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Geographical Indications: The Economics of Claw-Back

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Abstract

Geographical Indications (GIs) for products (Basmati rice, Champagne sparkling wine, Antigua coffee, etc.) were regulated at the international level in 1995 (WTO TRIPS Agreement, Part II, Section 3). This paper proposes a model on the welfare effects of the socalled “claw-back” of GIs; i.e. the protection in a country (Home) of a GI of another country (Foreign), when the said GI had previously acquired generic status at Home (cf.: protection of Feta in the EU or of Champagne in Chile). The setting includes two countries (Home and Foreign); three varieties (Foreign GI-original goods, Home GI-variety goods and generics) and a continuum of heterogeneous consumers. Two regimes are analyzed: protection / no protection; in two scenarios for Foreign firms: perfect / oligopolistic competition. Only the equilibrium at Home is analyzed. Although a loss in global welfare is always expected when fewer varieties are available in a market, results suggest that industrialized Home countries, with sophisticated consumers and higher relative costs tend to lose less from protecting Foreign GIs than developing Home countries, where the opposite is true. With oligopolistic competition, GI firms become from differentiated from their closest competitor after protection (now generics), further stressing the competitive distortion; consumers with a low willingness to pay for origin and a high degree of valuation for the GI-variety are the biggest losers. Regarding firms, however, contrary to the conventional wisdom, oligopolistic competition by Foreign firms leads to less stringent conditions for Home GI-varieties to compete, and does not affect generics. In effect, if after protection Home GI-varieties can successfully differentiate themselves from Foreign GI-original goods without the (unlawful) use of the GI label (either through the development of their own GI or through proper branding) and stay competitive, the scenario of oligopolistic competition from Foreign firms is more favorable to their development than the scenario of perfect competition.

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Bibliographic Info

Paper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 11-2010.

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Length: 42 pages
Date of creation: 16 May 2010
Date of revision:
Handle: RePEc:gii:giihei:heidwp11-2010

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  1. Daniel Pick, 2008. "Geographical Indications and the Competitive Provision of Quality in Agricultural Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 794-812.
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  7. Levin Jonathan, 2009. "The Dynamics of Collective Reputation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-25, August.
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Cited by:
  1. Tauber, Ramona & Anders, Sven & Langinier, Corinne, 2011. "The Economics of Geographical Indications: Welfare Implications," Working Papers 103262, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
  2. Ngokkuen, Chuthaporn & Grote, Ulrike, 0. "Geographical Indication for Jasmine Rice: Applying a Logit Model to Predict Adoption Behavior of Thai Farm Households," Quarterly Journal of International Agriculture, Humboldt-Universität zu Berlin, vol. 51.
  3. Teuber, Ramona, 2011. "Protecting Geographical Indications: Lessons learned from the Economic Literature," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 116081, European Association of Agricultural Economists.

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