Thank you, Mr. Chairman.
I'm pleased to be here with the committee to talk briefly about the Canada-Korea free trade agreement and its implications for the wine industry.
The CVA is the national association of the wine industry. We represent wineries across Canada and are responsible for more than 90% of Canada's annual wine production. Our members are engaged in the entire range of the value chain, from grape growing, farm management, R and D, grape harvesting, wine production, bottling, and retail sales, to tourism.
This afternoon I will touch very briefly on a little bit of the background of the industry and on three aspects of the Canada-Korea free trade agreement that are important to us in these negotiations.
Many of you are familiar with our industry. It's a growing sector. We now have more than 26,000 acres planted. Grapes are produced by 1,000 grape growers, and we have 325 wineries that are providing 10,000 direct and indirect jobs. We have many more wineries coming on. The industry's thriving, and not only in its traditional centres in B.C. and Ontario; it's expanding in Quebec and Nova Scotia. There are now grape-based wineries operating in six provinces. Our key economic indicators are all positive and are going up.
I also point out that in our industry, the 100% Canadian VQA and blended wines have a multiplier effect of $4.29 per litre compared with 56¢ per litre generated by imported wines. So we are getting a great return in our industry.
In terms of the benefits of the free trade agreement, it's vital that we seek international markets. As with some other goods and services, it's easier to trade internationally than it is to sell wine across Canada. The issue of our internal trade barriers is a subject for another day, but it's one of the reasons wineries are eager to take advantage of international opportunities.
In terms of Korea, the statistics tell the story of export growth. It was a mere $3,035 in 2001. Last year, in the first 11 months of 2007, we were up to $2.6 million. And with knowledge of orders that are going forward, we're looking forward to probably over $3 million by the end of 2007. Growth was approximately 26% last year, and over the past two years it was 186%.
Wine products entering Korea include both red and white table wines, but 96% of the exports are icewine products, which are, of course, our signature export for which Canada is internationally recognized. Korea is going to figure very prominently in our export target markets for 2008 and 2009, so it's timely that we are talking about the impact of the agreement.
Wines entering Korea currently face a 15% import tariff, which is a significant impediment to trade. Elimination of this tariff would clearly provide a significant impetus for increased exports to the growing Korean market. The most recent proposals on the table for negotiation would see icewine tariffs eliminated immediately upon an FTA coming into force. Tariffs on table wines would drop over a three-year period, which in our view is acceptable, given the small volume of table wines exported to Korea at the moment.
Reducing these tariffs is clearly a benefit of these negotiations for the wine industry, but there are two other issues I want to touch on.
The first involves geographic indicators. As our industry grows, it's important that the various regions where the wine is produced are branded, and branded well, both on the labels and in the promotional literature for our export marketing. This is the path to increased returns and the perception of quality. It also informs the world about our wine industry and assists tourism.
Everybody's familiar with France's system of appellation contrôlée and Italy's DOC. These systems have very strict criteria for what's a Bordeaux or a Burgundy, a champagne, a Valpolicella, or a Barolo. Similarly, wine consumers are very familiar with the Napa Valley or the Sonoma Valley in California. In Canada, many consumers may have heard about Niagara or Okanagan. But how familiar are consumers with the sub-appellations of St. David's Bench or Beamsville Bench in Niagara, the Similkameen Valley in B.C., or the Gaspereau Valley in Nova Scotia?
These so-called GIs, or geographic indicators, are an important topic of negotiation within the WTO, and indeed the EU has put this at the forefront of their current negotiating agenda. We've asked Canadian negotiators in the Korea trade negotiations to try to protect these names and to have them referenced. It's a form of insurance for descriptors that will brand our future and the distinctiveness of our wines. So geographical indicators are something that we hope we see referenced in any agreement.
The second ancillary issue is around icewine and the definition of icewine. This is Canada's flagship product in terms of our wine exports. Icewine is currently defined provincially under the Vintners Quality Alliance Act in Ontario, and the Agri-Food Choice and Quality Act in B.C., and there are industry production standards in place in Nova Scotia and Quebec. But at the federal level, there is no definition. Canada has agreed to a definition of icewine for purposes of the Canada-EU Wines and Spirits Agreement, and also in the most recent agreement with the World Wine Trade Group in their labelling agreement. However, we don't have any federal legislation or regulation.
The industry has been talking about this with federal agencies for many years, and its inclusion has been tied to the completion of national wine standards where, unfortunately, completion of negotiations has proven to be elusive. We now hope to look at how it could be defined under the Food and Drugs Act.
This lack of a definition is a barrier to success in our trade negotiations. The industry's flagship product is out there in the international marketplace, but without any nationally accepted definition, rule, or approach, its inclusion in international agreements becomes much more difficult. Not surprisingly, foreign trade negotiators, including those from Korea, question our attempt to protect our interests by pointing out that we don't have this defined at home.
Another dimension of this situation is the counterfeit icewines, which have become a significant problem, particularly in parts of Asia. The inclusion of an icewine definition in the Korea agreement would be important, given the rapid growth of our exports to that country, and Korea is now our number one icewine export market. Counterfeit icewine is rampant in China, and a growing concern in other Asian markets. The risk of fake products turning up in Korea is real, and if it happened we could potentially have problems for not only Canadian exporters but also the health and safety of Canadian consumers. To protect our interest and assist Korean authorities, should these problems ever occur there, a reference to icewine in the agreement would be very positive.
Canadian wine has come of age. We're winning international acclaim at prestigious wine competitions. However, as producers of other high-quality products found, high value and quality attract imitators. Icewines have become the Canadian Gucci of the counterfeit world, and more recently, Chinese nationals have even attempted to trademark VQA in China, something which we are actively opposing.
The industry supports positive results from these negotiations. We think the benefits that would come from tariffs and these related definitional issues would be good for the industry and good for Canada. It's vital that we try to achieve progress on these matters in our bilateral agreements because of the stalled nature at the moment of the WTO negotiations.