No more whining about geographical indications: assessing the 2005 agreement between the United States and the European community on the trade in wine.

The U.S. wine industry arose with European colonization. (37) After early efforts to establish wineries in the East failed, the spread of Spanish missionaries to California, the 1849 Gold Rush, and the ascendance of California to statehood resulted in an increase in American wine production from 9,462 hl in 1850 to 1.55 million hl in the early 1900s. (38) Roughly 85% of U.S. wine production between 1904 and 1908 came from California. (39) The prohibition movement between 1920 and 1933 severely stunted the U.S. wine industry; nearly all of California's seven hundred commercial wineries were forced to close their doors while the 18th Amendment to the U.S. Constitution, which implemented the prohibition of alcohol, was in effect. (40) Today, California is responsible for more than 90% of total U.S. wine production. (41)

Once Prohibition ended, the American wine industry experienced a rebirth. (42) Population growth as well as an increase in California's wine quality during the 1960s and 1970s resulted in a per capita increase in yearly wine consumption from 3.5 to 8 liters between 1950 and 1980. (43) After stagnant to declining American table wine (44) consumption in the mid-1980s, consumption in the United States has steadily increased from the mid-1990s to present. (45)

2. Current Trends in American Consumption

Much of this increase in wine consumption is due to the maturation of the baby boomers who have allocated a significant portion of their increased disposable income to the exploration of high quality food and wine. (46) In addition, an improved American economy has fostered increased wine purchases. (47) Finally, many scholars attribute the growth in American wine consumption to the November 1991 60 Minutes television broadcast concerning a study of the French diet that found a correlation between moderate consumption of red wine and a lower incidence of coronary heart disease among the French. (48) This phenomenon is known as the "French Paradox." (49)

Along with the upward trend in consumption has come a shift in wine purchase patterns by American consumers from lower quality "jug" wines to higher quality bottles. (50) The high-end premium segment has been the most rapidly expanding segment of the U.S. wine market; between 1980 and 2001, the volume share of high-end premium bottles has increased from less than seven to 20%. (51) This preference for high-end premium bottles, characterized by a movement from white and blush wines to red wines, (52) has entailed a necessary shift away from jug wines. (53) Between 1991 and 2001, the share of jug wine as a percent of total volume consumed in the United States fell from 65% to 36%. (54) Jug wines typically bear labels describing wines with "semi-generic" terms such as Chablis or Burgundy. (55) By contrast, the high-end premium category wine labels describe the product by the variety of grape from which the wine was derived. (56)

3. The American Wine Producers

American wine production is characterized by a remarkable degree of consolidation, with the Big Three (E. & J. Gallo, Canadaigua, and the Wine Group) accounting for roughly 60% of all wine shipped in the United States. (57) Despite the declining popularity of jug wines, these wines still constitute a strong majority of the Big Three's sales. (58) The continued presence of jug wines on supermarket shelves is due in part to the strong brands under which they are sold and the tremendous brand loyalty for lower segment wine. (59)

The brand affinity for jug wine has been both a benefit and a disadvantage for American producers, as many wineries have struggled to compete in both the jug and higher quality segments. (60) Robert Mondavi was particularly unsuccessful in its venture from the high-end premium market to lower-priced wines when it lent its name to lesser quality wines produced outside of Napa Valley, "the paragon of US wines in the eyes of consumers...." (61)Some wineries, however, such as E. & J. Gallo, have been more effective at bridging the gap between jug and high-end premium by slowly disassociating their names from the jug wines. (62) Other producers have sought to tap into the high-end market by creating standalone, premium brands. (63) As briefly discussed above, the New World producers, particularly the Australians and Chileans, have been most adept at capitalizing on the desire for higher quality and filling the "void left by US wineries repositioning themselves into higher price segments ... largely to the cost of the Old World." (64)

E. The Stakes in the Global Wine Trade

The conflict between the United States and the European Community over the trade in wine must be analyzed against the changing backdrop of the global wine industry. While Europe retains a strong presence in the American market, increased competition from other New World producers has resulted in a slip in market share despite increased American consumption and purchasing patterns that would seem to suggest a golden opportunity for the refined European product. (65) Further, American winemakers have increased their presence and reputation in European markets that have traditionally turned up their noses at American wine. (66) The end result is that by September 2005, both the Americans and Europeans had increased incentives to come to a new agreement on the trade in wine and end the 22-year stalemate.

II. DEVELOPMENT OF LEGAL PROTECTIONS FOR WINE

A. European Protection of Geographical Indications

European efforts to regulate the labeling of wine by place of origin date back to the nineteenth century. (67) In 1824, France became the first country to protect geographical indication by legislation. (68) The legislation sought to deter fraudulent indication of origin by subjecting violators to criminal sanctions. (69) In 1919, the French created the Appellation D'Origine Controlee (AOC) which layered a quality rating system on top of the requirement of accurately representing the true geographical origin of the agricultural product. (70) The AOC system recognized that a wine's place of origin was a product of both "natural and human factors in the particular locale." (71)

With the formation of the European Union, member countries continued their emphasis on origin as they moved from individual, country-specific regulation of the use of geographical indications to a Europe-wide scheme. (72) This system was created in 1989 when the European Union passed Council Regulation Number 2392/89 entitled "Laying Down General Rules for the Description and Presentation of Wines and Grape Musts." (73) Under this legislation, the regulations of wine descriptions apply to both wines produced in the European Community as well as wines originating in third countries. (74) The Council Regulation's primary concern was that descriptions of wine products "must not be incorrect or likely to cause confusion or to mislead the persons to whom they are addressed...." (75)

Accordingly, wines imported into the European Community must meet the strict labeling standards for identification of geographical units as defined by Article 29 of the Council Regulation. (76) Article 29 provides that the "geographical description" of wine imported into the European Union be conveyed by use of a "geographical unit which denotes a clearly defined wine-producing area: which is smaller than the territory of the third country in question, which produces the grapes from which the product was made, [and] in which grapes yielding wines conforming to standard quality criteria are harvested." (77)

To add additional protection for the European geographical units, Article 29 stipulates that "[t]he name of a geographical unit used to describe ... the name of a given region in the Community may not be used to describe an imported wine...." (78) This language bars wines produced in third countries from using terms such as "style" to link the product to a recognized quality of wine produced in another geographical unit. (79) The European approach to protecting geographical indications is particularly important given the degree to which the most recent international agreement on the use of geographical indications, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of 1994, (80) embodies similar protections. (81)

B. American Protection of Place of Origin

Currently, the Bureau of Alcohol, Tobacco, and Firearms (BATF) is chiefly responsible for regulating the labeling of wine sold in America. (82) Compared to the European regulation of geographical indications, the American system of law is notable for its de-emphasis on place of origin. (83) This devaluation of geographical indications resulted from the practices of America's earliest winemakers. (84) In the early nineteenth century, European immigrants brought with them cuttings from vines in Europe. (85) Influenced by the traditional European emphasis on place of origin, these pioneer wine producers identified their product by the region from which the vine cuttings were taken. (86) As a result, these geographical indications gradually lost their specificity and instead came to represent a generic "type" of wine rather than a particular product of known quality from a specific place. (87)

1. BATF Regulations