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In the Wake of the Champagne Wars

August 2009
 
by Hudson Cattell
 
 
The European Union is once again making its presence felt in the United States. It has only been three years since the EU succeeded in having Champagne, port, sherry and similar "place" terms banned not only on bottles for export into the EU but on all U.S. wine labels. Now the EU is withdrawing permission for 14 wine terms including chateau, classic, clos, sur lie, ruby, tawny and late bottled vintage from being used on labels of U.S. wines exported into the EU.

In just five years, starting with a 2003 trade agreement between the EU and Canada, the EU has put an end to the 70-year trade war between France and Canada regarding the use of the term Champagne. In addition to contributing a colorful chapter in wine history, the "Champagne Wars," as they were called at the time, provide useful background and lend some perspective to what is happening today.

The history
On May 23, 1933, Canada passed the Canada-France Trade Agreement Act of 1933, which enabled Canada to enter a trade agreement with France under which both countries protected their respective trademarks and trade names. This included "Champagne," which the French insisted could apply only to wine from the French district of Champagne. Despite the agreement, Canadian wineries continued to use the name Champagne on their wines, and there was apparently no protest from the French for two decades.

In 1955 Alexander Sampson, the president of Chateau-Gai winery in Niagara Falls, Ontario, placed a large display of that winery's "Champagne" in a Paris store window. This form of advertising worked to the extent that the Toronto Globe and Mail Magazine ran a feature article under the headline "He Sells Ontario's Wines in the Very Heart of France."

The French were incensed, but the Canadian government simply responded in 1957 by issuing a directive that allowed domestic wineries to use the word Champagne only if the product was labeled "Canadian Champagne."

The first French legal response came in 1964, when 15 French producers went to court in Quebec asking for an injunction forbidding Chateau-Gai to use the word Champagne on its labels. When the French won, Chateau-Gai began appealing the verdict, and in 1974 the decision was upheld by the Quebec Supreme Court, although one judge was impressed with Chateau-Gai's argument that the term Champagne had passed into common usage, and cast a dissenting vote.

While the Supreme Court's decision only affected the province of Quebec, the French began initiating court cases in Ontario in 1975 and 1976. An unusual feature of the 1933 trade agreement was a stipulation that French laws governing appellations were to prevail in Canada over Canadian laws on the same subject. A lawsuit challenging this provision was launched in 1975, citing both the 1933 trade agreement and the government directive of 1957.

In a newspaper article published in 1974, Judy LaMarsh revealed that the trade agreement of 1933 was a treaty that had to be ratified by both countries, and although the necessary documents for exchange with France were drawn up, they were never sent. The French, therefore, were bringing legal action on the basis of a treaty they had never ratified and to which Canada out of some misguided sense of honor was respecting as if it were in full force.

In December 1977, Donald Jamieson, Canada's external affairs minister, declared that the 1933 agreement no longer provided for a "balanced exchange of advantages," meaning the Canadian use of "Champagne." He asked Parliament to repeal the agreement. A bill introduced in early 1978 died in Parliament, and a similar bill was tabled a year later. It was not until May 7, 1980, that the House of Commons repealed the agreement retroactive to 1978, and all Canadian winemakers could now use the term Champagne legally.

On July 2, 1987, the Ontario Supreme Court ended the 1975 lawsuit by ruling that the French could not stop the Ontario wineries from calling their products Canadian champagne. Judge W.R. DuPont ruled that, "Canadian champagne is a distinct Canadian product not likely to be confused or even compared with French Champagne. The evidence indicates quite clearly that the high regard and reputation of French Champagne has not been affected by Ontario sales of Canadian Champagne and remains well established in this province." In conclusion, Judge DuPont noted that one way to tell the difference between the French and Canadian versions was to look at the vast price difference between the products. The French appealed but lost.

The Canadians had won the battle, but they were about to lose the war. For 70 years the weapons that the French had at their disposal--moral and ethical, judicial and political--had not done the job of protecting the name Champagne, even though in later years they had enlisted the aid of the European Economic Community. The one weapon they did not have, which later proved effective, was to restrict imports into the EU.

Ice wine
Canadian wines improved rapidly following the adoption of the VQA appellation system in the late 1980s. In the 1990s ice wine, a new product produced in Canada, became a sensation in the wine world and won major awards in competitions in Europe. Canadian exports of ice wine to Japan and other Asian countries increased quickly, and the prospect of breaking into the European market was economically appealing.

Despite years of trying, Canada had never been able to gain free access to markets in Europe. A major obstacle was the EU's insistence that only wines made by specific "traditional" winemaking practices be allowed to enter their markets.

One of the barriers to international trade has often been "enological practices." Technical winemaking requirements and regulations vary from one country to another, due to many factors including climate variations, local conditions and tradition. Insisting that imported wines meet another nation's standards was a convenient way of restricting access to wines from abroad.

The World Trade Organization was established Jan. 1, 1995, to facilitate international trade and work on ending obstacles to trade. One result of this was formation of an organization, the New World Wine Producers, to which both Canada and the United States belonged.

On April 9, 2001, these two countries and others initialed a Mutual Acceptance Agreement on Oenological Practices that permitted wine imports from other signatory countries as long as the wines were made in accordance with the producing country's technical winemaking regulation s and its domestic laws. This was in contrast to the EU's practice of examining and approving every enological practice. The EU much preferred bilateral negotiations.

On March 2, 2001, it was announced that the EU's Wine Management Committee was granting Ontario ice wine access to the EU as a first step in furthering Canada/EU cooperation. Bilateral negotiations began Nov. 7, 2001, and lasted until April 2003, when a trade agreement was initialed. Canada signed the treaty in September 2003.

The trade agreement resolved not only enological practices issues, but also gave European winemakers the exclusive right to use certain "traditional" names in the Canadian market. Names such as Bordeaux, Chianti and Madeira were prohibited immediately, while names such as Burgundy, Rhine and Sauternes were to be banned at the end of 2008, and other names such as chablis, Champagne, port and sherry could no longer be used after Dec. 31, 2013.

The EU knew exactly what it was doing, and one of the provisions in the agreement stated that after the effective dates, Canada could not allow wines with these names to be imported from any non-EU country, including the U.S., which at that time was supplying one of every six bottles of wine consumed in Canada. As a result of the agreement, Canada lost the right to use the term Champagne, but gained free access to ship Canadian wines to EU countries.

The EU also wanted a bilateral agreement with the U.S., which had withdrawn from the OIV in 2001 due to its insistence on adhering to specific traditional winemaking practices and its refusal to recognize new winemaking techniques such as ion exchange. For the U.S., an agreement would help create a marketing certainty for exporters. Bilateral negotiations between the U.S. and the EU concluded Sept. 14, 2005, with a trade agreement providing for the mutual acceptance of winemaking practices.

The U.S. agreed to prohibit the use of 16 semi-generic names on wine labels, many of them already prohibited in the Canadian agreement, such as chablis, Champagne, port, sherry and chianti. One particularly controversial issue was the protection of the rights and investments that many U.S. brand holders had in such terms as Champagne. The solution was to grandfather the use of these semi-generic names on non-European wines: After a certain date no new brands could use these names, even on domestic wines not intended for export. The EU had tried for many years to have these names prohibited in the U.S., and now it had largely succeeded.

EU reaches further
Also in the agreement was the provision that the EU would permit the use of a number of 14 terms including chateau, clos and late-bottled vintage for a period of three years, after which permissions would be reviewed. The three-year period expired in March of this year, and the EU advised the U.S. that the permission to use these names was being withdrawn.

The result of the latest EU action has been to call into question the use of these names on wines entering the EU countries. Clos and chateau are used in brand names of many wineries in the United States, and the damage to those wineries would be considerable. What the EU has done so far is to ban these 14 terms on labels of wine for export to the EU only.

As of this writing, there is no indication that the EU wants to have these names banned on labels of all wines, or that there might be a trade-off for the use of chateau or clos. Nor has the U.S. government reacted to the EU's withdrawal of permission.

As long as established international trade agreements are observed, the EU has the undeniable right to set its own regulations about what may be imported. What concerns me, however, is the extent to which protectionism is going, and how far it will go.

It is one thing to protect the wine from a specific winemaking district such as Champagne; protecting geographical indicators such as port and sherry has the effect of creating a wide variety of names for the same product. Trying to protect such terms as chateau, vintage and classic has, in my opinion, more to do with an obsession for protectionism than preserving the economic value of a product.

And this may not be the end of it. The EU has indicated that it would like to restrict the use of certain winemaking terms as well. The use of the term méthode champenoise, for example, would be limited to the area of France where the process originated.

The history of French and EU protectionism is instructive. It would be nice to declare that the Champagne Wars are over. The EU should be pleased with the results it has achieved, but its flag of protection is still flying.

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