It is clear that there will be an impact on competition within the EU. This is not just a problem for the single market; it will also have an impact on international trade.
In April, the European Commission published its proposal for a Regulation on Geographical Indication (GI) protection for craft and industrial products. In this, the Commission claims that “On the impact on competition, the initiative is unlikely to have any negative effects.” However, the proposal is not supported by all Member States, and poses potentially negative effects on trade relations with other parts of the world, as well as undermining European competitiveness.
When it comes to craft and industrial products, in order to be protected by a geographical indication, there are certain requirements that need to be met. These are, according to Article 5 in the proposal, that:
a) It originates in a specific place, region or country;
b) The given quality, reputation or other characteristic(s) are essentially attributable to its geographical origin; and
c) At least one of the manufacturing steps for the product takes place within the defined geographical area.
That means that there is virtually no threshold to obtaining GI status, and that the true connection to the specific geographical area can, in reality, be very tenuous. For example, all the raw materials can come from somewhere else; 99% of production steps can take place in Brazil or China, as long as 1% takes place within the defined geographical area. This can be compared with, say, the Swiss rules, which require that at least 60% of the costs for production take place within the geographical area.
With such a low threshold for protection, almost all types of craft and industrial products could theoretically be covered by a GI. From this alone, it is clear that there will be an impact on competition within the EU. This is even more apparent when looking at the type of protection that will be granted, as set out in Article 35 in the proposal. It will be very strong and have no time limitations. Yet a limited duration is a fundamental principle when it comes to balancing the interests of a protection with those of freedom of competition.
In the impact assessment, there is reference made to a communication from the European Commission on 25 November 2020, entitled ‘Making the most of the EU’s innovative potential – An intellectual property action plan to support the EU’s recovery and resilience’ (COM(2020) 760 final). This would consider the feasibility of a GI protection system for non-agricultural products at EU level. However, the protection of GIs represents virtually the opposite of innovation, and is backwards-looking, rather than forward-looking. It provides protection for ‘what has been done this way for a long time’, rather than ‘doing things in a new way’.
In 2020, the Confederation of Swedish Enterprise had already set out why it thought that a GI protection for craft and industrial products would prove problematic. This proposal is even more extreme than the Confederation had anticipated at that time.
This is not just a problem for the single market; it will also have an impact on international trade. The EU has shown tendencies to emphasise the protection of GI in various trade agreements. Indeed, when the European Commission states that: “It also allows for increased protection for EU CI producers in third markets such as China, Russia or India through robust GI provisions in bilateral trade agreements concluded by the EU” this is extremely problematic.EUGeographical indicationsEU Single Market