GM DB 2

Policy Analysis

E X E C U T I V E S U M M A R Y

K. William Watson is a trade policy analyst with the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute.

The European Union’s agenda in inter-national trade negotiations includes an effort to secure the protection of their “geographical indications” (GIs) in foreign markets. If European officials have their way, a great number of common food and drink names will disappear from American grocery store shelves. American companies would have to make up new names for wines such as champagne, port, and sherry, and also for common cheeses such as parmesan, gorgonzola, and feta. Even such identifiers as “California champagne” and “parmesan-style cheese” would not be allowed.

At the heart of Europe’s approach to GI protection is the idea of terroir—that there is an essential nexus between a product’s characteristics and the place it was made. When others use place names in a generic way, they are, in the European view, unfairly usurping the value created in that name by generations of local producers. Supporters claim that strong GI protection is needed to prevent fraud, ensure fairness, and promote economic development.

In truth, Europe’s approach to GI protection mainly serves to privilege traditional producers at the expense of consumer welfare and economic growth. The connection between quality and origin is often exaggerated by European

policymakers, and the level of protection that GIs enjoy prevents the flow of accurate information to consumers. Moreover, by incentivizing traditional production patterns through communal rights, Europe’s GI system directly reduces both innovation and competition in their own market.

For its part, the U.S. government views Europe’s posi- tion as a protectionist attempt to control the use of generic terms that correspond to European cities or regions where those products were first made. The United States has its own way of protecting GIs, but it does so, with some excep- tions, through trademark law rather than a dedicated regula- tory scheme. The consequence is that many European GIs are not protected.

The United States should fight against Europe’s attempt to spread its GI protections around the globe. This means, first, resisting efforts to expand the mandate for GI protec- tion at the World Trade Organization. Second, the United States should, like it did in the Trans-Pacific Partnership, secure open markets for generically branded products within regional and bilateral agreements. Finally and most impor- tantly, U.S. negotiators should make it clear that GIs will not be a subject for negotiation in the Transatlantic Trade and Investment Partnership (TTIP).

February 16, 2016 | Number 787

Reign of Terroir How to Resist Europe’s Efforts to Control Common Food Names as Geographical Indications B y K . Wi l l i a m Wat s o n

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“If European officials have their way, a great number of common food and drink names will disappear from American grocery store shelves.

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INTRODUCTION According to Merriam-Webster, champagne

is “a white sparkling wine made in the old prov- ince of Champagne, France; also: a similar wine made elsewhere.”1 But don’t tell that to the official Comité Champagne, whose slogan is “Champagne only comes from Champagne, France.”

So who is right? It may depend on where you are. Under European law the word “champagne” may only be used to refer to wine produced ac- cording to strict guidelines, one of which is that the entire process from grape to bottle occur within a delimited area near Epernay, France.

Champagne is one of many “geographical indications” (GIs) embroiled in an interna- tional debate over the proper protection of commercially valuable place names. If Euro- pean officials have their way, a great number of common food and drink names will disap- pear from American grocery store shelves. American companies would have to make up new names for wines such as champagne, port, and sherry, and also for common cheeses such as parmesan, gorgonzola, and feta. Even such identifiers as “California champagne” and “parmesan-style cheese” would not be allowed.

For centuries, geographical place names have been used to convey more than just geo- graphic origin. Some place names act purely as indicators of a product’s nongeographic quali- ties. For example, no one who orders French fries at an American restaurant believes they are—or should be—made in France.

Sometimes the nongeographic information conveyed by the descriptor is minimal (“Florida oranges” for oranges grown in Florida), while other times it is absolute (“Valencia oranges” for a type of orange, not an orange grown in Va- lencia, Spain, or Valencia, California). Contro- versy arises when a particular place name, such as Champagne, could convey both geographic origin and product characteristics.

When is it not okay for products named af- ter a place to be made somewhere else? That is the questions at the heart of the policy debate over GIs. The United States and the European Union have adopted two very different ap-

proaches to GI protection that rely on differ- ent mechanisms to pursue different goals.

The European model of GI protection is very strict, reflecting the belief that the link between place and quality—the product’s so- called terroir—is an objective creation of tradi- tional culture and practices. When others use place names in a generic way, they are, in the Eu- ropean view, unfairly usurping the value created in that name by generations of local producers. Supporters claim that strong GI protection is needed to prevent fraud, ensure fairness, and promote economic development.

In truth, Europe’s approach to GI protec- tion mainly serves to privilege traditional pro- ducers at the expense of consumer welfare and economic growth. The connection between quality and origin is often exaggerated by Eu- ropean policymakers, and the level of protec- tion GIs enjoy prevents the flow of accurate information to consumers. Moreover, by in- centivizing traditional production patterns through communal rights, Europe’s GI system directly reduces both innovation and competi- tion in their own market.

For its part, the U.S. government views Eu- rope’s position as a protectionist attempt to control the use of generic terms that correspond to European cities or regions where those prod- ucts were first made. The United States has its own way of protecting GIs, but it does so, with some exceptions, through trademark law rather than a dedicated regulatory scheme. The conse- quence is that many European GIs are not pro- tected in the American market.

The European Union has made the spread of GI protection a key trade policy priority. EU policymakers want their robust approach to GI protection adopted by the World Trade Organization (WTO), and have had some suc- cess winning strong protections for their most prominent GIs in a variety of bilateral trade agreements. The United States has resisted those efforts directly at the World Trade Orga- nization and indirectly by promoting alterna- tive rules in its own free trade agreements.

The debate over GI protection is taking on greater importance now that the European

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“There are many geographic brands in the United States that receive trademark protection.

Union and United States are working to estab- lish the Transatlantic Trade and Investment Partnership (TTIP). The question of how to protect GIs immediately became one of the most contentious issues in the negotiations.

The United States should fight against Eu- rope’s attempt to spread its GI protections around the globe. This means, first, resisting efforts to expand the mandate for GI protec- tion at the WTO. Second, the United States should, like it did in the Trans-Pacific Partner- ship (TPP), secure open markets for generically branded products within regional and bilateral agreements. Finally, and most importantly, U.S. negotiators should make it clear that GIs will not be a subject for negotiation in TTIP.

THE U.S. APPROACH Sometimes geographic terms convey both

geographic and nongeographic information about products to consumers. It is not un- reasonable for governments to ensure that regional producers can use GIs as a branding strategy by protecting such brands from imita- tion or misuse. The United States does a pretty good job of achieving that goal by protecting GIs through trademark law.

Trademark law confers to producers exclu- sive rights in their brands with the ultimate goal of preventing consumer confusion in the marketplace. The test for trademark infringe- ment is “likelihood of confusion,” and the law does not protect marks that are merely de- scriptive or generic terms for products.2

The U.S. Patent and Trademark Office gen- erally prohibits the registration of place names as part of a trademark if they are geographi- cally descriptive or misdescriptive.3 Thus, a company isn’t normally allowed to register a name like “Chicago mattresses” because that would enable the company to prevent Chi- cago-based mattress makers from describing the geographic origin of their product. How- ever, geographic signs may be protected if “it is clear that they are meant to convey some meaning other than geographic origin.”4 As a result, there are many geographic brands in

the United States that receive trademark pro- tection—Philadelphia for cream cheese, Swiss Army for knives and luggage, Amazon for on- line shopping.

While trademark law is generally concerned with protecting the use of brands that iden- tify a single producer, regional groups can also use the system to protect a shared geographic brand. Regional producer groups can register a collective mark or (more commonly) a certifica- tion mark. A registered certification mark can be used by a company to show that its product meets the standards established by the owner of that mark. The owner of a certification mark may not produce the product or use the mark itself. American consumers are used to seeing nongeographic certification marks on all sorts of products. Examples include the Under- writers Laboratories’ “UL” symbol, the Good Housekeeping Seal, Fair Trade Certified, and various kosher food certifications.

The owner of the certification mark allows producers to use the mark only if they meet certain established criteria. The purpose of the mark can be “to certify [1] regional or oth- er origin, [2] material, mode of manufacture, quality, accuracy, or other characteristics of such person’s goods or services or [3] that the work or labor on the goods or services was per- formed by members of a union or other orga- nization.”5 Registered certification marks are currently being used to protect both Ameri- can GIs (Idaho potatoes) and foreign GIs (i.e., Roquefort cheese, Parmigiano-Reggiano cheese, Egyptian cotton) in the U.S. market.

Protecting GIs through certification marks offers two important features that make it somewhat comparable to the European ap- proach (discussed below). The first is that cer- tification marks can be registered even if they are geographically descriptive. That is, the place name does not need to carry “secondary meaning” in the eyes of consumers as it would for regular trademark protection.6

Second, protecting GIs through certifica- tion marks facilitates the use of the mark as a method of quality control. Many geographic certification marks require users to make their

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“At the heart of Europe’s approach to geographical indication protection is the idea of terroir—that there is an essential nexus between a product’s characteristics and the place it was made.

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products not only in a particular place but ac- cording to specific standards. Some of them, in fact, are owned by government agencies, which can impose standards directly through law. Generally, though, protecting GIs through trademark law leaves much of the quality con- trol and enforcement activities in the hands of private parties. The European approach, in contrast, involves a much more aggressive role for government.

The main complaints that European poli- cymakers and industry representatives have about the U.S. system are that not enough Eu- ropean GIs are protected and that securing and enforcing GI rights in the United States is too expensive. Many of the GIs that Europe wants protected in the United States, however, are not protectable under U.S. law because in the United States they are generic names for types of food.

THE EUROPEAN APPROACH European GIs may be backed by centu-

ries of tradition, but the current system of GI protection is a fairly modern institution. The first mention in an international treaty of “ap- pellations of origin” as something worthy of protection was the Paris Convention for the Protection of Intellectual Property in 1883, al- though that treaty did not define appellations of origin or impose any specific obligations.7 The substance of GI law was developed in France in the early 20th century, driven largely by a desire to protect domestic producers in an increasingly international wine market.8

At the heart of Europe’s approach to GI protection is the idea of terroir—that there is an essential nexus between a product’s char- acteristics and the place it was made. French appellations of origin are about more than just preventing false advertising. The policy is driven by the goal of preserving the reputa- tion and character of French regional wineries. Indeed, GIs are one part of a comprehensive quality-control scheme that imposes specific production standards for producers of each appellation. That means champagne is not

merely wine grown in the Champagne region, but wine grown in the Champagne region ac- cording to specific practices laid down in law.

Today, the French model has become the standard European approach. Nearby markets with traditional wine industries such as Italy, Spain, and Portugal quickly adopted their own version of appellation protection. The Eu- ropean Union allows for the registration of a union-wide GI known as a Protected Designa- tion of Origin (PDO). Many cheeses imported from Europe and sold in U.S. grocery stores carry the PDO label.

National and international laws on GI protection vary to some degree, but there are central components of what can be called Europe’s approach to GI protection that are found in all of the jurisdictions that follow the model. The first is the terroir element: an es- sential land-qualities nexus that must exist for a GI to be protected. Article 22 of the WTO Agreement on Trade Related Aspects of Intel- lectual Property Rights (TRIPS) defines GIs as “indications which identify a good as originat- ing in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin.”9 The European Union’s GI regulation spells it out a bit more as “the name of a region, a specific place or, in exceptional cases, a coun- try, used to describe an agricultural product or a foodstuff . . . the quality or characteristics of which are essentially or exclusively due to a particular geographical environment with its inherent natural and human factors.”10

The second essential feature is the inclusion of mandatory product standards for users of the GI. That is, producers must not only be located in the delimited region, they must also conform to prescribed production practices and quality standards in order to use the GI label. The stan- dards of production for Parmigiano-Reggiano cheese, for example, dictate how many hours per day farmers can milk their cows and how the milk must be stored, delivered, and pro- cessed. One typical provision of the standards states, “A portion of the milk from the morn-

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“The focus is not on consumer perception but on ensuring that all commercial value contained in the geographic brand is captured by the protected producers.

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ing milking, up to maximum of 15%, may be set aside to make cheese the following day. In this case, the milk shall be kept at the dairy in spe- cial steel containers; if chilled, its temperature may not be lower than 10ºC.”11 Then there are specifications for the final product’s appear- ance, aroma, and texture.

The third essential feature of the European approach is absolute protection against unau- thorized use. Unless you meet the geographic and regulatory requirements of the law, you may not use a protected GI to market your product even if there is no likelihood of confusion as to the source. The European Union’s GI regula- tion provides a thorough list of prohibitions:

Registered names shall be protected against:

a. any direct or indirect commercial use of a registered name in respect of products not covered by the registration in so far as those products are comparable to the products registered under that name or in so far as using the name exploits the reputation of the protected name;

b. any misuse, imitation or evocation, even if the true origin of the product is indi- cated or if the protected name is trans- lated or accompanied by an expression such as “style,” “type,” “method,” “as produced in,” “imitation,” or similar;

c. any other false or misleading indication as to the provenance, origin, nature or essential qualities of the product, on the inner or outer packaging, advertising material or documents relating to the product concerned, and the packing of the product in a container liable to con- vey a false impression as to its origin;

d. any other practice liable to mislead the consumer as to the true origin of the product.12

The focus is not on consumer perception but on ensuring that all commercial value con- tained in the geographic brand is captured by the protected producers. Others are not al-

lowed to “exploit the reputation of the pro- tected name” or use it in ways that disassociate the place name from the geographical origin of the individual product being sold. The conse- quence of these prohibitions is that registered GIs are protected from becoming generic.13

GEOGRAPHICAL INDICATION PROTECTIONISM

The most common and consistent complaint from U.S. industries and policymakers about Europe’s GI scheme is that it is protectionist. Opponents claim that Europe simply wants to protect traditional farming interests from the competitive forces of globalization and econom- ic progress.14 There’s little doubt that strong GI protection benefits the traditional producers it privileges but, like all forms of rent-seeking, it does so at the expense of economic growth, competition, and consumer choice.

Nevertheless, when European policymak- ers try to sell the European model of GI protec- tion to their counterparts across the Atlantic and around the world, they argue that strong GI protection universally furthers the public interest. They argue that Europe’s GI system protects consumers by preventing fraudulent advertising; that generic uses of place names unjustly violate the intellectual property rights of traditional producers; and that GI protec- tion promotes economic growth and develop- ment. As explained below, each of these argu- ments is misleading and inadequate to justify Europe’s model of GI protection.

Not Good for Consumers A central part of the GI argument is that

strong protection is needed to prevent bad actors from deceiving the public.15 To be sure, there are criminals out there who fraudulently label counterfeit products. But the purpose of GI protection is simply not to fight against fake products or deceptive advertising. Those behaviors are already proscribed by other laws that target fraudulent labeling in general.

The function of GI protection is to prevent use of a place name by legitimate competitors

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“By exaggerat-ing the impact of terroir, geographical indication protection serves to limit the globalization of wine and cheese production.

employing the name as a generic descriptor for their product. That’s why European law pro- tects against uses that are not misleading. Re- member that GIs cannot be used by unauthor- ized producers “even if the true origin of the product is indicated or if the protected name is translated or accompanied by an expression such as “style,” “type,” “method,” “as produced in,” “imitation,” or “similar.”

In other words, uses of a GI that have abso- lutely no chance of misleading consumers be- cause they are used with words that clarify their generic nature are still prohibited. Expressions like “California champagne” or “parmesan-style cheese” are not allowed. Also prohibited is the use of flags or monuments or even picturesque village scenes on packaging if the product doesn’t come from the place alluded to by the image.

Prohibiting these uses does nothing to promote the interests of consumers or ensure the flow of accurate information. Instead, GI protection enables producers to maximize consumer association of the place name with the product’s nongeographic qualities without worrying that the term will become generic.

The reason GIs ever need protection is be- cause they convey both geographical origin and product characteristics. If they did not convey characteristics or quality, they would have no real commercial value. Traditional producers want their place name to carry a strong reputa- tion for quality, but they run the risk that the place name will become synonymous with the quality and less tied to the place. This is particu- larly likely for consumers who don’t even know that the place exists. Americans, by and large, do not know that many of the cheese variet- ies they enjoy, such as gorgonzola or gouda, are named after places, while others, such as moz- zarella, are not.

Advocates say that protection is warranted even without consumer confusion because regional products are imbued with an inimi- table terroir. According to these advocates, if consumers think that parmesan cheese can be made outside of Parma, they are wrong. Generic uses of place names are objectively deceptive and prohibiting their use protects

consumers, in this perspective. Aside from the fact that many place names

are uncontroversially used as generic descrip- tors even in Europe, advocates are guilty of greatly exaggerating the existence and impor- tance of terroir for most products protected by GIs.16 Terroir may be relevant for products that grow out of the ground because of the dif- ferent characteristics imparted by different soils and climes. Winemakers cannot perfectly mimic the growing conditions for grapes in various places around the world in order to ex- actly reproduce famous wines. But the human element of production is just as transferable across space as it is across time.

There is nothing about making Parmigiano- Reggiano that requires that the machines be operated by Italians living in or near Parma, Ita- ly. Perhaps the cheese would taste different if it were made from cows that ate grass grown in a different place, although it’s difficult to believe that any but the most discerning of connois- seurs would notice. Everything else about the production process can be copied in another lo- cation. People who live in different places sim- ply do not have special genetic traits that affect the qualities of cheese they produce. Hundreds of years ago it would be reasonable to assume that traditional know-how would be kept with- in a small geographic area, but in today’s world of fast travel and immediate communication, cheesemakers are perfectly capable and likely to share their special knowledge with people all across the world. The reason that Kraft par- mesan cheese tastes different from traditional Parmigiano-Reggiano is that it is made using different methods—methods that can produce cheese that consumers like at prices they want to pay. Kraft could make its cheese in Emilia- Romagna, just as traditional Italian producers could make their cheese in Illinois.

By exaggerating the impact of terroir, GI protection serves to limit the globalization of wine and cheese production. If grazing cattle on a particular hillside adds value, then the ad- vantage is in the production of milk, an inter- mediate product that can be traded. Incentiviz- ing a production model in which all parts of the

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“Traditional producers are better understood as the beneficiaries of protectionist regulation rather than the owners of a property right.

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production process occur within a delimited area limits the creation of global supply chains or even urban relocation—it probably makes more economic sense to build your cheese fac- tory in the city instead of out in the country— which could reduce production costs.

Efforts to prevent economic globalization in order to promote domestic jobs and pre- serve key industrial sectors are rightly con- demned as protectionist. Excessive GI protec- tion should be as well.

Finally, another reason that fraud prevention and an objective land-qualities nexus don’t jus- tify current levels of GI protection in Europe is that many GIs are not, in fact, the names of the places where the product is made. The EU pro- tects “feta” as a GI for cheese from Greece, but you won’t find feta on a map because it is, in fact, just the name of a type of cheese. Stilton cheese may legally be made in one of three counties out- side of Stilton, England, but not in Stilton itself.17 There are numerous other GI-protected cheeses that are no longer—or have never been—made in the town whose name they bear.18 GI protection schemes that impose misleading and confusing rules actually hinder the public’s ability to under- stand the geographic origin of products.

Not Intellectual Property Supporters claim that GIs are a distinct

form of intellectual property that belong to traditional producers, which is infringed when place names are used as generic terms.19 Com- paring GIs to intellectual property is an under- standable position considering that GI law de- cides who has the right to extract value from an intangible asset through exclusive use. But the differences greatly outweigh the similarities.20

The basic economic case for patents and copyrights is that monopoly privileges are need- ed to ensure that people have adequate incentive to invent new technologies or create art. They further innovation by conferring private prop- erty rights in a competitive market place.

GI protection does just the opposite. It re- wards companies who maintain old ways of do- ing things by making it more difficult for inno- vative competitors to communicate product

qualities to consumers, and it directly impedes innovation and competition by privileging es- tablished firms using traditional methods.

The intellectual property argument is of- ten used to claim that traditional producers deserve GI protection because generic uses misappropriate the reputation built up by countless generations of local producers. But this moral argument for GI protection rests on the thoroughly illiberal idea that ancient economic arrangements should determine the rights and obligations of groups of people.

Traditional producers are better understood as the beneficiaries of protectionist regulation rather than the owners of a property right. GIs are not alienable and cannot be used to exclude qualifying producers. Moreover, the communal nature of GI rights eliminates their value as a driver of innovation. Because they are enjoyed by a group of producers who would otherwise compete against each other, GIs actually reduce competition. Once all the producers in a particu- lar country are divided by region and style, the in- dustry 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 qual- ity. In short, rather than reward innovative pro- ducers for making something new, GI protection privileges traditional producers for doing some- thing old by preventing innovative producers from efficiently communicating product charac- teristics to the public.

Not Good for the Economy In their bid to spread their excessive form of

GI protection around the world, European of- ficials have argued that strong GI protection is good economic policy, not just for Europe, but for everyone. One argument supporters make is that other countries’ producers would benefit from protection of their own GIs to distinguish their own regionally distinctive products.21 But very few, if any, non-European countries have a large number of regionally distinctive products named after those regions where producers are losing profits because competitors are using the name as a generic descriptor.

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“Rather than promote economic progress and improve the lives of poor people, geographical indication protection has been found to reinforce existing economic arrange- ments.

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Supporters of strong GI protection point out that some American producers that rely on geo- graphic brands struggle to prevent foreign coun- terfeiting or misuse. Indeed, some U.S. industry groups support the European approach and have lobbied for its adoption in the United States.22

The biggest problem with the argument that American producers could benefit from GI protection is that the most famous Ameri- can geographical indications do not face the problem of genericization. The place names most likely to become common names for types of food are those that carry a strong as- sociation with particular characteristics rather than a simple reputation for quality. “Napa Val- ley” is a place in the United States known for its winemaking, but it is not associated with a particular kind or style of wine. Even more so, “Idaho” potatoes are simply potatoes that come from Idaho. Consumers may, for some reason, think those are better potatoes, but there’s no possibility that consumers will think the term could apply to potatoes grown outside of Idaho.

Producers in those regions are surely inter- ested in fostering consumers’ association be- tween quality and origin. They will likely have to deal with counterfeiters and competitors try- ing to pass off their products as from the region. But those goals don’t line up with the high level of protection afforded under the European ap- proach, which is designed to prevent generic uses rather than false or misleading ones.

Supporters also claim that strong GI protec- tion promotes economic development in poor countries. The European Commission, for ex- ample, states that GIs “can create value for local communities through products that are deeply rooted in tradition, culture and geography. They support rural development and promote new job opportunities in production, process- ing and other related services.”23

The evidence, however, does not support this claim. Numerous studies seeking to deter- mine how GI protection can help agricultural producers in the developing world have found that GI regimes have not helped farmers un- less they are coupled with other forms of gov- ernment support.24

The empirical evidence against GIs as a de- velopment tool should not be surprising. The intentional effect of GI protection in Europe is to prevent modernization of traditional food markets. In this way, they operate like agriculture subsidies by insulating producers from competitive market forces.

Protecting GIs not only preserves tradi- tional products but traditional ways of life in rural communities. That’s because GIs provide a valuable incentive to maintain old-style pro- duction processes and locations. Rather than promote economic progress and improve the lives of poor people, GI protection has been found to reinforce existing economic arrange- ments and the social hierarchies and institu- tions threatened by economic change.25 This is just as true in Africa as it is in Europe.

HOW TO COUNTER EUROPE’S GEOGRAPHICAL INDICATION AGENDA

The battle over GI protection is going to take place primarily on three fronts. The first is at the multilateral level, where the European Union and some of its key member states hope to enshrine their form of GI protection into international norms. The TRIPS Agreement currently reflects a compromise on GIs from the Uruguay Round of trade negotiations. It is vital that the United States and other like- minded countries oppose efforts to strength- en GI disciplines in any future WTO nego- tiations. The United States should also put forward proposals to scale back existing rules that privilege Europe’s protectionist agenda.

The second front concerns the rules for GI protection contained in regional and bilateral trade agreements. The European Union has been using trade agreements to advance its agenda one foreign market at a time, hoping to eventually establish favorable international norms. At the same time, the United States has been using its own trade agreements, often with the same countries, to defend market ac- cess for U.S. products using terms that are ge- neric in that market. The United States wisely

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“European negotiators know that geographical indication protection is an area where cooperation with the United States is highly unlikely.

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used the TPP as an opportunity to fight back against excessive GI protection by blocking the European Union’s agenda in other TPP member countries and securing coexistence of GIs and trademarks in the region. The Unit- ed States should insist that any future trade agreements with non-European countries fol- low the TPP’s approach to GIs.

The third, and most important, venue for the United States to prevent the spread of GI protection into the U.S. market is the TTIP, a potential free trade agreement between the United States and the European Union. Eu- ropean negotiators know that GI protection is an area where cooperation with the United States is highly unlikely. Nevertheless, they are under great pressure to make some progress on the issue. U.S. negotiators need to be reso- lute in rejecting compromise offers that ap- pease powerful U.S. industries at the expense of the public. The United States must not ac- cept even a partial or heavily limited list of GIs that could push the American market closer to the European model of anti-competitive, geography-based marketing practices.

Global Norms at the WTO The current provisions on GI protection

in the TRIPS Agreement reflect a compro- mise between the European and American approaches. As noted above, Article 22 de- fines GIs according to the European model, placing the emphasis on terroir as the basis of GI protection. But Article 22.2 lays out a level of protection that depends on consumer per- ception:

In respect of geographical indications, Members shall provide the legal means for interested parties to prevent:

(a) the use of any means in the designation or presentation of a good that indicates or suggests that the good in question originates in a geographical area other than the true place of origin in a manner which misleads the public as to the geograph- ical origin of the good; (emphasis mine)26

This changes in Article 23, which establish- es a stricter level of protection for wines and spirits that is more in line with the European approach:

Each Member shall provide the legal means for interested parties to prevent use of a geographical indication identify- ing wines for wines not originating in the place indicated by the geographical indi- cation in question or identifying spirits for spirits not originating in the place indicated by the geographical indication in question, even where the true origin of the goods is indicated or the geographi- cal indication is used in translation or ac- companied by expressions such as “kind,” “type,” “style,” “imitation” or the like.27

Article 23.4 provides for the establishment of an international wine and spirit GI registry at the WTO:

In order to facilitate the protection of geo- graphical indications for wines, negotia- tions shall be undertaken in the Council for TRIPS concerning the establishment of a multilateral system of notification and registration of geographical indications for wines eligible for protection in those Members participating in the system.28

The concept of an international registry is not new. The highly restrictive Lisbon System for the International Registration of Appella- tions of Origin allows any of its 27 members to place a GI on an international registry of GIs, which all members are then required to pro- tect. Twenty years after TRIPS was signed, the WTO has still not established a wine and spirit GI registry.

Finally, and most importantly, there is an ex- ception to both Article 22 and Article 23 for ge- neric terms. Article 24 allows a WTO member not to protect a GI when its use is “customary in common language as the common name for such goods or services in the territory of that Member.”29

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“The United States should put its system forward as the ideal form of protection that all countries should follow.

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The European Union wants to strengthen TRIPS GI rules by extending the higher pro- tection for wine and spirit GIs to all GI prod- ucts.30 This would mean that the consumer perception standard in Article 22.2(a) (“in a manner which misleads the public”) would be eliminated and all GIs would be protected from nonconfusing uses (“even where the true origin of the goods is indicated or the geo- graphical indication is used in translation or accompanied by expressions such as “kind,” “type,” “style,” “imitation,” or the like”).

The EU has also proposed the creation of a WTO-wide registration system for GIs. Every WTO member would be required to protect any qualifying GI placed on the registry unless that member actively “lodges a reservation” within 18 months. Reservations could only be made on the grounds that the GI is not valid or is a generic term. Also, “the reservation shall identify the applicable ground or grounds and be duly substantiated.”31

The United States has resisted and should continue to resist all of these efforts. As noted at length above, Europe’s approach to GI protec- tion that prohibits non-confusing uses of place names is conceptually unjustified and economi- cally harmful. An international mandate to ex- tend that level of protection to all products would benefit established producers of traditional prod- ucts at the expense of everyone else.

The United States has proposed that if a WTO GI registry is created it must not impose any obligations on nonparticipating members. This is a direct rebuttal to the EU’s proposal to require WTO members to file reservations against listed GIs. But a better position would be for the United States to block the creation of any registry, because the existence of a reg- istry privileges those countries that offer sui generis protection of GIs through a dedicated regime over those countries that protect GIs through a decentralized trademark system.

It is not enough simply to insist that trade- mark-style protection be allowed to coexist with the European model; the United States should put its system forward as the ideal form of pro- tection that all countries should follow. The cre-

ation of an international GI registry at the WTO would thwart such an effort by helping the EU enshrine its system as an international norm.

The United States ought to forward its own proposal to improve the TRIPS Agreement’s GI provisions. This could include the removal of Article 23 entirely, so that all GIs are entitled to the same level of protection, one contingent on whether consumers are actually misled. An- other simple and very effective proposal would be to amend Article 24, which currently allows members not to protect generic terms, so that it would require that members not protect ge- neric terms.

Fighting Geographical Indications in the TPP

Unable to get strong GI norms mandated through the WTO, the EU has turned to bilat- eral trade agreements to push a more targeted agenda. Like the United States, the EU has negotiated dozens of free trade agreements with countries around the world. Those agree- ments typically include a list of European GIs that the other country is required to protect. The EU is perfectly willing to protect the oth- er country’s GIs if it has any.

Europe’s trade agreements do not always require a level of protection equal to that pro- vided in Europe, but the scope of protection is generally higher than what is required under the TRIPS Agreement. The phenomenon of TRIPS -plus obligations in trade agreements is rightfully controversial in areas such as pat- ent and copyright policy. Europe’s TRIPS - plus position on GIs should raise special con- cern because it applies only to the EU-origin GIs imposed through the agreement. That is, European trade agreements may require the other country to protect Europe’s GIs more strongly than those from a third country, a potential violation of TRIPS Article 4 (Most- Favored-Nation Treatment).

Europe’s actions have prompted a curi- ous sort of proxy war with the United States over GI norms in bilateral trade agreements. Europe’s agenda disadvantages American pro- ducers of generic products by making it more

11

“The best way to ensure that countries maintain a liberal geographical indication system is to include a broad prohibition against protecting generic names.

”

difficult for them to sell in those markets us- ing names consumers understand. More im- portantly, though, the spread of Europe’s GI- based marketing model acclimates consumers and businesses toward a less competitive and innovative environment for food products.

So even though the European Union is not in the TPP, there was good reason for the United States to make GI liberalization a ma- jor issue in the negotiations. Removing regu- latory barriers to trade, such as excessive GI protection, that incentivize local production at the expense of consumer welfare and eco- nomic growth serves the broad goals of the TPP in facilitating cross-border supply chains. The goal should be to block Europe’s ability to further spread its GI protections through its own bilateral agreements in the region.

The best way to ensure that countries maintain a liberal GI system is to include a broad prohibition against protecting generic names. That simple prohibition would strike at the heart of the problem that Europe’s GI agenda poses for international trade. It would also let countries maintain whatever GI regu- latory scheme they want as long as it doesn’t restrict the use of common food names.

The TPP’s provisions on GI protection aren’t quite that simple, but they do take on the problem of generic GIs. Article 18.32 of the TPP provides that an interested party can op- pose a new GI or seek to cancel an existing one on the grounds that its registration is “likely to cause confusion with a pre-existing trademark or geographical indication” or “the geographi- cal indication is a term customary in common language as the common name for the relevant goods in that Party’s territory.”32

These are essentially mandatory excep- tions to GI protection that ensure that U.S. companies can challenge any improperly pro- tected GI in another TPP country. More im- portantly, it introduces the element of con- sumer perception and confusion into the GI regimes of all 12 members.

The EU already has trade agreements man- dating strong protection of European GIs in a number of TPP countries, including Canada,

Mexico, Peru, and Chile. For those members, a TPP GI cancellation provision could poten- tially place them in violation of their agree- ments with the EU that mandate protection even against generic use.

So, there was debate among negotiators over whether the past agreements should be outright exempt from the cancellation pro- cedures.33 A number of countries that are cur- rently negotiating free trade agreements with the EU, notably Japan and Vietnam, wanted any GIs added as part of an international agreement made during the first three years of TPP to be exempt from the cancellation procedures. Not being constrained by TPP rules against generic GIs would strengthen their ability to make of- fers to the EU in trade negotiations.34

In the final text of the TPP, the parties agreed to exempt from the cancellation pro- cedures all GIs added as part of agreements that were completed before the TPP was com- pleted, ratified before the TPP was ratified, or entered into force before the TPP entered into force.35 This may end up including GIs in EU agreements with Japan and Vietnam, depend- ing on how quickly those are wrapped up rela- tive to the TPP.

Expanding the TPP’s GI disciplines is one of many reasons why the United States should welcome other countries to join the agree- ment in the near future.

High Stakes for the Transatlantic Trade and Investment Partnership

If completed, the Transatlantic Trade and In- vestment Partnership promises to be the single most important bilateral free trade agreement in history. The United States and the European Union are not only two of the largest econo- mies in the world, but major trading partners who already experience significant commercial interdependence. The idea of TTIP has broad support on both sides of the Atlantic, but ac- tually reaching an agreement will be a difficult task. Both governments have listed as a main priority the elimination of regulatory policies that the other government is highly unlikely to reform through trade negotiations.

12

“It’s important that U.S. negotiators not be tempted by apparent compromise offers.

”

Geographical indications fit into this cat- egory as a key offensive priority of the European Union that has received stiff opposition from the United States. As they have in all other recent bi- lateral negotiations, the EU wants to use TTIP to secure protection for certain specific GIs in the wine, spirits, meat, and cheese sectors. In addi- tion to their list, the EU contends that the cur- rent U.S. system of protecting GIs through trade- mark law is inadequate. They claim the system is too costly for foreign producers to use, ineffec- tive at enforcing existing rights, and, of course, that it only protects terms that are not generic.

The rhetoric on both sides has become quite heated. Cecilia Malmström, the Europe- an Commissioner for Trade, has lamented that Italian cheeses are being “undermined by infe- rior domestic imitations” in the United States and vowed to solve the problem through TTIP by “getting a strong agreement on geographical indications.”36 On the opposite side, Rep. Paul Ryan (R–WI), current speaker of the U.S. House of Representatives and, before that, chairman of the House Ways and Means Committee that oversees trade matters, has condemned Euro- pean GIs as trade barriers and vowed that “for generations to come, we’re going to keep mak- ing gouda in Wisconsin. And feta, and cheddar and everything else.”37 It’s difficult to see a path forward on the issue that will satisfy both sides.

There is much more at stake for the United States in the TTIP negotiations than in the TPP, because TTIP rules will directly affect American consumers. Even advocates of strong GI protection recognize that taking common food names off the shelf will initially cause con- sumer confusion as companies try to figure out what to call their wines and cheeses. It may be difficult to convince the American public that the TTIP is worthwhile if it involves control- ling the use of language for the express purpose of furthering the economic interests of ineffi- cient foreign producers of high-class products.

It’s worth remembering that, assuming it be- comes a member of the TPP, the United States will be bound to deny or cancel protection for any GI that is a common name, even if that GI is added pursuant to an international agreement.

Despite the legal and political impossibility of securing its GIs in the United States, EU nego- tiators still consider GI protection a priority for the TTIP. It’s important that U.S. negotiators not be tempted by apparent compromise offers.

Going through the Food and Drug Administration

One early proposal the EU came up with was to protect GIs through existing U.S. regu- latory structures.38 In particular, they’ve of- fered the idea of including geographic criteria within “standards of identity” enforced by the U.S. Food and Drug Administration. Stan- dards of identity are a form of regulation that dictates what qualities a product must have in order to be called something. For example, the FDA recently told a vegan mayonnaise maker that it could not label its product “mayon- naise” because it lacked eggs, and under feder- al rules a product isn’t mayonnaise if it doesn’t have eggs.39

Standards of identity are a reasonable fit for GI protection, which as explained above is as much about regulating product characteristics as it is about truth in labeling. As with GI rules, standards of identity are a common avenue for rent-seeking businesses to disadvantage com- petitors through lobbying and legal tactics. The FDA’s mayonnaise decision came not long after Hellmann’s filed a lawsuit against a vegan com- petitor over the same issue.40 In another per- tinent example, PepsiCo has lobbied for stan- dards of identity for hummus that correspond to the traditional products it offers under its Sa- bra brand in order to reduce competition from other, more creative, companies.41

Making it easier to use existing regulatory mechanisms to enact GI regulations would have the same effect as a direct GI protection scheme. The United States should reject this sort of ap- proach with the same conviction as it would re- ject adopting Europe’s GI regime outright.

Tinkering with the List It may be tempting for U.S. TTIP negotia-

tors to follow the model used in the Canada- EU Comprehensive Economic and Trade

13

“Importing the culture of privilege and cartel status enjoyed by Europe’s traditional food and wine producers is not something the United States should do even if some businesses would find it appealing.

”

Agreement (CETA). In CETA, Canada ac- cepted an obligation to protect the EU’s list of GIs, but with limitations on some of the more onerous ones. In particular, five generic cheese names—asiago, feta, fontina, gorgonzola, and muenster—are still allowed “when the use of such terms is accompanied by expressions such as ‘kind,’ ‘type,’ ‘style,’ ‘imitation,’ or the like, and is in combination with a legible and visible indication of the geographical origin of the product concerned.”42 Those modifiers are not permitted for any other GIs included in the agreement. The agreement also allows Canadian companies that have used those and three other generic names for a certain num- ber of years to continue using them under a series of complex grandfather clauses.

The reason the United States might be willing to accept this approach in the TTIP is that it enables the U.S. dairy industry to secure carve-outs that will reduce its self-interested opposition to the entire GI agenda. That is, if the main commercial opponents of GI protec- tion are bought off with complex exceptions, the rest of the agenda can squeak through. This is a common tactic in trade negotiations.

The Europeans might also find this ap- proach palatable because, although it leaves some prominent GIs unprotected, it still moves policy in their preferred direction. A similar outcome was reached in the 2006 wine agree- ment between the United States and the Euro- pean Union that established semi-generic wine categories with rules very similar to CETA’s cheese exceptions.43 Rather than settle the dis- pute over wine names, that agreement merely emboldened Europeans to demand more re- strictions in future negotiations. Some Ameri- can wine makers have even decided that a Eu- ropean-style GI system would benefit them.44

U.S. negotiators should be very wary of this tactic. Opposition to Europe’s GI agenda should not hinge solely on the interests of one or two industry groups. Even if American pro- ducers across the board wanted strong GI pro- tection, the interests of consumers, free trade, and economic dynamism would demand that the United States avoid giving in to European

demands. Importing the culture of privilege and cartel status enjoyed by Europe’s tradi- tional food and wine producers is not some- thing the United States should do even if some businesses would find it appealing.

CONCLUSION The protection of GIs beyond what is need-

ed to prevent consumer confusion does not serve the public interest. Europe’s strong GI re- gime works to reduce innovation and economic growth while insulating traditional producers from competition among themselves and with the rest of the world. U.S. policymakers should avoid adopting the European model for any in- dustry or product group. Instead, they should continue to rely on trademark law as a well-bal- anced approach to protecting consumers and producer interests in a competitive market.

It is not enough, however, that the United States avoid the European model. It must also actively fight against European efforts to spread its model around the world. Multilat- eral, regional, and bilateral trade agreements are fronts in a battle that pits protection of traditional production patterns against com- petitive innovation and consumer choice. The United States is on the right side of this con- flict and should continue its efforts.

NOTE 1. Merriam-Webster’s School Dictionary, 2015 ed., s.v. “champagne”; Merriam-Webster.com, s.v. “cham- pagne,” http://www.merriam-webster.com/diction ary/champagne.

2. See 15 U.S.C. §§1052, 1114.

3. U.S. Patent and Trademark Office, Trademark Manual of Examining Procedure, §1210, http:// tmep.uspto.gov.

4. U.S. Patent and Trademark Office, Trademark Manual of Examining Procedure, §1210.02(b)(i).

5. 15 U.S.C. §1127.

14

6. U.S. Patent and Trademark Office, Trademark Manual of Examining Procedure, §1306.02.

7. Dev Gangjee, Relocating the Law of Geographical Indications (Cambridge, UK: Cambridge Univer- sity Press, 2012), pp. 21–22.

8. Ibid., pp. 80–83.

9. “Agreement on Trade-Related Aspects of Intel- lectual Property Rights,” Article 22, https://www. wto.org/english/docs_e/legal_e/27-trips_04b_e.htm.

10. Council Regulation (EC) no. 510/2006, Article 13, March 20, 2006, on the protection of geographical indications and designations of origin for agricultur- al products and foodstuffs, http://eur-lex.europa.eu/ legal-content/en/ALL/?uri=CELEX:32006R0510.

11. Parmigiano-Reggiano Cheese Consortium, “Specification of the Parmigiano Reggiano Cheese,” http://storage.parmigiano-reggiano.it/ file/Parmigiano_Reg giano_specification_29_ August_2011_en.pdf.

12. Council Regulation (EC) no. 510/2006, Ar- ticle 13, March 20, 2006, on the protection of geographical indications and designations of origin for agricultural products and foodstuffs, h t t p : / / e u r- l e x . e u r o p a . e u / l e g a l - co n te n t / e n / ALL/?uri=CELEX:32006R0510.

13. Ibid. Section 2 of Article 13 of the regulation, in fact, specifically states, “Protected names may not become generic.”

14. William New, “Stakeholders Give Opposing Views on GIs in EU-US Trade Agreement,” Intel- lectual Property Watch, December 2, 2015, http:// www.ip-watch.org/2015/02/12/stakeholders-give- opposing-views-on-gis-in-eu-us-trade-agreement/.

15. European Commission, “Geographical-indi- cations,” http://ec.europa.eu/trade/policy/access- ing-markets/intellectual-property/geographical- indications/.

16. Justin Hughes, “Champagne, Feta, and Bour-

bon: The Spirited Debate about Geographical In- dications,” Hastings Law Journal 58 (2006): 364–68.

17. Matthew J. Rippon, “What Is the Geography of Geographical Indications? Place, Production Methods and Protected Food Names,” Area 46 (2014): 154–62.

18. See, for example, Rebecca Helm-Ropelato, “The Birthplace of Gorgonzola. Maybe.” Chris- tian Science Monitor (February 2, 2005), http:// www.csmonitor.com/2005/0202/p11s02 -lifo. html.

19. European Commission, “Geographical-indica- tions.”

20. Teshager W. Dagne, “The Identity of Geo- graphical Indications and Their Relation to Tra- ditional Knowledge,” WIPO Journal 5 (2014): 142–44.

21. European Commission, “Geographical-indi- cations.”

22. See American Origin Products Association, http://www.aop-us.org/.

23. European Commission, “Geographical-indi- cations.”

24. See, for example, Chidi Oguamanam and Teshager W. Dagne, “Geographical Indication (GI) Options for Ethiopian Coffee and Ghanian Cocoa,” in Innovation & Intellectual Property: Col- laborative Dynamics in Africa, ed. Jeremy de Beer, Chris Armstrong, Chidi Oguamanam, and To- bias Schonwetter (Claremont, South Africa: UCT Press, 2014), pp. 77–99; Andrea Zappalaglio, “The Protection of Geographical Indications: Ambi- tions and Concrete Limitations,” Edinburgh Law Review 2 (2015): 89–102.

25. Rosemary J. Coombe, Sarah Ives, and Daniel Huizenga, “Geographical Indications: The Prom- ise, Perils and Politics of Protecting Place-Based Products,” in The SAGE Handbook of Intellectual Property, ed. Matthew David and Debora Halbert

15

(London: SAGE Publications Ltd., 2015), 207–20.

26. “Agreement on Trade-Related Aspects of Intellectual Property Rights,” Article 22, https:// www.wto.org/english/docs_e/legal_e/27-trips_ 04b_e.htm.

27. Ibid., Article 23.

28. Ibid.

29. Ibid., Article 24.

30. World Trade Organization, “Geographical Indications: Communication from the European Communities,” June 14, 2005, http://docsonline. wto.org/imrd/directdoc.asp?DDFDocuments/t/ tn/ip/W11.doc.

31. Ibid., p. 13.

32. Trans-Pacific Partnership, Article 18.32.1(c).

33. “TPP Ministers Fail to Bridge Gaps over GI Rules Aimed at Curbing EU Efforts,” Inside U.S. Trade, November 7, 2014, http://insidetrade.com/ inside-us-trade/tpp-ministers-fail-bridge-gaps- over-gi-rules-aimed-curbing-eu-efforts.

34. Kimberlee Weatherall, “TPP–Section-by- Section Analysis of Some Provisions People Aren’t Talking About,” October 29, 2014, http://papers. ssrn.com/sol3/papers.cfm?abstract_id=2516058, pp. 18–19.

35. Trans-Pacific Partnership, Article 18.36.6.

36. “EU Trade Commissioner Expects Italian Cheese Exporters to Benefit from Lower Tariffs, Strong GI Protections in TTIP,” Cheese Reporter, June 26, 2015, http://npaper-wehaa.com/cheese-

reporter/2015/06/s3/#?article=2545800.

37. Adam Behsudi, “U.S. to Europe: Don’t Move My Cheese,” Politico, June 20, 2015,.http://www. politico.com/story/2015/07/us-to-europe-dont- move-my-cheese-120387.

38. “EU TTIP Proposal on GIs Pushes Other Routes over Trademark Protection,” Inside U.S. Trade, February 6, 2015, http://insidetrade.com/ inside-us-trade/eu-ttip-proposal-gis-pushes-other- routes-over-trademark-protection.

39. Marina Koren, “The True Meaning of Mayon- naise,” The Atlantic, August 25, 2015, http://www. theatlantic.com/national/archive/2015/08/the- true-meaning-of-mayonnaise/402286/.

40. Ibid.

41. K. William Watson, “Are Americans too Igno- rant to Buy Good Mediterranean Food?” Cato@ Liberty (blog), May 23, 2014, http://www.cato.org/ blog/are-americans-too-ignorant-buy-good-med- iterranean-food.

42. “Comprehensive Economic and Trade Agree- ment,” Chapter 22, Article 7.6.1, www.international. gc.ca/trade-agreements-accords-commerciaux/ agr-acc/ceta-aecg/text-texte/22.aspx.

43. See Renée Johnson, “The U.S. Wine Indus- try and Selected Trade Issues with the European Union,” Congressional Research Service, July 24, 2014.

44. See Napa Valley Vintners, press release, “Napa Valley Vintners Joins Prominent International Network of Geographic Indications,” May 1, 2012, http://www.reuters.com/article/2012/05/02/ idUS28885+02-May-2012+BW20120502.

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