Geographical Indications (Wine and Spirits) Registration Bill

I move, That the Geographical Indications (Wine and Spirits) Registration Bill be now read a first time. At the appropriate time I intend to move that the bill be referred to the Foreign Affairs, Defence and Trade Committee for its consideration.

The bill repeals and replaces the Geographical Indications Act 1994. The Act was passed in response to obligations arising from the World Trade Organization Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPs). The Act established a registration system for the protection of geographical indications and accorded a level of protection consistent under the TRIPs agreement. However, the Act has never been brought into force, in part because there was no strong interest in New Zealand, and in part because other developments internationally did not eventuate. This has resulted in the 1994 Act being out of date. The purpose of the bill, then, is to put in place a modern, efficient, and cost-effective process for the registration of geographical indications of wines and spirits, which both serves the purposes of our industries and meets our obligations under the TRIPs agreement.

The geographical indications, as defined by the World Trade Organization TRIPs agreement, indicate that a good originates from a place where a certain quality, reputation, or some other characteristic is essentially attributable to its geographical origin. The most obvious example is champagne. In New Zealand, over recent years, regions such as Marlborough, Martinborough, Hawke’s Bay, and Central Otago have also become synonymous with great wine production. For producers, geographical indications can be a helpful marketing tool, along with trademarks, in the promotion of products. They support regional efforts for establishing and developing both a geographical branch and excellence. A geographical indication can help consumers to make informed choices about the products they are buying. Over the past decade New Zealand’s reputation as a producer of great wine has gone from strength to strength. Our sauvignon blanc is regarded as the finest in the world. We may well need to move to protect Hawke’s Bay or Marlborough’s sauvignon blanc, for example, against producers passing it off as theirs in other places around the world.

The bill reaffirms New Zealand’s commitment to providing a strong intellectual property regime that offers clarity for users and fully complies with New Zealand’s obligations internationally. The TRIPs agreement establishes minimum standards for the protection of intellectual property rights, including geographical indications, which World Trade Organization members are required to provide. But we do have flexibility on how we choose to give effect to those obligations. The bill will provide a clearer, more coherent framework for honouring New Zealand’s international obligations. At present, we implement our TRIPs obligations via the Fair Trading Act 1986 and the tort of passing off. This has necessitated legal action in order to clarify the status of geographical indication—for example, in the champagne case. By establishing a register for geographical indications, the bill will provide a less costly method of establishing legal certainty as to the status of geographical terms.

The bill contains a new definition of geographical indication to ensure that only those places that meet the standards of the TRIPs agreement are able to register under the Act. This means that a registered geographical indication needs to be able to indicate that a good is originating from a particular area where a particular quality, reputation, or other characteristic of the good can be attributable to its geographical indication.

The bill limits registration to geographical indications for wines and spirits only. The TRIPs agreement accords two levels of protection for geographical indications: a standard level, which applies to all goods and requires Governments to provide measures to prevent the misleading or confusing use of geographical indication; and a higher level, which applies only to wines and spirits. This requires us to provide measures to prevent the use of a geographical indication on a wine or spirit that does not originate from the area indicated. The prohibition applies regardless of whether the use misleads or confuses as to the origin of the product.

The protection accorded to registered geographical indications by the bill is consistent with this higher level of protection for wines and spirits. A person who uses that indication on a wine or spirit that does not originate from the geographical area indicated will be deemed to have contravened section 9 of the Fair Trading Act 1986, and the provisions of that Act will apply accordingly. However, registration will not be compulsory. Unregistered geographical indications for all products—wines, spirits, and others—will continue to be protected through the Fair Trading Act 1986 and through the common-law tort of passing off.

The TRIPs agreement establishes a balance of rights and obligations for the protection of geographical indications. This balance includes limitations and exceptions for geographical indication protection. The bill incorporates all of the limitations and exceptions to protection provided for by the TRIPs agreement—for example, the protection is not to be afforded to terms that are considered generic in the New Zealand market, nor will the bill influence the way in which common descriptive terms are used in the New Zealand market. Similarly, the bill also clarifies the relationship between trademarks and geographical indications consistent with the New Zealand position internationally on those issues.

The bill implements a first-in-line, first-in-right principle for determining which right has priority. A later-filed geographical indication will, in most instances, be prevented from registration by an earlier-filed trademark, and vice versa. In very limited circumstance the bill allows for the potential of a later-filed geographical indication to be considered, despite a pre-existing trademark having priority.

Homonymous geographical indications refer to geographical indications that are identical in name but relate to different geographical areas. Provided that both are legitimate, the bill allows for the possibility of registration for both geographical indications. Conditions may be imposed on the registration to ensure that the use of both terms does not lead to confusion in the market place. As registration is not compulsory, the bill introduces an exception to protect unregistered homonymous geographical indications to be used in the event that someone subsequently registers the geographical indication.

More generally, the Geographical Indications (Wine and Spirits) Registration Bill represents a comprehensive reform of key aspects of New Zealand’s intellectual property regime. It forms part of a wider reform process to ensure that our intellectual property legislation is up to date, taking into account international developments. The wider process includes the updated Trade Marks Act 2002 and reviews an updating of the Patents Act 1953, the Plant Variety Rights Act 1987, and the Copyright Act 1994.

Geographical indications are an important aspect of New Zealand’s intellectual property rights framework. The bill will assist our burgeoning wine industry by ensuring that a modern, efficient, and cost-effective registration process is in place for geographical indications of our wines and spirits. A registration system will provide legal certainty for producers, without stifling the innovation that has marked the rise of the New Zealand wine industry. The bill does not make registration compulsory. Existing legal mechanisms will continue to apply, and the bill will also help consumers to make informed choices.

The bill will provide a clearer and more coherent framework for honouring New Zealand’s international obligations. It considers the changes that have taken place in the international context since the 1994 Act was passed and puts in place measures that ensure the continuing use of terms in common use in New Zealand.

It always frustrates me when Ministers come down to the House and gabble through a speech written by someone else when they introduce a bill, and clearly do not have the faintest notion what the bill is doing or what it is about. It is even worse when they do not even know how to pronounce words that have been written into the speech. If Ministers are not going to write their own speeches—if they are going to come in here and read a speech that some official has written for them—they should at least make sure that they can pronounce the words and that they know what they mean.

Having said that, I want to make it clear that National will be supporting the Geographical Indications (Wine and Spirits) Registration Bill. I must say that this legislation has a fascinating history. It would be fair to say that when the issue of geographical indications was first raised here in New Zealand, it caused a bit of concern. If members think back, we used to make stuff in New Zealand that we used to call champagne. Things like port were made in New Zealand. There was a lot of concern that if the New Zealand Parliament were to have to pass this kind of legislation it might mean that New Zealand would not be able to market products that it has always accepted had certain names, and they would lose their identity.

However, over recent years, as trade liberalisation has become a major development around the world, and as the World Trade Organization—which was formed from the GATT during the Uruguay round of trade negotiations—continued its work of trade liberalisation, the issue of geographical indications and, if one likes, protecting intellectual property in a liberalising market, became a major issue for the World Trade Organization. Consequently the World Trade Organization members agreed to an important agreement called the World Trade Organization Agreement on Trade-related Aspects of Intellectual Property Rights, more commonly known as the TRIPs agreement. Up until now it would be fair to say that the way in which New Zealand has given effect to that agreement, although it has been reasonably effective, has been a cumbersome way of giving effect to our international obligations under the TRIPs agreement.

When National was in office in 1994 it passed the first Geographical Indications Act, but it never actually brought its provisions into effect. When this bill, whose first reading we are debating today, is passed into law it will repeal the 1994 Act, and we support that. I think that this bill is an improvement over the 1994 Act. We concur with the Government that instead of simply bringing the 1994 Act into effect, it makes sense to replace it with this bill. One of the big differences between the 1994 Act and this bill is that this bill quite wisely restricts the geographical indications legislation to wine and spirits. Under the TRIPs agreement that is an area where New Zealand must make sure we comply very carefully with our international obligations, so this legislation makes sense.

One could give examples to show where this kind of legislation will have effect. The Minister, when introducing the bill, spoke of champagne and how the TRIPs agreement makes it illegal for New Zealand to call sparkling wine champagne. Of course, many fine wines do come from places like Champagne in France. Another classic example of a French geographical indicator is Burgundy. Of course, Burgundy is a wine name that has tremendous significance around the world. Many countries, I guess, would like to market wine under the name Burgundy, but, of course, the TRIPs agreement makes it clear that that is a geographical indicator that has market value to the Burgundy area and that wines produced elsewhere should not be able to use the name Burgundy. Likewise, with Bordeaux wines, some winemakers around the world might dearly like to call their wines Bordeaux because of the very fine reputation that wines from Bordeaux have.

Most countries of any significance are members of the World Trade Organization and most are parties to the TRIPs agreement, so those kinds of geographic indicators are protected. As the Minister said, as time goes on this could have positive spin-offs for New Zealand. I guess that initially it was seen as negative for us that we could not call wines Burgundy. I cannot remember where the situation has got to on port, but I guess that in the future we may not be able to call wines port. Of course, for us in the future it does have potential benefits—unless we get into the provisions in the clause on homonymous indications. The Minister had a bit of trouble getting that word past her tongue, and I am not sure that the Minister explained exactly what it means. Words that have the same spelling or the same sound are homonyms, and the bill provides for that. For example, one of our indicators could be Marlborough. It would not take much thought to realise that there is more than one Marlborough in the world. It would be extraordinarily difficult for one country to claim an exclusive geographical indicator when there is a homonym that is common to more than one place, and the legislation addresses that.

As with all legislation like this—and earlier on today legislation was introduced to license immigration advisers—we are all the time introducing more and more red tape into our economy. It is really important that this red tape be minimised. The Government has introduced several bills today that bring in miles more red tape, but I am not aware of any bill introduced today that actually gets rid of red tape. We always have to be careful of red tape. One feature of this bill that I do support is that it makes no provisions beyond that required of our obligations under the TRIPs agreement. The Government has not taken any great flights of fancy to provide more red tape under this legislation than is required under our obligations under the TRIPs agreement. What is more, the level of protection guaranteed by this bill is a level of protection consistent only with that required by article 23 of the TRIPs agreement. Again, one of the reasons that National supports this legislation is that it does not go beyond the protections required by the TRIPs agreement.

Having said that, I point out that although National totally supports the bill’s coverage, because it goes no further than that required by the TRIPs agreement, we must make sure that the processes the bill establishes put in place minimal red-tape requirements. I repeat that today the Labour Government has introduced several bills that will bring in more red tape. I am not aware of any bills that the Government has introduced today that get rid of red tape. One thing that all New Zealand business people understand is that we are becoming absolutely tied up in red tape. It is becoming a major constraint on New Zealand’s economic growth. The select committee should make sure that this legislation does not produce any more red tape in its procedures than is required.

I repeat that National will support this bill because it is consistent with our international obligations. We support the fact that it repeals the 1994 Act and we support its coverage. We think it is a sensible measure.

New Zealand First likewise supports the bill. Yet again, as Dr the Hon Lockwood Smith has said, it is something we have to do to line up with international obligations. Unfortunately in the countries we sell into—be that selling wine, dairy products, beef, or the other things we rely on, basically, for our standard of living—we face not only tariff barriers but also non-tariff barriers.

The greatest of those is the apple situation in Australia. To give Dr Lockwood Smith his credit he battled that for many years. To his credit he involved himself in, I guess, an international incident—it is off our shores—by suggesting to the Australians that they were not as clean as perhaps they might pretend to be. He was right, of course, but diplomacy does not allow one to say those things, and the matter was plastered over. However, the honourable member was quite correct.

We have to fall into line, particularly in the matter of wine, where one cannot name a wine after a French province, or whatever, without paying some sort of fee. New Zealand First supports this bill. We think it is essential. International agreements are something that we as a country cannot get around. This is one of many such agreements that we are forced to comply with, and we do so reluctantly but with the knowledge that New Zealand has to abide by its international obligations.

The wine industry is of huge importance to my electorate. It provides employment, foreign exchange earnings, and outstanding wine for all consumers to enjoy. This situation is replicated throughout New Zealand.

I did not understand one word of the Minister’s speech, so I want to start by focusing on what this bill is about. International demand is changing away from the heavy red wines of Europe, towards lighter flavoured wines, and our plantings are very important in areas like Martinborough, which is regarded as an area that produces the best Pinot noir wine in the world. There is huge room to expand our industry, because we are contributing only 0.2 of 1 percent to the global wine bucket each year. If we look at our climate, we realise that New Zealand wine yields can vary by 25 to 50 percent, plus or minus, compared with plus or minus 5 percent in Australia, which this morning’s Dominion Post points out is in vast oversupply of grapes.

Although production and markets are important, New Zealand must ensure that it meshes with our international trade obligations in the World Trade Organization, and particularly the Agreement on Trade-Related Aspects of Intellectual Property Rights, or “TRIPs”. I feel it is a real pity that the Minister has taken so long to bring this bill to the first reading stage, but certainly National supports it. The bill will bring common sense to bear. It is really important that our wine-producing regions have identifiable boundaries, and that is what this bill will provide. The consumer and the producer need to know that if a bottle of wine has the words “Martinborough wine” on the label, the wine can be proven to have been produced from grapes grown in Martinborough. This outcome, from the point of view of Wairarapa electorate vintners, cannot come soon enough.

But let me draw members’ attention to the bill. One area of the bill that looks to me to be weak is where it gives precedence to existing trademarks over geographical indication registrations, where they are similar or identical—for example, clauses 13 and 14. Clause 15 does provide limited grounds for a geographical indication to be registered, where it conflicts with an existing trademark. But a problem that could arise is that if a wine with a trademark similar to a geographical indication—for example, Martinborough Vineyard—contains less than 85 percent of grapes from the geographical indication its name suggests, then a requirement that wines with a trademark substantially similar to a geographical indication meet the 85 percent content rule would fix that and ensure that the consumer would not have the wool, legally, pulled over the eyes on origin. Otherwise, the bill is better than expected, and the sooner it is implemented the better.

But let me draw the attention of this House to the unreasonable charges being levied on this industry. For example, this Government is taking $130 million from the wine industry as an excise tax.

💬 Mark Blumsky: Robbery!

It is absolute robbery. And what is it using the money for? It is using it to give interest-free loans to our students. It is robbing the vintners and giving the money free, without any interest at all, to students. These same growers who provide this $130 million invest in land and plant. They provide employment, and they provide our country with foreign exchange earnings. They generally operate as small businesses that face a plethora of red tape and regulation, as well as a disadvantageous exchange rate and high interest rates.

If one says “$130 million” fast enough, it does not register much. Most people do not understand what $130 million actually means, because they have never experienced that sort of money. Well, I would like the chardonnay socialists sitting across the Chamber to realise that one bottle of chardonnay costing $20 allows the Government to retain $2.20 as GST. That is the first tax. Then there is a retail margin of about $3.78, and a distributor’s margin of about $3.45. Of the $20 retail, about $10.55 ends up with the wine producer, exclusive of GST. From this residue, the chardonnay socialists take $1.69, or about 16 percent of the money the vintner receives. This is after they have paid GST, of course, and it is after they and their company and employees have paid income tax. The vintner pays about $2.60 for the grapes that go into the bottle, which is roughly 25 percent of the price, then another $2.49, or 23 percent, for winemaking and packaging costs. This leaves $3.77, or 36 percent, of the amount the vintner receives—$10.55—to cover overheads, freight, marketing, and a return on capital.

But a $20 bottle of wine, as our chardonnay socialist friends would know, is a super-premium wine. Most wine is cheaper, so the impact is greater. This excise tax—$130 million a year, or $1.69 on every bottle—is a huge money-spinner for the Government, which feels it knows better than the vintners how to spend. And who says that a chardonnay socialist knows how to spend the vintner’s money better than a vintner, especially when the vintner is struggling to survive? In my view, the $130 million excise tax should be left to the industry to decide how to spend. It is the industry’s money. The chardonnay socialists are squandering it. Furthermore, the promise of a high dollar—or the economic policy being pursued by the chardonnay socialist, resulting in a high dollar—is creating a very dangerous situation in an environment of high interest rates and difficult market conditions, and this will impact on New Zealand’s foreign exchange earnings. Foreigners are buying millions of New Zealand dollars every day, primarily because of an exchange rate differential. If we take the euro as an example, for the first time in 5 years Belgium has this week reviewed its interest rate upwards to 2.5 percent. The economic policies of our chardonnay socialists will cause huge damage to our economy in 2006. This House has been warned.

Bill read a first time.

Bill referred to the Foreign Affairs, Defence and Trade Committee.