Geographical Indications: Protection for Producers or Consumer Information

Trade implications

The trade impacts are in the main a direct consequence of the ability or inability of domestic policy to provide the appropriate level of protection and information. If consumers are under-protected at home, through the absence of reliable information about where a product was produced, then there will tend to be a trade distortion. In domestic markets there will be too many imports: in foreign markets the lack of information will adversely hit sales of the product with the geographically-linked quality attribute. If consumers are over-protected in the domestic market then there will be too few imports from other areas and too many exports from the GI-favored producers. Competition in third markets will also be distorted, as protected and un-protected producers compete for the consumer’s allegiance. If the information is valuable then the lack of protection in either the producing or the importing market will distort trade flows. As in other areas of potential non-tariff trade barriers, the key is whether there are appropriate domestic policies in place. Where domestic policy is optimal, liberal trade subject to non-discrimination and national treatment will also be beneficial. Where domestic policy is inadequate, trade is distorted and the inadequacies show up as potential losses to other countries as well as to the mismanaged country. So much of the debate about protectionist GIs in the trade system revolves around whether GIs are being correctly protected on the home market. It is to this issue that we turn.

II. The Regulation of GIs in the EU and US

Protection of GIs takes place within the country of production and marketing, through the specific regulatory systems developed over time. These are well developed in the EU and the US, as well as other developed countries. A discussion of the EU and US systems gives a flavor for the main mechanisms in use by WTO members. The EU has a sui generis process for granting such protection: the US incorporates the protection in general types of instrument. Other countries can be categorized by which of these two systems they use. Developing countries often have a less well-developed regulatory machinery for GIs, reflecting the fact that rents associated with locational indicators are likely to be small. On the other hand, there is growing interest in protection of cultural goods and those that embody traditional production methods.

GIs in the EU

The EU has the most highly developed system of regulation for GIs. As an aspect of the “single market” that is the backbone of the economic construct of the EU, legislation falls essentially at the Community (first pillar) level.⁸ Much of the legislation on GIs is incorporated in Regulation (EEC) No. 2081/92 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs.⁹ In addition, Regulation (EEC) No. 2082/92 protects traditional recipes. Between them, these two regulations allow three different forms of protection, as described below.

The notion behind the Regulation 2081/92 (that applies as law in all Member States) is to enable consumers to make the best choice by being given “clear and succinct information regarding the origin of the product.” Regulation 2081/92 establishes two categories of protected names: designations of origin and geographical indications.

Protected Designations of Origin (PDOs)

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  Quality or characteristics of a product must be essentially or exclusively due to the particular geographical environment (including natural and human factors such as climate, soil quality, and local know-how) of the place of origin.¹⁰
  
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  Production and processing of the raw materials, up to the stage of the finished product, must take place in the defined geographical area.
  

These conditions are designed to establish a “close and objective link” between the features of the product and its geographical origin. Thus the concept of terroir has a legal manifestation in this Regulation. Exceptions are allowed, such as when a particular term has become associated with a region.¹¹ Moreover, cases where the raw materials come from a larger or different geographical area can be allowed if production of those raw materials is limited and itself a result of special conditions.

Protected Geographical Indications (PGIs)

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  At least one stage of the production of the protected product is undertaken within the geographical area (with, say, imported raw materials)
  
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  There must be a link between the product and the area, though this need not be exclusive or essential. A specific quality or reputation may be sufficient to link the product with the geographical area.
  

The link in this case need not be close or objective: it can be based on reputation at the time of registration. PGIs can be defined for a wider range of conditions, as only one stage of the production or processing needs to be undertaken in the region. PGIs cannot be registered with non-geographical names. Moreover, the presumption in PDOs that human contributions and local know-how can qualify a good is absent from the description of a PGI. Producers and producer groups can choose whether to apply for PDO or PGI protection.¹²

Generic names, that have become common names for a product even though they refer to a geographical region, cannot be granted PDO or PGI status. No exhaustive list of generic names exists, and they are defined only when a producer group attempts to register such names.¹³

The regulations cover most food and many non-food agricultural products.¹⁴ Over 700 products have been registered as PDOs, PGIs or TSGs. Most are cheese, fresh meats, meat-based products, honey, olive oil, fruits and vegetables (see Table 1). This indicates that their purpose has expanded somewhat from protecting well known geographical terms to essentially local produce of which few outside their country of origin, much less in the rest of the world, would have heard.

The concentration of PDOs and PDIs in a few countries itself is noteworthy. The dominance of the southern members, Italy, Portugal, Greece and Spain, along with France, indicates the strong trend toward the differentiation of products by locality in these countries. Many northern countries have not (yet) caught the local food bug. Finland, Sweden, Denmark and Ireland together have registered nine PDO/PGIs. Germany has 64 products registered, indicating that the food system has experienced considerable differentiation. Allowing for the fact that some northern products are classified as generic, the bi-modal distribution of registrations is notable.

EU Wine GIs

The legislation that governs GIs for wines and spirits is more complex and rooted in the traditions of the individual wine-producing members. Moreover, it is embedded in the Common Market Organization for wine, and hence is a part of the CAP. The new rules for that sector were revised as a part of the Agenda 2000 Reform, and are included in Regulation 1493/1999. The Regulation makes a distinction between “quality wines produced in specific regions” (quality wines spr) and “table wines,” but either can qualify for a GI. The competence for registering and validating that GI remains in the hands of the member state concerned.

The control of labels for wine has also been updated recently. Regulation 753/2002 mandates the obligatory terms that must appear on a label (name of producer, volume and strength) and the optional (though still regulated) terms such as vintage, variety and traditional expressions.¹⁵

The result of the shared competence for administering GIs for wine is an additional layer of complexity and arguably confusion in the quest for informing consumers. National systems survive within the EU system, with differences between say the two French wine categories (quality wine spr is sub-divided into VDQS and AOC wines) and the Italian classification using three (IGT, DOC and DOCG) categories, in addition to the table wines. Members without local wine sectors are latecomers to the protection of GIs, and have avoided much of the complexity. Many term are considered generic, though that has not stopped producing countries to attempt to “claw back” some of these names, such as “sherry.”

The EU has the largest number of food products protected by GIs, but increasing trade has exposed the inability of producing countries to impose the same protection in overseas markets. The EU has pushed hard for expansion of TRIPS protection for a number of these products, as discussed below. But the EU is not awaiting the outcome of the WTO talks to advance its “protected quality agenda.” It has negotiated bilateral treaties with Australia, Chile and South Africa that mutually protect a number of GIs. These bilaterals may go some way to defusing the tensions in the WTO, as it is more difficult to argue against a multilateral agreement that is similar to one that one has negotiated bilaterally. More significantly, they offer an alternative option if the multilateral path is blocked.

Table 1: Distribution of PDOs and PGIs in the EU (2003)

Member	Number	Main Commodity Groups
Belgium	4	Meat products
Denmark	3	Cheeses
Germany	64	Beers and other drinks
Greece	83	Cheeses, olive oil, fruits
Spain	68	Cheeses, fruits
France	131	Fresh meats, cheeses
Ireland	3	Cheese and meat products
Italy	126	Fruits, cheese, meat products and olive oil
Netherlands	6	Cheeses
Luxembourg	4	Meats and meat products
Austria	12	Cheeses, fruits
Portugal	85	Meats, fruits and cheeses
Sweden	2	Cheese, bakery products
Finland	1	Fruit
UK	27	Cheeses and meats

Source: Rangnekar (2004)

US GI protection

US protection of GIs is fundamentally different from that practiced by the EU.¹⁶ Current US policy does not recognize GIs as a separate class of intellectual property. It does however protect GIs within the scope of US law. This is done mainly through certification marks established under the trademark law, primarily the Lanham Trademark Act of 1949 (as amended in 1999).¹⁷ A certification mark refers to a “word, name, symbol or device” used by someone other than the owner (usually a government body) but conforming to specifications laid down by the owner. The specifications may be in terms of place of origin and/or methods of production.¹⁸ A comparison of the nature of trademarks, GIs and Certification and Collective marks is given in Table 2.¹⁹

In general, trademarks (for private firms claiming ownership of a name or symbol) cannot relate to a geographical area. Certification marks are a way to avoid such a limitation. But some trademarks using geographical terms are allowed if over time consumers have come to recognize those terms as identifying the product of a particular company or group of producers. Thus the original geographical descriptor has taken on a “secondary meaning” or an “acquired distinctiveness” that can indeed be protected by a trademark. Many such trademarks have been in use for some time and are considered by the US as fulfilling their TRIPS obligation to protect GIs.²⁰ Neither trademarks nor GIs can be registered for “generic” names are those that have passed into general usage and lost their direct link with their region of origin.

In addition, GIs could be protected under US law by Collective Marks. A collective trademark can be granted to the members of a “collective” for use by its members. The collective does not sell goods but may advertise or promote goods produced by members of the collective.²¹ The collective holds the title to the mark on behalf of its members. A process of opposition to the inclusion of a collective mark is specified by law, and the cancellation of existing marks can result from disuse or misuse.

Wine is protected by a somewhat different method. Appellations of origin are registered and protected, both those relating to US regions and to foreign countries. An appellation is required when the wine is labeled with a grape varietal designation, when it carries a vintage date, when it is called “estate bottled” or when it uses one of seventeen regional names (such as Burgundy or Champagne) but does not emanate from that region.

Trademarks differ from GIs in that they apply to particular firms. As such they are even more restrictive, as they do not allow new producers within a geographic zone to enter the market. Most trademark legislation pays little attention to the need to provide consumer information, being more concerned with conditions of competition. And trademarks are essentially a private sector tool, with public sector help to enforce them, whereas the European style GI is much more an instrument of public policy. So conflicts can easily arise between the two systems, even if both respond to similar pressures and have similar aims.

In a recent article, Hayes, Lence and Babcock (2005) have discussed a variant of GI protection that they call Farmer Owned Brands (FOBs).²² The concept attempts to retain the market power aspects of trademarks (that the owner can control supply) but extend this to a group of producers who share a marketable attribute. The key to the success of FOBs would be the granting of a degree of supply control to the group: they would be responsible for limiting output and controlling abuse. The government would provide legal cover for such groups. The encouragement of FOBs in the US is suggested as a way that US farmers can gain some of the rents that their EU counterparts are enjoying. But supply control even at the local level raises some sticky issues. The power to raise prices by limiting output of a differentiated good where the differentiation depends on convincing consumers of a quality attribute may be limited. Rents may decline rapidly as competition among “local” producers intensifies. In the end, the best strategy may be to expand supply and extend marketing efforts to gain some economies of scale while maintaining the product quality.

As in the case of the EU, the US has not been against the incorporation of GI protection in trade agreements. Every regional and bilateral trade pact since the North American Free Trade Agreement (NAFTA) has included some provisions for mutual protection of particular US GIs, such as Tennessee Whiskey and Bourbon, and the corresponding national favorites from the other country. Moreover, the intellectual property rules in US trade agreements tend to be more strict than are the TRIPS provisions. So one could imagine a web of bilateral agreement protecting US GIs not unlike those that the EU is negotiating.

The differences in the basic approach to the protection of GIs between the EU and the US have led to an interesting and unstable situation across the Atlantic. EU GIs get protection in the US market through the application of trademarks. But US GIs are not given protection in the EU. The WTO case described below arises largely from this difference, though it could be that the underlying commercial and political tensions would have surfaced in some other way.

Table 2: Comparison of Trademark Protection and GIs

	Trademarks	Geographical Indications	Certification and Collective Marks
Identifier	Identifies a manufacturer	Identifies a place of origin	Identifies quality sometimes linked with place of origin
Intention	Reflects human creativity	Reflects climate and soil and “other characteristics”	Reflects certification of product quality or member of collective
Owner of right	One producer	Ownership by state or parastatal on behalf of all producers in area	Owner of mark not allowed to produce but can promote
Means of protection	Private firms protect trademark with help of courts: no public intervention	Public agencies protect GIs, sometimes complicated by multiple producers	Protection of certification by public agency: collective marks by collective
Transferability	TM can be sold or licensed	GI cannot be sold or licensed	Not transferable
Registration	Self-declaration: no reputation necessary for registration	Registered by public authority: reputation necessary	Request for certification by producer groups must show quality
Cost	Expensive for small producers	Inexpensive for small producers but not for large groups	Inexpensive
Extended protections	No protection against modifiers of translations	Protection for modifiers and translations	Certification should be unambiguous
Conflicts	Cannot contain GIs (unless grandfathered) if consumers might be misled	Can coexist with Trademarks and Certification and collective marks	Can coexist with both GIs and Trademarks
Duration	Trademark permanent for life of owner	Continuous as long as conditions do not change	Often subject to renewal of collective and certification marks

Source: Author, based on material from the USPTO and the EU Commission