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A Closer Look at the New Wine Trade Agreement Between Australia and the ECs

On September 1, 2010, the 2008 Wine Trade Agreement Australia and the European Communities (“ECs”), which requires Australia to comply with the European GI system with respect to wine products, went into effect. (See Agreement Between the European Community and Australia on Trade in Wine, 2009 J.O. (L 28) 3.) The new agreement replaces another wine trade agreement signed in 1994 between the two wine powers and protects eleven of the EU drink labels and 112 of the Australian GIs. (See Agreement Between the European Community and Australia on Trade in Wine, 1994 J.O. (L 86) 3.) Specifically, this means that many of the wine products produced in Australia that were previously labeled according to European names, such as sherry and tokay, will no longer be labeled under these names. Wine producers in Australia will have three years to “phase out” the use of such names on labels.

The 1994 Agreement

The 1994 Agreement created three separate transitional periods by which Australia was restricted from producing certain wines: December 31, 1993, December 31, 1997, and a transitional period “determined in accordance with Article 9.” (See Article 8 § (1)(a)–(c) of the 1994 Agreement.) Although the 1994 wine agreement between the European Community and Australia prevented Australia from producing wine of particular GIs and did name the wines mentioned in the 2008 Wine Trade Agreement between the two powers, the 1994 did not portray a date by which Australia would transition from the use of such GIs. Article 8 of the 1994 agreement indicates that Article 9 of the agreement will determine the transitional period of these GIs. Article 9 states that, by December 31, 1997 the latest, a transitional period will be determined with respect to the aforementioned wines. It was not until the 2008 Wine Trade Agreement, however, that such a period was determined.

The 2008 Wine Trade Agreement

The 2008 Wine Trade Agreement provides additional protections for wines originating in both the European Community and Australia and indicates that the parties “shall take the measures necessary . . . for the reciprocal protection of the geographical indications” that are listed by country in the text of the new Agreement. The 2008 Agreement, which was signed on December 1, 2008 in Brussels and became actionable on September 1, 2010, sets clear dates for the transition of the GIs named in § (1)(c) of Article 8 in the 1994 agreement. Additionally, the 2008 Wine Trade Agreement names the additional protection for the GIs Manzanilla and Tokay.

The 2008 Agreement additionally recognizes protection of traditional expressions used in wine production that are characteristic of a particular region and/or wine quality, such as the French traditional expression vin doux neturel or the Italian traditional expression vino dolce naturale, and contends that Australia “shall not permit within its territory the registration or use of a trade mark which contains or consists of a traditional expression” listed as that of a European Community. This further establishes recognition of cultural and regional wine production and processes as separated by provisions in the 2008 Wine Trade Agreement. Article 23 of the 2008 Agreement further recognizes Australia’s use of quality wine terms, such as cream, crusted, and tawny, on wine products exported to the EU and allows Australia to use these terms given conditions of use are met according to Annex V of the Agreement.

Additional Benefits from the 2008 Wine Trade Agreement

The 2008 Agreement set out additional benefits to the Australian community, including the recognition of oenological practices for wines originating in Australia, 112 geographical indications of wines produced in Australia, traditional expressions used in wine production and labeling, quality wine terms of Australia, product type limits with respect to sugar makeup, identification of vine varieties, clear definitions of production methods, and domestic legislation applicable to description, presentation, packaging or composition of wine. Annex 1 of the 2008 Agreement provides acknowledgement of Australian oenological processes for wines produced in Australia to be exported to the European Communities, including the use of polyvinylpolypyrrolidone, the use for deacidification purposes of calcium carbonate, the use of pieces of oak, and the use of reverse osmosis. The recognition of and adaptation of such processes, names, and procedures in a universal wine trade agreement with the European Communities, many of which are domestic in nature or procedure, codifies Australia as a world wine power.

The agreement additionally allows for an “easier access” to the European wine market for Australian wineries. (SeeAustralia Corks its Use of “Champagne.”) The terms of the 2008 Agreement that allow “easier access” to the European market for Australian wine producers is very sensible. In 2009, Australia exported a total of €643 million worth of wine to the EU. (See Australia Confirms it’s a World Wine Power and Agrees Labeling with the EU.) Europe is the largest market for Australian wine products and is likely to remain so, given the favorable outcome of this new agreement to both powers. (Id.) The European Commission reported that the EU exported a total of €68 million worth of wine to Australia in 2009. (Id.) Additionally, Australian government officials state the new agreement creates more flexible rules on blending alcohol content and a simpler labeling system for wine producers exporting their products to the European Communities, which is an asset to an industry that exports a considerable amount of its commodities to an external market. Such conditions as outlined by the 2008 Agreement suggest that, while complying with geographical indications auspicious to the European Communities’ wine regulations, Australia has severely strengthened its wine trade relations with the European Community and positioned itself favorably with respect to continual wine trade exports to Europe. The Agreement itself has been said to be a “win-win outcome” for both the EC and Australia.

The Adaptability of the 2008 Wine Trade Agreement in the U.S.

The 2008 Agreement between Australia and the EC is a highly adaptable model that the U.S. should consider for future wine trade negotiations with the EC. The Agreement maintains four notable elements essential to preserving domestic wine production while constructing an international wine market among world wine powers: (1) it establishes GI protection for domestic wine products of Australia, (2) it recognizes domestic wine processes and terminology, (3) it creates a transitional stage during which previously-used GIs will be “phased out” by Australian wine producers, and (4) it allows for future alterations among the two world wine powers. Most notably, however, Annex II of the 2008 Agreement recognizes that Australian vintners may no longer produce wines with GIs of European countries and awards adequate legal protection to these wine product names.

The 2008 Agreement between Australia and the EC named nine of the seventeen GIs reflected in the current U.S.–E.C. Wine Trade Agreement. The two wine trade agreements function with the same overall purpose: to prohibit the two New World wine powers from producing wine products under the names of European GIs and to further the objective of TRIPS. However, these differ in their implementation: whereas the Australian Agreement strictly prohibits Australian producers from producing wine products under any of the eleven named GIs in its Agreement, the U.S.–EC Wine Trade Agreement does not provide such legal protection. The grandfather clause of the U.S.–EC Agreement (Section 2 of Article 6) legally still allows wine producers in the U.S. to use these seventeen GIs in wine production whereas the Australian Agreement does not contain a similar provision. The U.S. Agreement establishes that these GIs are “semi-generic” and, because of this labeling, can still be used by U.S. wine producers—as long as they meet the more stringent restrictions under U.S. law.

Whereas this provision certainly enhances the position of American wine producers from an international standpoint, as well as furnishes significant power with respect to the EC, it is not legally compliant with the TRIPS Agreement because it enhances market dilution of semi-generic wine product names and creates a substantial impediment to GI protections. The purpose of the U.S.–E.C. Agreement was to curtail the usage of any European GIs by American wine producers. Whereas the Agreement prohibits future producers from using the seventeen named GIs, and whereas Congress did enact legislation to make legal compliance more difficult, the Agreement does not forbid prior producers from labeling bottles under such GIs. The legal specifications outlined by the 2008 Agreement between Australia and the EC serves as a more appropriate and legally compliant model for the United States to adopt. Accordingly, future wine trade concessions between the U.S. and the ECs must consider the adaptability of a similar agreement to that between Australia and the EC.

DISCLAIMER: This blog post is not intended as legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

Lindsey A. Zahn

About 

Lindsey is the founder and author of On Reserve: A Wine Law Blog. She is an alcohol beverage and food attorney and is admitted to the New York State Bar.

{ 4 comments… add one }
  • Logan Hunsley February 15, 2011, 10:03 PM

    Impressive stuff, Lindsey!

  • Cody Rasmussen February 16, 2011, 10:24 PM

    A great piece of writing Lindsey; thanks for posting!

    I understand that the current EU-U.S. Wine Agreement, signed on 10 March 2006, is/was supposed to go through a second phase of negotiations beginning no later than 90 days after the signing of the first phase agreement. Any idea if there’s been any discussion between the U.S. and the EU since the first phase signing?

    If the U.S. and EU were to enter into another, more ambitious round of negotiations, do you have reason to believe that the U.S. would meet the EU on more even ground, as Australia recently has? I’m considering writing a senior thesis on the relationship between international wine law, liberal multilateral institutions and U.S. hegemony, and I’m wondering if the EU has any bargaining power left.

  • Lindsey A. Zahn Lindsey A. Zahn February 17, 2011, 10:20 AM

    Hi Cody:

    Thanks so much for your comment; I actually wrote my law journal note on a similar issue last semester. I did not come across any information indicating that a phase of negotiations occurred between the US and ECs after the signing of the 2006 agreement. I imagine there might be more discussions between the two powers at some point in the near future because of the agreement Australia just ratified with the ECs. But what is particularly interesting about Australia’s ratification of that agreement is that during the drafting of the TRIPS Agreement, North America and Australia’s opposition to the EC was deemed “most difficult” regarding multilateral protection of geographical indications. Additionally, the past history between Australia and the United States with respect to global wine trade has been somewhat in sync. The two countries filed complaints with the WTO against the EU in 2005, alleging that the EU did not provide adequate protection for preexisting trademarks that were either homogenous or indistinguishable from that of a European GI. Additionally, the two New World wine countries requested that the WTO impel the EU to allow protections that were offered to EU products to be applied to products from non-EU countries without requiring reciprocity. The WTO ruled in favor of the United States and Australia, confirming the rights of parties that had established trademarks for wine products that were also the names of geographic regions and rejecting the desire of EU members to restrict sales of wine and beverage products within the region in which they were produced.

    Considering Australia’s prior positioning with respect to GI protection (i.e. a similar perspective to that of the United States, preserving intellectual property through trademark registration), it is understandable that the wine power’s shift from supporting trademark protection to adapting a European GI sytem of protection is likely to pressure the United States to comply with a similar, if not exact, wine trade agreement advocating the GI system. I am not sure of the exact power the EU has with respect to wine trade in the US, but I do know that the EU is still the largest producer of wine products but also imports many American wine products. This could be a significant bargaining chip for the ECs. For further information, see European Communities—Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs, WT/DS 174 R 15, March 2005 (05-0955) (Complaint by the United States) and WT/DS 290 R 15, March 2005 (05-0936) (Complaint by Australia).

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