The release of the New Zealand-European Union Free Trade Agreement (“EU–NZ FTA”), signed on 9 July, reveals the deal struck for sensitive “geographical indications” (“GIs”) between the two parties. It puts pressure on Australian negotiators, embroiled in finalising an Australia–EU FTA and updating the Australia–EU Wine Agreement, concerning the terms on which the Australian companies will still be able to use European GIs… if at all.

The main GIs of concern for Australia and the EU are “prosecco” and “feta”, which the EU wants to reserve for their Italian and Greek producers respectively. Will Australia recognise these GIs and restrict its producers’ usage of them? Will some continuing freedoms or phase-out arrangements, such as grace periods for prior users, be contemplated? Will Australia be able to “buy” better access to EU markets for other products if it concedes to the EU’s demands?

Moulis Legal special counsel Jessica Giovanelli explains what this is all about, and what actually happens when “two tribes go to war” across the trade negotiating table.

Geographical indications - not what your GPS is for

A “geographical indication” is a word or term that can only be used where the product comes from a specific location. GIs are used to protect the reputation of the product and ensure authenticity.

A GI will often be a term that has been in common use, but which originally or traditionally is a geographical name or is associated with a specific region, the classic example being “Champagne”. Trade marks don’t work in this context. They are linked to a specific company and may consist of any mark, whereas GI protection protects a class of producers in a particular place. However, the EU–NZ FTA borrows a little from trade mark law in allowing producers that have previously used a GI to keep using it – for a while.

Say “cheese”, not “feta”

The EU–NZ FTA will protect the use of the word “prosecco” for Italian producers. This would mean that the word “prosecco” may only be used (for example, on a label) for wine from prosecco or glera variety grapes grown in a specific region in Italy. New Zealand will have to provide legal means to object to and to prevent any other use of the GI, or anything that misleadingly suggests that the product comes from Italy when it does not.

Notably, the treaty includes a grace period for prior users, so that a New Zealander that has “made commercial use of that term in a continuous manner since before the date of entry into force” of the EU–NZ FTA will be allowed to continue to use “prosecco” for a period of five years. This will need to be accompanied by a visible indication of the geographical origin. After that phase-out period, the GI will be reserved only for wine from the Italian growing region.

With respect to dairy, the EU–NZ FTA will also protect the terms “parmesan” and “gruyere” for specific EU producers. Here there will be a broader continued use right for New Zealanders, which is that producers will be allowed to continue to use those terms indefinitely, as long as the producer concerned has used it “in good faith for a period of at least five years before the date of entry into force”. This authorisation for prior users will provide some comfort for existing NZ producers. However, the “grandfathering” effect will make it difficult for new entrants to the market to describe what they are offering. As well, when the terms are used there will need to be a visible indication of the geographical origin, the definition of which is not immediately apparent. Implementation under other world treaties has involved regulations describing the appearance, size, content and method of drawing attention to the actual geographical origin.

The EU–NZ FTA will also protect the Greek term “feta”, by providing the legal means for Greek producers to object to and prevent its use. Again, there is a “prior use” allowance, whereby NZ producers who “made commercial use of that term in a continuous manner” before the FTA to continue to use the term for nine years. If they do use the term, they must also “not mislead consumers as to the origin of the good”. After that period, the use must cease altogether. In essence, New Zealanders have nine years to get used to asking their dinner guests to pass them the “crumbly and salty milk cheese of sheep or of sheep and goats or of cows that comes from Taranaki and not Thessaloniki”. Which, if you are familiar with humour in this part of the world, is actually quite catchy!

How might Australia respond?

It will be interesting to see how Australia responds to similar demands by their EU counterparts in the Australia–EU FTA and Wine Agreement negotiations. The talks have been underway since June 2018. Unsuccessful attempts to come to a deal during meetings with European leaders have led to Australian Trade Minister Don Farrell talking tough about walking away from negotiations. Protection of “prosecco” (and also of “feta”) are major stumbling blocks. For example, the responsible Australian industry group, Australian Grape and Wine, openly proclaims on its website that the “prosecco” GI is a “lie”.

If Australia gives up “prosecco” or “feta”, will Australia demand broader prior use and indeed continuing use conditions than those brokered by New Zealand? New Zealand does not have a significant prosecco industry. Australia’s prosecco industry, on the other hand, is worth millions of dollars. In Australia’s consultation process for the update to the Australia–EU Wine Agreement, over 80% of submissions were opposed to the protection of “prosecco”. Key players in the Australian industry who will be watching this debate include Dal Zotto Wines, Accolade Wines, Brown Brothers, and Pizzini Wines. All have made significant investments not only in their grapes, but also in their marketing and branding. If Australia agrees to GI protections that only gave them another five years’ use of “prosecco”, Australia will want to secure something very good in return.

On the cheese front, New Zealand looks to have driven a harder bargain, which is unsurprising given New Zealand’s dairy interests. However, Australia has a strong array of local and export-oriented cheese makers using the sensitive terms, and a “prior user” caveat like New Zealand’s won’t benefit new and recent entrants. This, too, would need to be traded for significantly better market access for agricultural products through tariff concessions and relaxation of other EU agricultural restrictions.

If Australia resists protecting these sensitive terms, it may have to settle for poorer results in another area, such as meagre gains in agricultural market access. That could risk the entire deal. But the EU is now certainly alive to how much Australians value these GIs and may tone down its GI demands if Australia agrees to ditch its AUD880 million luxury car tax. If that happens, Australians might be driving cheaper luxury cars, sipping local prosecco and enjoying home grown cheese boards for a long time to come.

Buying broader access to European markets through trade-offs

Self-evidently, given the long period of discussions so far, these are tough negotiations. Brexit, the AU–UK FTA, and the EU–NZ FTA outcomes have all made the process of striking an agreement with the EU harder.

Geographical indications are more than intellectual property. They are considered to be national property, at the cultural, political, economic and cultural levels. For generations there has been constant transplant or imitation of locational recipes and terms, whether that was done by the European diaspora in other parts of the world, or by local producers who have admired and commercialised those recipes and terms in their own countries. And for generations they have done nothing legally wrong. The conclusion of the Australia–EU FTA will impact those commercial freedoms. The question is, to what extent.

Australia can be assured that the European negotiators will ask for nothing less than the controls agreed with NZ, and possibly even stricter controls, given the strength of the relevant Australian industries.

In that light, Australia might seek appropriate counterbalances in the commercial value of key demands, including agricultural tariff concessions and the relaxation of EU market restrictions, where wider economic benefits could be achieved. Quantifying the commercial damage this will cause, in terms of labelling, regulation, and ultimately product popularity of Australia’s GI-exposed wine and dairy producers, would presumably be part of that counterbalance.

Managing the political fallout with those wine and dairy producers would then be the Government’s next challenge.

This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.

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