Conrad De Aenlle
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
The International Herald Tribune August 14, 2004