoholic solution. At least, I can wash my hands with Châtaux Margaux!