WIPO Journal - World Intellectual Property Organization

The Economic Effects of Geographical Indications on Developing Country Producers 159
GIs as specified in TRIPS (s.3) have two distinct degrees of protection, a higher one for wines and
spirits (also known as appellations of origin) and one for other eligible products, those for which “a given
quality, reputation, or other characteristic of the good is essentially attributable to its geographic origin”
(art.22(1)). A higher level of protection means GIs “should be protected even if there is no risk of misleading
consumers or unfair competition”. 4 Applications are typically to food and other agricultural products, but
not exclusively so. The additional protection presently accorded to wines and spirits includes preventing
the use of GIs for products even when the true source of origin is indicated, used in translation or
accompanied by expressions like “kind”, “type”, “style”, “imitation” or similar phrases, and a prohibition
for the GI name becoming generic. 5
During the now-suspended WTO Doha Round negotiations, the European Union (EU) representatives
sought to have the level of protection for all eligible products enhanced in three ways:
• extension of the level of protection currently available for wines and spirits to other goods;
• rolling back of a limited set of GIs in use in countries where the GIs did not originate; and
• creation of a multilateral registration system for GIs.
The EU emphasis on GIs revived interest in their functioning and economic ramifications. 6 Interest is
focused not only on the EU and the United States, but on developing countries as well because the EU
takes the position that enhanced GI protection will benefit developing countries, which can potentially
enhance export markets for products like Oolong tea (China), and Basmati rice and Darjeeling tea (India).
GIs are seen as particularly applicable to developing country agriculture because ownership of the mark
is by the group and not the individual, and because the established standards make it possible to standardise
quality across a large number of small suppliers.
With the apparent suspension of the Doha Round the likelihood of enhancing GIs multilaterally is very
much in doubt. However, the functionality, including the economic effects, of the current systems is poorly
documented. The understanding of their impacts on developing countries is even more incompletely
documented. Policy-makers in both developed and developing countries have identified GIs as a potential
mechanism to assist primarily the agricultural sector in developing countries by reducing supply competition
for traditional products while raising/standardising the quality of those products. The perception seems
to be that GI benefits will flow primarily to smallholders in local communities as a form of rural
development, but the correctness of that assumption, which is to say the projection of the distribution of
benefits from the use of GIs, has to date not been analysed empirically. The objective of this study is to
estimate the distribution of benefits from using GIs among factor owners and consumers. Our contribution
is to document the resulting benefit distributions using two GIs operating with different levels of land
supply. A secondary objective is demonstrating how our methodology can be applied to assess the benefit
distribution for other GIs. We use a two-factor market displacement model of agricultural policy; while
the model is perfectly general, the configuration we use is applicable only to agriculture. 7
The use of an economic model configured for analysis of agricultural GIs has several ramifications for
our objectives. The model functions with several quantifiable inputs, components of production, the
broadest being land, labour and capital. Then it computes how benefits generated are distributed among
those inputs. The analysis is useful for determining just who the major beneficiaries are and, with additional
cost data, whether the benefits justify investments in, say, advertising or market channel development.
Conversely, the results can indicate that, even if there is a net financial gain, the benefit recipients may
4 “The Doha Declaration Explained”, at http://www.wto.org/english/tratop_e/dda_e/dohaexplained_e.htm#top [Accessed March 28, 2011].
5 See Correa, Trade Related Aspects of Intellectual Property Rights, 2007.
6 W.A. Kerr, “Enjoying a Good Port with a Clear Conscience: Geographic Indicators, Rent Seeking, and Development” (2006) 7(1) Estey Centre
Journal of International Law and Trade Policy 1, at http://ageconsearch.umn.edu/bitstream/23827/1/07010001.pdf [Accessed March 28, 2011].
7 Note for example that 80% of 82 current Indian GIs are for non-food products, mostly handicrafts. See http://docs.google.com/View?docid=dc39jv73
_6f75sk3s2 [Accessed March 28, 2011]. Since in our model we use supply shifters such as input (land) quota, the current configuration is more applicable
to agriculture.
(2011) 2 W.I.P.O.J., Issue 2 © 2011 Thomson Reuters (Professional) UK Limited