Beyond GI

To start the ball rolling, I have been pondering a number of issues around the subject of geographical indications as the process of defining the first round of regional and sub-regional name indications for label purposes is really starting to move now.

With this in mind I felt that it may be useful to try and put the process of setting geographical indications in place with some sort of international context.  Why is this happening? What are the issues? What might it mean for the future?

The following is a version of an essay recently prepared on the subject.  In order to manage size it will be split over 3 posts.

“Beyond GI”

The Impact of Geographic Indications and Corresponding Regulation on Regional Diversity and Consequent Effects on Practices, Markets and Industry Structures

Summary

New Zealand is about to follow Australia and other New World countries in implementing a geographic indications regime.  The pressures that led to the first geographic indications regimes in Europe, in particular passing off and trade mark abuses, are among the reasons New World countries have willingly adopted similar laws.  However, the European experience of geographic indications provides salutary reminders that there are associated risks, especially on market structures.  These risks must be reflected in how implementation is executed in New Zealand, although heading down the geographic indications route will result in greater emphasis on regional over national brand marketing.

Introduction

This paper could arguably be re-titled “Welcome to the New Old World”. When evidence is needed as to the potential impacts of moves to geographical indicator regulations, just as the wine industry’s Old World has provided stylistic guidance in the early phase of industry development, now the Old World also provides not only examples of the potential pitfalls but even more importantly it demonstrates the potential longer-term industry structural consequences.

Australia adopted its Geographical Indications system well before New Zealand, as a direct consequence of the EC/Australia Wine Treaty of 1994, but nevertheless took more than a decade to fully implement this.  Part of the delay was the degree of contention associated with certain specific areas, in particular the dispute over the boundaries of the Coonawarra wine region. 

In the Coonawarra case the issue was whether the geographic designation of the area could, or should, be limited only to those areas with the specific soil type known as Terra Rossa for which the area was particularly well known.  Following a case that reached the High Court of Australia the boundaries that were eventually adopted favoured a broad and inclusive approach, rather than the exclusiveness implicit in a narrow soil-based definition.

As the New Zealand wine industry now moves to agree on its approach regarding how to set regional and sub-regional demarcations for the purposes of the Geographical Indications (Wine & Spirits) Registration Act 2006, it is perhaps timely to consider the “side issues” associated with regional identity in an industry where there is constant competition between the wants and needs of the individual producer and those of that producer’s peers.

 Ultimately, how the industry adopts geographical indication regulation will influence longer-term trends toward regulation in other areas, industry structures and, consequently, industry economics.  Of particular and not to be underestimated importance, is the potential for regional demarcations to become a new marketing paradigm and therefore to progressively overwhelm “Brand New Zealand” in marketing terms, creating increased inter-regional competition for both sales and for promotional dollars and, potentially, redefining the whole drive for sustainability as a market edge.

Starting Rationale

The rationale for implementation of a Geographic Indications regime in New Zealand, extending far beyond simply wine (but where wine, internationally, is the most significant driver for detailed geographic regulation) seems to depend on the viewpoint of those expressing an interest:  for some it is primarily about consumer protection (from geographic “passing off”); for some it is perceived as creating marketing opportunities; and for yet others it is a consequence of external trade barriers and competitive pressures.

It is not at all surprising that there are those within both the Australian and New Zealand industries who consider that legislated geographic indication requirements are the top of the “slippery slope.” Northern hemisphere producers are often reported to express envy at the relative freedom of “New World” producers, who are perceived as having a range of freedoms not only to experiment but to produce wines that would be illegal (or effectively unmarketable) owing to the restrictive production laws of many European countries. 

There is some justification for the view that when European trade negotiators effectively require New World countries to adopt compliant labelling laws, including those governing geographic indications, it is with the expectation that with time it will lead to the tightening of rules.  Even the ossification of some practices may become an effective trade protection mechanism in the longer-term if it blunts those perceived advantages of supposedly “unregulated” producers.

The balancing argument is of course that of consumer protection, and there is clearly evidence from many New World wine countries that there are producers that will not hesitate to seek market advantages from different types of what are popularly regarded as labelling “abuses”, including with regard to regional origins, varieties and blend information. 

The nature of wine production is such that genuinely balancing volumes available for supply with market demand at any given time is extremely difficult, if not in fact impossible, giving rise to the natural temptation to boost production of certain labels to meet financial objectives. Some of those abuses include supplementing production from regions with quality reputations with wine from elsewhere (and sometimes not just supplementing) in order to piggy back on that region’s reputation.

It is not surprising then that most New World countries have accepted geographical indication regulations relatively willingly, given that the rising reputations of many regions are themselves considered worthy of protection just as the Europeans seek to do.

Consequently, it is surmised that as time passes regional structures will take on roles of increasing importance in the development of the industry in New Zealand.  Some of these roles may even be legal or regulatory in nature, requiring local bodies to implement practices they will presently be unaccustomed to, given the potential commercial consequences of this new form of compliance.  Other roles may ride on the back of marketing imperatives as over time it becomes increasingly difficult for the national body, New Zealand Winegrowers, to balance competing industry interests while the already evident trend for regions (and indeed sub-regions) to market themselves becomes widespread. 

However, the regions will increasingly find that these roles involve potential conflicts that may in some cases overwhelm the good intentions of most participants.

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