SUBMISSION TO THE MINISTRY OF FOREIGN AFFAIRS AND TRADE AND THE MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT

EU-NEW ZEALAND FTA:
GEOGRAPHICAL INDICATIONS (GIs)
APRIL 2020

This submission is made on behalf of the NZ International Business Forum (NZIBF), whose members are listed at Annex A.  NZIBF is a forum of senior business leaders working together to promote New Zealand’s engagement in the global economy.  The views in this submission are those of the NZIBF as a whole on potential cross-sectoral issues relating to geographical indications (GIs) in the current negotiations for a free trade agreement (FTA) with the European Union (EU).  Individual NZIBF members may make their own sector-specific submissions.

Summary

2          NZIBF is a strong supporter of an ambitious, high-quality and comprehensive FTA with the EU, including for food and agriculture products.  We also recognise that the EU has a significant negotiating interest in GIs as part of the FTA process.   NZIBF acknowledges that GIs have a role to play in international trade law to protect the intellectual property rights of products where a given quality, reputation or other characteristic of the product is essentially attributable to its geographical origin – such as may be the case for wines and spirits that possess a unique and strong tie to a single geographical location.  This is reflected in New Zealand’s GI legislation.  In relation to the question of the extension of a higher level of protection to foodstuffs, however, NZIBF would be very concerned about the internal inconsistencies in the proposed approach, along with the potential administrative, commercial and policy implications for New Zealand producers, exporters, businesses, taxpayers and consumers that would be associated with adopting the GI regime that has been proposed by the EU.  We further note that New Zealand already has in place consumer protection and trade mark legislation that addresses the use of misleading names or descriptions for food.

3          In order to be acceptable, any future framework for GIs for food products would need to be part of an ambitious, high-quality and comprehensive market access outcome for food and agriculture products.  It would, moveover, need to include tight disciplines to ensure that such that protection were limited to products for which a given quality, reputation or other characteristic were essentially attributable to single geographical location; would not impinge on the rights of New Zealand producers to use generic names or terms in common use; would not override existing trade mark rights; and would include provisions for opposing and cancelling GIs, including on the basis that a name was generic, with a final decision being made on the merits of the opposition by an objective body in New Zealand.

About the New Zealand International Business Forum

4          NZIBF provides a voice to articulate the needs and priorities of New Zealand’s business community, and in particular the importance of open markets and international connectedness, to the New Zealand Government and public stakeholders.  The NZIBF Board brings together leaders from among New Zealand’s largest internationally-oriented companies.  A list of Board Members is in Annex A.[1]   NZIBF receives no direct government funding for its operating budget but from time to time receives funding for jointly-funded projects.  Funding is also provided in respect of the policy support NZIBF provides to the New Zealand members of the APEC Business Advisory Council. 

The NZ-EU FTA: Negotiating context

5          The EU’s proposal on food geographical indications cannot be considered in isolation from the negotiating context for the FTA.   The MFAT/MBIE consultation paper of December 2019 states that New Zealand will not agree to protect any EU GIs or change the existing framework for protection of GIs unless as part of a “satisfactory overall FTA outcome” for New Zealand.  While this statement is welcome on its face, it merits further elaboration.

6          In short, New Zealand food and agriculture producers have long faced the double disadvantage of both low levels of market access into Europe, and of having to compete against subsidised European products in both European and third markets.  At the same time, of course, our own market has been one of the most open in the world and our producers have not enjoyed the benefit of any trade-distorting subsidies on either the domestic or export markets. 

7          Given that history, a comprehensive and high-quality market access package for agriculture, which includes both duty-free trade and minimal or no non-tariff barriers, must surely be the sine qua non for any FTA with Europe.   It is hard to see a compelling case for having to “pay” for this outcome with the introduction of new trade restrictions on products of commercial and export significance, not just in the EU and New Zealand markets, but potentially in any market to which New Zealand producers may export – which seems to be a likely result of the proposed GI regime.

8          NZIBF made a submission in August 2018 to the Ministry of Foreign Affairs and Trade in strong support of the proposed EU-New Zealand FTA.  We continue to be enthusiastic advocates for negotiating an ambitious, comprehensive and high-quality trade agreement with the EU – but the framing noted in paragraphs 6 and 7 above is our starting point. 

EU proposal for Geographical Indications for Food

9          We acknowledge the EU’s strong negotiating interest in seeing a detailed outcome on GIs, including for food and other agriculture products, in the FTA.   This submission responds specifically to the EU negotiating proposal in that regard.   As noted above, NZIBF is primarily focused on promoting New Zealand’s engagement in the global economy, including through deeper economic, trade and investment relationships with trading partners; to that end, NZIBF is also concerned to minimise trade-related disadvantages or costs to New Zealand business.  The approach that the EU has tabled on GIs raises a number of concerns in that connection.

The proposed EU approach

10        The EU has proposed that New Zealand adopt an EU-style system of protection for GIs.   This proposal would necessitate New Zealand making changes to its current GI system, including, among other actions: extending the scope of the Geographical Indications Act 2006 to apply to food products (or setting up a stand-alone registration regime for food) encompassing a proposed list of some 2,200 EU GIs, as well as potentially any food GIs that New Zealand may propose; increasing the level of protection for GIs so that they are protected against any misuse, imitation or “evocation”; allowing for GIs that may conflict with the names of plant varieties or animal breeds, provided that this does not mislead consumers as the origin of the product; establishing a mechanism for adding new names to the list of GIs; limiting the grounds for cancelling or removing a GI; and requiring New Zealand to provide for administrative enforcement of GIs. 

11        The proposal seems to imply that New Zealand exports into third markets would also have to comply with the new GI rules – thereby giving the regime an extra-territorial effect for New Zealand producers of affected products.

Lack of rationale for the proposed approach

12        NZIBF acknowledges that GIs have a role to play in international trade law to protect the intellectual property rights of products where a given quality, reputation or other characteristic of the product is essentially attributable to its geographical origin, for example in the case of wines and spirits that possess a unique and strong tie to a single geographical location.  New Zealand’s Geographical Indications Act 2006 already enables New Zealand to meet its international obligations relating to GIs for wines and spirits, including under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPs Agreement).  

13        With regard to the extension of a higher level of GI protection to food products (something akin to Article 23 of the TRIPs Agreement, which currently applies only to wines and spirits), this would go beyond New Zealand’s WTO obligations without, in our view, a strong rationale for so doing.  As the MFAT/MBIE consultation paper points out, New Zealand already has in place consumer protection and trade mark legislation (the Fair Trading Act 1986 and the common law tort of passing off, along with the Trade Marks Act 2002) that address the use of misleading product names or geographical descriptions for food and other products.   This provides an avenue for European food producers to challenge the misuse of particular names.

14        NZIBF considers that there are a number of internal inconsistencies or problems in the EU’s proposed approach, including the absence of consistent and objective criteria to determine GI protection; in relation to the treatment of generic names; the eligibility of processed foods; the use of plant/animal names; the treatment of pre-existing trade marks, and the use of “evocation”.  These aspects are discussed further below.

The use of objective criteria to determine whether a food should be protected

15        In NZIBF’s view, any potential future GI framework should have both clearly-stated characteristics for legitimate GIs, and equally clearly-defined parameters around products that should be denied protection – and, for credibility, as well as to minimise the creation of new non-tariff barriers for exporters operating in multiple markets, we would expect these to have been adopted consistently with trading partners.   The EU proposal appears to fall short of these benchmarks.

16        Indeed, the fact that, in its recent FTAs with Korea, Singapore and Canada, the EU has been prepared to agree to variable lists of specific food GI names, and to different forms of GI systems (including in relation to how GIs are selected, the treatment of pre-existing trade marks and so on), suggests that there is no single compelling, objective rationale for the protection of foodstuffs in this manner, nor a single, universal list of GIs – and that, even under an EU-style GI system, there is scope to generate considerable consumer confusion over the provenance or “quality” of a product, and for producers to face different impacts in different jurisdictions.

Generic names and common terms

17        NZIBF does not consider there to be justification for seeking to claw back generic names or other common terms for food products that are widely in commercial use and do not meet the threshold of products where a given quality, reputation or other characteristic of the product is essentially attributable to its geographical origin.  Indeed, such products frequently reflect a shared food heritage arising from the European diaspora around the world over many decades or longer.  A curb on the use of such names would seem to deny this shared cultural history without good reason.

18        The EU itself recognises the concept of “generic” products, both in its own domestic legislation (e.g. Regulation (EU) No. 1151/2012) and in its proposal to New Zealand. [2]  However we are concerned at the apparent disjunct between the proposed new rules for GI registration and opposition (which include a provision in relation to generic names) and the inclusion on the EU’s proposed list of GIs of a great many product names that NZIBF would consider to be “generic”.  The inclusion of these generic names by the EU in a list of supposed non-generic GIs strongly reduces the confidence we might otherwise have had in the provisions enabling a GI application to be declined for a “generic” product.  

19        This is compounded by the proposal to establish a joint working body – rather than an independent, objective body in New Zealand such as the Intellectual Property Office of New Zealand, IPONZ – to make determinations about future GI additions based on what appears to be a process of negotiation rather than via determination against a set of tightly-defined criteria.  (By contrast, the EU’s own internal system of GI applications provides for the objective assessment of applications solely by the EU, as laid down in Regulation (EU) No. 1151/2012.)

20        The parameters for denying GI protection as part of any new GI framework should include objectively-defined generic names and common terms, or an established history of production outside the area for which protection is being sought.  The provisions on generic names in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (specifically, Article 18.34) are a good basis for such an approach.

Trade marks

21        We are also concerned at the proposal to allow GI designation to trump pre-existing trade marks.   Allowing such names to be designated as GIs would be highly inequitable for businesses who had invested in and taken commercial decisions on the basis of the use of those trade marks in good faith.  Nor is the proposed approach even fully consistent with the EU’s own internal system: Article 6(4) of Regulation (EU) No 1151/2012 states that, “A name proposed for registration as a designation of origin or geographical indication shall not be registered where, in the light of a trade mark’s reputation and renown and the length of time it has been used, registration of the name proposed as the designation of origin or geographical indication would be liable to mislead the consumer as to the true identity of the product.”

22        The parameters for denying GI protection as part of any new GI framework should include the case where other legal protections, such as a trade mark, already exist.

Other categories of “GIs” without a strong tie to a unique geography

23        Beyond generic names and trade marks, there would seem to be little justification for the inclusion of a range of other product categories.  For example, it is difficult to see a justification for the inclusion of processed food products such as confectionary or baked goods: we struggle to see how such products could have a quality, reputation or other characteristic that is “essentially attributable” to a single geographical location. 

24        Likewise we are not sure how common plant variety or animal breed names are justified.  We note, in that regard, that other recent GI provisions agreed by the EU, for example in the Canada-EU FTA, do not allow such plant variety or animal breed names to be designated as GIs, even where doing so would not mislead consumers.   

Evocation is highly subjective

25        NZIBF is further concerned about the proposed provisions on “evocation” – that is, a prohibition on products whose name, packaging or labelling are determined to “bring to mind” an image of a GI for consumers.   Determining whether a term “evokes” a GI is an inherently subjective exercise.  It would also seem to duplicate the protection already provided by New Zealand’s fair trading legislation against misleading advertising or packaging.  Moreover, this proposed approach effectively shifts the burden of proof from an aggrieved EU producer (who would need to take private enforcement action or convince the Commerce Commission to investigate and prosecute) as at present, to the New Zealand Government to monitor and enforce compliance.   

26        Overall, the provision would be likely to increase and sustain uncertainty for New Zealand and other producers in relation to product design and innovation.  Nor is it clear whether determinations made in the New Zealand judicial system would be consistent with those made by the European Court of Justice, and vice versa, leading to legal complexity and uncertainty across both jurisdictions as well.  

Commercial implications for existing products

27        Leaving aside the inconsistencies highlighted above, the proposed approach would likely have significant commercial implications for New Zealand producers of generic cheeses, meat producers using common terms for cuts such as “Scotch”, processed food manufacturers and many others. 

28        The combined impact of a prohibition on the use of generic product names, in concert with the prohibition on product descriptions that may “evoke” certain GIs; on the use of terms in translation, transcription and transliteration; and on the use of a GI to identify an ingredient, seem likely to entail increased costs for New Zealand producers of a range of both primary and processed food products.  These costs would accrue in relation to product development, investment and innovation, manufacturing facilities, packaging, labelling, marketing, regulatory and compliance costs – and potentially may even entail the complete loss of particular sales streams. 

29        In addition, if the regime is open-ended – that is, open to the addition of future GI registrations by the EU and potentially by other countries – it would significantly increase the costs and business uncertainty for New Zealand producers on an ongoing basis, particularly given the size of the foodstuffs category compared to wine and spirits.   This would not be consistent with the good regulatory practice on which New Zealand has long prided itself.

30        Some New Zealand producers may anticipate that the ability to use GIs for particular New Zealand products would be commercially advantageous.  One such example would be Mānuka honey, which has faced considerable market challenges in recent years.   However, in this case, the quality, reputation or other characteristics of the product are not essentially attributable to a specific geographical region: Mānuka grows widely throughout New Zealand, and many species also grow in Australia.  Further, the name is based on a common plant variety name, and under the proposed new regime, it would seem that such names might not be granted for use as GIs since this may cause confusion for consumers as to the specific origin of the product.

31        We note in paragraph 11 above that it seems to be intended for the new GI regime to apply to products exported from New Zealand.  If so, extending a higher level of GI protection to honey would not in fact confer any benefit in important export markets (other than the EU) – such as China or other Asian markets – since GI designation would only, of course, apply to New Zealand producers of honey in those markets.  By contrast, competitors from other jurisdictions, such as Australia, would be free to market “Mānuka honey”. 

32        In short, while recognising the considerable challenges that this sector has faced in recent years, it would seem that, rather than seeking GI designation, it may be more promising to deploy the range of other tools available to exporters, such as other means of intellectual property protection (namely, certified trade marks, consumer protection and passing off/fair trading laws in destination markets), along with production- and market-related measures such as continuing the existing high-quality production standards and practices, robust traceability mechanisms and premium market positioning of New Zealand products.

Administrative costs

33        The proposed European system would raise costs for the New Zealand Government – in essence, paid for by New Zealand taxpayers – by requiring active monitoring of compliance and, where warranted, the taking of enforcement action on behalf of GI rights-holders.  While we understand that no detailed analysis has been undertaken of the magnitude of these costs, it would be reasonable to assume that these would be significant, especially given the large number of names on the EU list.  This would in effect also create an imbalance in the obligations of the parties to the agreement, since New Zealand is unlikely ever to develop a list of GI terms as lengthy or pervasive as the EU’s but will nevertheless be obliged to continue to protect all EU terms at our own expense.

34        The EU proposal provides that no fees would be payable for any GIs protected under the new system, meaning that any costs could not be recovered from the beneficiaries of that protection, as is currently the case for wines and spirits under the New Zealand GI Act 2006.  This would in turn raise a question of equity with current beneficiaries of the Act, who must pay fees to IPONZ on a full cost-recovery basis.

Implications for broader New Zealand approach, and for trade

35        More broadly, NZIBF would be concerned about the implications for New Zealand’s international trade policy as well as for its domestic economic and policy settings. 

Wide impacts for IP protection internationally

36        Extending protection akin to TRIPs Article 23 to food raises concerns of principle and precedent at the international level.   Article 23 was itself formulated as an exception to the broad general rules of Article 22 (and, as it happens, an accommodation to EU demands at the time); applying such a level of protection to food would in effect be making the exception into the rule for the whole food and beverage sector.   Given that foodstuffs are a much larger category than wines and spirits, this would have a very significant impact.  

37        Further, in order to meet its WTO ‘most favoured nation’ obligations, New Zealand would have to extend this level of protection to foodstuffs from all WTO members, further increasing the impact that Article 23 protections would have in the New Zealand market and beyond. 

38        Agreeing to the EU proposal may also jeopardise our ability to pursue the protection of other aspects of intellectual property in international settings, since it would throw into sharp relief a policy inconsistency in our approach (specifically, in relation to which types of intellectual property we consider merit strong protection).    This may have impacts on sectors beyond food and beverage.

The Australian dimension

39        It is also the case that, given the deep and broad integration of the Australian and New Zealand markets, including through a single food standards system and extensive trans-Tasman food trade, any any decision by either New Zealand or Australia on extension of GI protection to food may have substantial implications for the trans-Tasman food sector – but would likely be made in isolation from the other CER/SEM partner.   This would need to be carefully worked through by all Parties.

Relationship with other standards, such as Codex

40        Finally, the relationship between new GI product specifications (as set out in the EU proposal) and the large extant body of Codex standards is not clear, but at a minimum would seem to imply a duplication of administrative effort to develop product standards; along with the rejection by New Zealand of internationally-agreed food standards (inconsistent with our normal practice and WTO principles).  At worst, it suggests the creation of new non-tariff barriers for food exporters, flying in the face of our longstanding trade policy goal of reducing and eliminating all such barriers. 

Domestic policy implications – IP and competition policy

41        Looking at domestic policy settings, the new system would seem to raise questions in relation to the consistency of our IP treatment of other ‘unique’ products not covered by the proposed GI system (that is, beyond wine, spirits and food), and may raise concerns for other sectors – if not pressure on policymakers to make available to them a system where similar ‘monopoly’ rents would be available to an exclusive group with little substantive justification.

Conclusion

42        NZIBF acknowledges that GIs have a role to play in international trade law to protect the intellectual property rights of truly specialised products like wines and spirits that possess a unique and strong tie to a single geographical location.  However, in relation to the extension of a higher level of protection to food, and in the absence of certain mitigating criteria identified below, NZIBF does not support the current EU proposal, and indeed would be very concerned about the potential administrative, commercial and broader policy implications for New Zealand producers, exporters and businesses, taxpayers and consumers that would be associated with adopting the GI regime that has been proposed. 

43        In order to be acceptable, any future framework for GIs for food products:

  • would need to be part of an ambitious, high-quality and comprehensive market access outcome for food and agriculture products into the EU;
  • would need to include tight disciplines to ensure that such that protection be limited to products where a given quality, reputation or other characteristic of the product is essentially attributable to its unique geographical origin;
  • would not impinge on the rights of New Zealand producers to use generic names or terms in common use;
  • would not override existing trade mark rights;
  • and would allow for opposing and cancelling GIs, including on the basis that a name is generic, with the final decision being made on the merits of the opposition by an objective body in New Zealand, with a right of appeal.
Recommendations to the Ministry of Foreign Affairs and Trade

44        NZIBF recommends that the Ministry:

  1. note NZIBF’s continued support for an ambitious, comprehensive and high-quality FTA with the EU – and specifically for an agreement that enhances, rather than detracts from, fair and market-oriented trade in food and agriculture in New Zealand, in the EU and in third-country markets;
  2. note the NZIBF’s strong concerns about the potential administrative, commercial and policy implications for New Zealand businesses, exporters, taxpayers and consumers associated with adopting the proposed EU regime;
  3. note the criteria that NZIBF sees as essential to any future framework for GIs for food products (including tight and objective disciplines to ensure that GI status could only be accorded to truly specialised products with strong and unique geographical ties, and that current or future GIs would not impinge on the rights of New Zealand producers to use generic names or pre-existing trade marks), and take these fully into account in responding to the EU’s proposal.

For further information;

Stephen Jacobi

Executive Director

NZ International Business Forum

Phone: 0294 725 502

Email: stephen@jacobi.co.nz

NZ International Business Forum

JULY 2019

Annex A

NZIBF BOARD MEMBERS

Executive Committee

Malcolm Bailey (Chair), Chair, Dairy Companies’ Association of New Zealand

Michael Barnett, Chief Executive, Auckland Regional Chamber of Commerce and Industry (representing the New Zealand Chambers of Commerce)

Bruce Cameron, Chairman, Zespri International Ltd

Philip Gregan, Chief Executive, NZ Winegrowers

Kirk Hope, Chief Executive, Business NZ

John Loughlin, Chairman, Meat Industry Association

Sam McIvor, Chief Executive, Beef + Lamb New Zealand

Alan Pollard, Chief Executive, NZ Apples and Pears

Hon Simon Power, General Manager, Consumer Banking and Wealth, Westpac

Katherine Rich, Chief Executive, New Zealand Food and Grocery Council

Sarah Salmond, Partner, Minter Ellison

Tim Silverstone, General Counsel, General Manager Corporate Affairs, Sealord Group

Simon Tucker, Director, Global Stakeholder Affairs, Fonterra Co-operative Group

Alternate Directors

Catherine Beard, Executive Director, Export NZ/Manufacturing NZ

Jeffrey Clarke, General Manager, Advocacy, NZ Winegrowers

David Courtney, General Manager, Zespri International

Jenny McGregor, General Manager, Trade Strategy, Fonterra

John Milford, Chief Executive, Wellington Chamber of Commerce

Tim Ritchie, Chief Executive, Meat Industry Association

Executive team

Stephen Jacobi, Jacobi Consulting Ltd (Executive Director)

Fiona Cooper, Owl Consulting Ltd (Associate Director)

Stephanie Honey, Honey Consulting (Associate Director, Staffer ABAC)

Associate members

NZIBF’s membership comprises a range of associate members who are listed on our website, www.tradeworks.org.nz.


[1] NZIBF was incorporated in May 2007.

[2] For example, in their proposed “registration and control” mechanism (viz., in Section B of Annex [XX]-A), the EU refers to registration (or refusal of registration) in relation to “terms customary in common language as the common name for goods”; in the proposed “opposition procedure (Annex [XX]-B, paragraph 5(e)) the EU refers to opposition to a name/term on the grounds of “details which indicate that the name, for which protection and registration is considered, is generic”.

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