Trade

Europe eats Trump’s lunch

Armed with Champagne and Parmesan, Europe is trouncing the U.S. in the multibillion-dollar battle to set the global gold standard in gourmet foods.

Brussels is accelerating international trade agreements to impose a new world order in protected delicacies, while an increasingly introverted U.S. administration under President Donald Trump retreats from global dealmaking. With even Mexico and Canada turning toward the European model, the U.S. is being outflanked by the EU at the lucrative end of the food business.

Europe’s quest for supremacy in the gastronomic Great Game hinges on intellectual property rights. Each time the EU signs a trade deal, it pushes to lock its partners into its ecosystem of geographical indications, or GIs, which protect food names traditionally tied to a certain region, such as Bordeaux wines and Parma ham.

That means non-EU farmers and exporters take a direct hit. When the EU wins protection for, say, Italian Parmesan and Greek feta in a deal with Japan, it means that Australian and U.S. dairies are barred from selling their products there under those labels. They instead have to rebrand and use labels such as “Parmesan-style,” which often turn off consumers who may see the products as unauthentic.

Europe’s Commissioner for Agriculture Phil Hogan told POLITICO that the EU’s 3,300 GIs now represent 6 percent of food and drink production, and 15 percent of exports. The brand power of the most iconic foodstuffs, he said, had helped turn Europe into “the best food address in the world.”

If Brussels concludes all the trade deals involving GIs that it is now working on across Latin America, Australasia and China, Europe’s culinary security shield will cover markets with a population of some 2.3 billion — over a third of the world’s population.

EU big in Asia

The Asia-Pacific region is a particularly attractive hunting ground for Brussels. When Trump withdrew from the 12-nation Trans-Pacific Partnership in January, he unwittingly pumped jet fuel into Europe’s regional ambitions. The European Commission has since not only struck a landmark deal with Japan, but it is also in talks with a raft of countries once involved in TPP: Australia, New Zealand and Indonesia. And it’s working on an upgrade to the Chilean and Mexican agreements. It is also closing in on a deal with the Mercosur trading bloc — Brazil, Argentina, Paraguay and Uruguay — and a specific GI deal with Beijing. Brussels concluded negotiations with Vietnam last year.

“TPP has been abandoned by the U.S. and the EU has rushed into the void that was left,” said Bernard O’Connor, who specializes in GIs as a managing partner at Brussels law firm Nctm.

Trump’s withdrawal from the TPP deal was particularly astonishing since Washington originally identified it as a way to fight GIs. A briefing document from the Office of the U.S. Trade Representative cast the Pacific accord as a way to shield owners of existing trademarks and ward off EU-style GIs that “shut out U.S. agricultural and food producers.” America’s national dairy lobby also warned Trump that, while TPP was imperfect, it would protect against the “abuse” of geographical indications.

A Bulgarian harvester works in the vineyard of the Champagne house Pommery-Vranken on August 30, 2017 in Reims, France | Francois Nascimbeni/AFP via Getty Images

The former EU trade negotiator played down Trump’s withdrawal from TPP as a reason for Europe’s success and said countries were prepared to accept the GI system simply because they wanted to trade with Europe, or because they wanted equal protection for their own GI products.

“Our success with GIs started when the current [U.S.] administration was nowhere to be seen,” he said.

Outside observers are often bemused by the Herculean diplomatic effort that EU trade negotiators put into GIs, but the money associated with protected labels is jaw-dropping. The EU said in 2013 its trade in GIs was worth some €54 billion a year.

The figure has likely ballooned since then.

The stakes are so high that GI negotiations often require the highest ranks of government. One person familiar with negotiations recalled that former Commission President José Manuel Barroso had to repeatedly call former Canadian Prime Minister Stephen Harper after midnight at make-or-break stages of talks with Ottawa in 2013 — all to ensure that European cheeses were properly protected. The Ottawa deal was signed three years later.

Make America small again

For Europe, GIs are common sense: Quality products distinguished by centuries of savoir-faire must be distinguished from cheap imitations.

To Washington, Brussels’ insistence on protecting GIs smacks 0f arrogance and greed. The U.S. took in millions of poor Europeans, along with their rich and varied cuisines, during the 19th and 20th centuries, and they went on to set up thriving food businesses. In an effort to protect them, Washington insists that terms such as Parmesan belong to everyone.

It’s failing to win the argument.

Washington claims it has a system that works just as well: trademarks. But these are far broader than GIs, and are not narrowly tied to a particular place. The U.S. treats Parmesan, feta and Champagne as generics that don’t necessarily have to have been made in Italy, Greece or France.

Italian Parmesan-makers have registered several Parmigiano Reggiano trademarks in the U.S., tying the name to their own type of cheese. This type of protection doesn’t stop American food conglomerate Kraft Heinz from selling tons of grated Parmesan in the country, however.

A GI expert with experience in EU negotiations said the European model was bound to spread and dismissed the American argument that products made there were equivalent to European counterparts. “Once it has a brand, people will trust it and will know that it’s made in a certain way, with a certain care … and they are ready to give much more money for it,” he said. “The [Americans] are comparing it to something that is done without any of this care. But that is free-riding on the reputation.”

Slabs of feta cheese are on display in Athens. The U.S. treats feta cheese as a generic product, while in Canada, new feta producers are blocked from entering the market | Aris Messinis/AFP via Getty Images

Washington concedes that GI protection is sometimes appropriate and even signed an agreement protecting wine names with the EU in 2006. It even has a few GIs of its own, such as Kentucky bourbon or Idaho potatoes.

A U.S.-based GI expert said Brussels essentially twists the arms of smaller countries to enforce its own system and boost its own food sector’s profits in exchange for access to the European market.

“It’s a crazy demand,” she said. “The EU has made a lot of progress in upping the profile of GIs as an intellectual property right.”

She added that shoppers would eventually pick the European product if they’re told it’s more authentic.

“The EU’s dream is to box out the U.S.,” said Shawna Morris, a senior director at the Consortium for Common Food Names, a lobby that fights EU geographical indications worldwide. Morris said the EU exploits its size to bully trade partners into accepting its system and cast 2017 as a “critical year” for geographical indications, as more countries look likely to side with Brussels. U.S. Commerce Secretary Wilbur Ross lambasted GIs as an “artificial trade barrier” in November and accused the EU of being highly protectionist.

The EU’s bilateral trade deals make it “very difficult for the U.S. to come back subsequently and try to claw back the names that the U.S. considers generic,” O’Connor said.

But he doesn’t see Brussels as a bully.

“Is that aggression? No, it’s trade negotiation,” he said. “The EU has been very good at it.”

Snowball effect

The Commission’s recent trade crusade in Asia and Latin America has nonetheless spread heightened fear across the Atlantic. A slew of U.S. food lobbies and members of Congress wrote to the president last month demanding that he act against the EU’s promotion of GIs in Mexico, Japan and Mercosur, citing a severe threat to American business.

They also warned that governments such as Ottawa already had “carelessly given the EU virtually everything it asked for.”

“This is a critical moment,” the letter said.

An official from a country that recently signed a deal with the EU said Commission negotiators made it very clear that accepting GIs were key demands and that the deal would serve as an example to other trade partners.

Morris, from the International Consortium for Common Food Names, said Commission negotiators are famously exacting and duplicitous, going through food names line by line, while quietly seeking to protect names in translation, so that Parmigiano Reggiano and Parmesan mean the same thing.

The former EU negotiator rejected the accusation. “I hope you don’t think we twist the arm of China,” he said. “Even Canada, frankly, they are hard negotiating partners.”

A man views wheels of Parmigiano Reggiano at the Slow Food Salone del Gusto and Terra Madre on September 22, 2016 in Turin, Italy | Marco Bertorello/AFP via Getty Images

Brussels does not always achieve full protection — especially in countries with strong European diaspora communities such as Canada. Discussions surrounding feta were particularly tense, owing to the country’s roughly 250,000-strong population of Greek descent. In the end, both parties agreed to allow existing Canadian feta producers to continue marketing their products, but blocked any new market entrants — a process known as “grandfathering.”

To some, the very idea of signing away their heritage still rankles, however. “The Old World supplied the immigrants. It seems to be very weird that you’re saying that people can’t take culture with them,” said one dairy negotiator who declined to be named for fear of influencing current negotiations with the EU.

The U.S. Trade Representative argues the topic is high on its priority list. “The EU GI agenda remains highly concerning, especially because of the significant extent to which it undermines the scope of trademarks and other IP rights held by U.S. producers, and imposes barriers on market access for American-made goods and services that rely on the use of common names, such as parmesan or feta,” it said in a report this year.

Brussels insists it is attuned to these cultural sensitives and flatly rejects the accusation that it bullies others. For example, the EU agreed to protect the Portuguese name of São Jorge cheese in Canada — a hard cheese from one of the volcanic islands in the Azores,as part of the Canada trade deal. That meant that Canada’s Portuguese community could still sell a cheese marked with the English or French translations: St. George or St. George’s.

Massimo Vittori, managing director of oriGIn, an NGO that advocates GIs, said people are waking up to Europe’s concept because they feel adrift in a globalized world. “It reconciles globalization with culture and roots,” he said.

The largest prize — China — lies in wait. Brussels and Beijing are negotiating a deal that would have each recognize 100 of the other’s geographical indications. Vittori said those 100 could just be the bridgehead.

“This is just a beginning,” he said.

This article is part of the special report Leveraging Food Labels.

Original Article

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