Geographical Protections and Trade: Product-level Evidence from EU Agreements

Geographical protections (GP) are enhanced trademarks based on the regional origins of products. Avid proponents such as the EU argue that foreign producers should not infringe on GPs, but current WTO rules are insufficiently clear to enforce national GPs across borders. While a widely contested issue in international policy circles, the trade impact of GPs is not fully understood. In this paper, I compile a unique product-level dataset from EU agreements with 31 countries over the period 2005 to 2020 that enforce EU GPs abroad and explore their effects on trade. The analysis shows that the EU enjoys a significant boost in exports to its partner countries due to these arrangements, especially in products with higher numbers of negotiated cross-border GPs and low initial EU market shares. Whereas EU GPs do not divert trade away from third-country exporters, the evidence suggests that they lead to significant price increases, both in EU and third-country exports. Given the WTO’s current ambivalence on the issue, its members are risking the emergence of an ever-rising patchwork of GP blocs that will affect trade flows and potentially hamper cooperation on other policy initiatives.