February 27, 2015 3:29PM

U.S. Trying (and Failing) to Contain the Spread of European ‘Geographical Indications’

One of the European Union’s highest priorities in trade negotiations is to globalize its restrictions on the use of place names as generic product descriptions. When they negotiate a trade agreement, they insist that the other country adopt regulations requiring that, for example, all champagne come from Champagne and all parmesan cheese come from Parma. The United States, worried that these rules limit access for U.S. products, is trying to use its own trade agreements to contain the effects of Europe’s push to protect “geographical indications” (GIs) in countries around the world.

Europe’s GI protections restrict the flow of accurate information while reducing competition and innovation. GI protection is not about preventing consumer confusion or false advertising; European rules forbid the use of place names even when phrases like “style” or “type” are added. 

One often overlooked but essential aspect of GI regulation is that use of a protected name requires not only physical location in that place but also adherence to government-mandated production practices.  “Authentic” champagne is therefore not only made in Champagne, but made a specific way required by law. 

By operating this way, the system functions not only to capitalize on a collective brand but also to reduce competition among producers. Once all the producers in a particular country (say, France) are divided by region and style, the industry starts looking a lot like a cartel. There may be multiple producers, but they all agree to keep making the same thing in the same place forever. They no longer have to compete on product quality.

U.S. trade negotiators are rightly resisting efforts to spread this anticompetitive regulatory scheme to other countries. As it stands, there is almost no chance that the United States could convince the EU or its member states to drop their GI regulations. But it is also unlikely that the United States will acquiesce to European demands to adopt such a system here, especially for meats and cheeses.

The battle over GIs is therefore being waged in other countries as the EU and the United States both use trade agreements to influence how GIs are protected in foreign markets. Commercially, the question is whether U.S. companies can continue to sell their generic brands abroad.

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Right now the United States is losing.  At this point, the most U.S. negotiators are hoping for is coexistence between protected GIs and trademarked U.S. brands.  According to Inside U.S. Trade ($), U.S. negotiators may not even get that much in the Trans-Pacific Partnership:

The United States, Australia and New Zealand are pushing rules in the IP chapter that would, among other things, require TPP countries to maintain a domestic process that allows for applications for GI protection to be rejected or canceled under certain circumstances. The proposal is aimed at countering the European Union's drive to protect such food names in countries around the world.

But TPP countries have been at odds over the extent to which international agreements between TPP countries and other parties such as the EU would be excluded from having to comply with these GI rules, and if so, what would be the scope of such an exception. TPP ministers considered this question at their October ministerial in Sydney but did not reach any resolution.

One informed source said Japan in particular is being defensive on the GI issue, as it does not want the TPP rules to prevent it from offering to protect EU GIs in a bilateral trade agreement that is currently under negotiation. If Japan was prevented from doing so, it might not be able to get as good of a deal on market access from the EU, this source said.