Geographical Indication Tags - Are GI Tags helping India’s exports?

Exporters and producers of unique regional products have always tried to guard their produce from imposters and free riders. Geographical Indication Status or GI Tag as it is popularly known has gone a long way to preserve these unique products. But do GI Tags make a difference when it comes to exports from India?

Manisha Choudhari | April 2016 Issue | The Dollar Business

For the uninitiated, Geographical Indication (GI) tag is a proof of where the product (which can be natural, agricultural or manufactured) is born or produced. A product is best known by its reputation, characteristics and its quality, which is in most cases dependent on its place of origin. GI status is also believed to be the oldest form of Intellectual Property (IP) protection. Some products worldwide with GI tag include Champagne, Feta cheese, tequila, Ceylon tea, Antigua (Guatemalan) coffee, and Kalamata olive. The tag is given to authorised users in a certain country, who can use it exclusively, and no unauthorised person is permitted to use the same. But there’s no foolproof method developed yet that ensures 100% protection to a particular GI tag. Picture this: It has been estimated by the International Trade Centre that every year, about 125% more coffee bags are labelled and exported as ‘Antigua’ than those truly produced in Guatemala!

So how does a GI tag work? The tag is developed to protect consumers from misleading information and fake products, and producers from having to resort to selling goods for lowered prices. For instance, if someone sells counterfeit Darjeeling tea, he can be taken to court, because that product bears a GI tag in India. But if a seller in Bangladesh markets the fake product in Sudan, you cannot do much as your Darjeeling Tea’s GI tag is not recognised in Sudan. Going back to the Antigua coffee case, outside of Guatemala there is likely to be more coffee marketed as ‘Antigua’ by unscrupulous traders and “one estimate puts this at as much as 300-700% the actual volume produced in Guatemala (Dwijen Rangnekar, 2004; paper titled, ‘The International Protection of Geographical Indications’). That practically implies that GI tags have to be registered country-wise if they are to bear any significance because ‘multilateral GI registration system’ hasn’t been established yet under WTO; except of course in the case of wines and spirits.

As on February 17, 2016, India had 238 products with GI status (with another 270 in the queue for approval) – the most recent being basmati rice. [Despite the filing date being November 26, 2008, basmati rice only got accorded the GI status on February 15, 2016, when the Intellectual Property Appellate Board (IPAB) instructed Chennai-based Geographical Indications Registry (GIR) to issue a GI tag for the product.]

Out of the GI tags registered in India, nine are foreign products – French Champagne and cognac, wine from Napa Valley, Scotch whisky, Italian Prosciutto di Parma, Portuguese Porto and Douro wines, Peruvian Pisco and Mexican Tequila. Made in India products include the world famous Darjeeling tea, Mysore silk, Madhubani paintings, Jaipur blue pottery, Goan feni, Hyderabadi Haleem, Naga Mircha (also known as bhut jolokia) and many more. The top five states that have the maximum number of products with GI tags are Karnataka (33), Tamil Nadu (24), Kerala (22), UP (21) and Odisha (15).

As is mentioned in a paper by Sarah Bowen in 2010, ‘Embedding Local Places in Global Spaces: Geographical Indications as a Territorial Development Strategy’, GI status is very unique in the sense that it provides ‘a means of ensuring that control over production and sales of a product stays within a local area, but at the same time [it] makes use of extralocal [foreign] markets’.

Of course, a GI tag is very different from a trademark, in the sense that the GI tag is given to a product from a certain place, but a trademark is given to a product from a certain company. The GI product can only be made at a certain place, while a trademarked product can be manufactured anywhere around the world by the same company.

As is mentioned in a chapter by Cerkia Bramley, Estelle Biénabe, and Johann Kirsten called, ‘The Economics of Geographical Indications: Towards a Conceptual Framework for Geographical Indication Research in Developing Countries’ in a World Intellectual Property Organisation report from January 2009 called ‘The Economics of Intellectual Property’, GI tags can be thought to be the “result of a process whereby reputation is institutionalised in order to solve certain problems that arise from information asymmetry and free riding on reputation”. Products with a GI tag get premium pricing, thus helping exporters earn better, and which in turn incentivises producers. As is mentioned in the same report, since registration of the GI tag 18 years ago, producers of Italian Toscano olive oil started earning a premium of almost 20%. With premium pricing, producers of a GI product (especially in rural areas), can help improve their living conditions by means of this increased income.

So who does GI tags help? Third world nations or those in the developed world? For poorer economies, the product recognition is like an insurance or protection, especially for those where manufacturing happens across rural areas and with producers who cannot invest in branding owing to a lack of ‘marketing muscle’. For these producers the GI tag helps create brand equity. Like it has in the case of tequila manufacturers in Tequila (Mexico). Referring to Sarah Bowen’s study (of the differences between the enforcement of GI between French Comte cheese and tequila, focusing on the latter), tequila is made out of the blue agave plant. The Mexican government’s GI for tequila was enforced in 1974 and covers two types of tequilas – one that is made from 100% blue agave and the second made from 51% agave and 49% alcohol from other types of sugar. What makes the tequila made in Tequila different from that in, say Los Altos, is that the agave grown in Tequila is sweeter and a lot subtler. By promoting this very difference, the producers of tequila were able to secure for themselves a place in the global market. Today, Tequila bottles are a common sight across duty-free shops across international airports.

FROM WTO TO INDIA

The origin of the GI tag can be traced back to when WTO administered an international agreement in 1994 called the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) to safeguard IPs of member countries and set down certain standards for it. TRIPS has had its fair share of controversy. Protection under TRIPS is defined in two articles – Article 22 and 23. As per Article 22, GIs are protected to avoid providing public with misleading information and to prevent unfair competition, and thus, products under this article are provided with standard protection. On the other hand, Article 23 is mostly used for GI tags for wines and spirits and are subject to a higher level of protection. Some countries including India, Pakistan and Switzerland want Article 23 to increase its coverage of products so that their respective produces can benefit from greater brand equity born out of them being a GI.

A Multilateral System

In 1999, the Geographical Indications of Goods (Registration & Protection) Act was passed in India. While the use of GI tags by unauthorised users is in principle illegal, there is no concrete method of preventing it. If a man, say, from Kenya decides to sell rice as Indian basmati rice, despite not being authorised to use the GI tag, at most, the government of India can write to the Kenyan authorities. But what if Kenya refuses to take action? It’s fairly impossible to even imagine the efforts and time that The All India Rice Exporters’ Association (AIREA) will take to go about establishing the GI tag for the product in every country. So the need of the hour is to ensure that GI tag given to any product in any country, retains its significance and essence of origin, and as such, once a GI is registered for any good in a country, the database on WTO website should be updated and a circular or notice should be shared with its member governments. The government in turn should publicise in their respecitve countries the fact that a certain GI registration has been awarded. This multilateral GI registration system is inarguably required immediately. Just because China, Hong Kong and a few other nations are using their muscles to arm-twist WTO, the multilateral system isn’t being worked upon at present.

[caption id="attachment_45491" width="650"] Madhubani painting was the first product from Bihar to win a GI tag[/caption]

GI tags are not made for the Nikes, Apples, GEs and Guccis of the world. They are meant to serve interests of the third and first world manufacturers who don’t have the pocket for building an expensive-to-make brand. And for protecting their interests, the multilateral system has to be born soon.

GOOD for Some...

The Darjeeling tea and logo were the first products to get a GI tag in India. Says Girish Sarda, partner at Nathmulls Tea, “The GI tag was a good step for the Darjeeling tea industry, as it helps check authenticity of the products being shipped. Earlier, we had a lot of tea being exported as Darjeeling tea, most of which were fake. However, the government needs to be stricter on that, as our laws aren’t strong enough”. On the impact on business since implementation of the GI tag, he says, “To be very honest, it hasn’t really affected the business in any way, except for the fact that more genuine tea is being sold. The laws are not implemented well, so it will take time for the GI tag to be successful”.

GI tagging has really helped some products like Darjeeling tea, so much so that when the production would fall in India, its prices elsewhere would rise. The last time this happened was during the couple of years leading to 2013, when the agitation for a separate state (Gorkhaland) was on in Darjeeling district and adjoining areas. Exports of Darjeeling tea to many parts of the world including UK, Australia, China and Pakistan fell dramatically and in the first half of August 2013, at least three major dailies in England – The Telegraph, The Guardian and The Daily Mail – carried articles expressing concerns of Darjeeling tea-lovers. The press in countries like China, Australia, Pakistan and Gulf countries also echoed a similar concern. Prices of Darjeeling tea in high-street cafés across London, Paris and other export markets shoot up when political or labour unrest happens in Darjeeling. That’s a known fact.

Also, that about 90 kg of the first flush from a certain tea estate in Darjeeling fetched over Rs.40 lakh in London just last year – which translates to a kilogram of exported tea from India fetching close to Rs.45,000 – had much to do with the produce being labelled ‘Darjeeling tea’. But tea is an exception.

[caption id="attachment_45493" width="650"] Last year, 90 kg of the first flush from a certain tea estate in Darjeeling fetched over Rs.40 lakh in London – that valuation had much to do with the product being labelled ‘Darjeeling tea’.[/caption]

...Others Doubt It

The direct impact of GI tags on exports is questionable. For example, the silver filigree of Karimnagar got the GI tag in 2007. Says Arroju Ashok, President of Silver Filigree of Karimnagar Handicraft Welfare Society (SIFKA) about its effectiveness, “There is a recognition of the product now – the tag has helped secure the identity of the silver filigree. But apart from that, there is no other effect. In fact, the local people don’t even know what a GI tag is.” However, the recognition that GI tag has brought to the product in overseas markets has really helped. “Business has got better,” he says. What can be clearly sensed is a lack of education about GI tags that could play a pivotal role in making a good quality, indigenous product popular across international markets, and allowing the higher prices realised to aid greater investments and improve livelihood of the rural population, farmers, craftsmen, etc. It is indeed a circular flow. Dilip Kumar, Director at Nazrana Chikan has a similar story to tell. He says that GI registration is done in two parts – first the product and its area are registered, and then, the manufacturers and users of the product register themselves. Out of the thousands involved in Chikan work, he says woefully that only four have registered themselves. “There is no awareness of the product,” he laments,

“We need to popularise the art first within India and then the world. If even 70% people register themselves, the benefits will immediately follow. The state government, too, needs to promote chikan”. Lucknow Chikan got the GI tag in 2008, but its full potential is yet to be availed. Adds Kumar, “Internationally, Chikan craft is known as a handicraft product. However, I find it very strange that apart from UP, nowhere in India is this considered a handicraft, and so, it does not get the status of handicraft that it has in UP throughout India. This must change”.

Call In The Doctor

It is also important that the government steps in to make GIs work well for Indian exports. Problems of acute funds shortage amongst many registered GIs, absence of civil and criminal remedies in case of GI infringements, lack of a vigilant market watch and regular inspections, improper coordination between actors involved in the value chain of exports of GI products, etc., are some areas that the central and state governments should look into.

As per a paper titled, ‘Pre-and-post Geographical Indications Registration Measures...’ by Kulkarni and Konde in the Journal of Intellectual Property Rights, the researchers state that, “The Indian government has not made any headway in adopting strategies for branding and promotion of GI products or their marketing and distribution in both domestic and export markets.”

True, if industries like handicraft and others that create rural employment are to flourish, in the absence of massive pockets, the government has to take GIs in all seriousness. Make in India is a good, steady development, but factories and warehouses will take their time to get established, and all of India is not skilled enough to be lifted from the farmlands and placed in factories.

Creating Impact

Developed and developing economies hold the GI tag dear, as is seen in the case of Tennessee whiskey, Champagne, Darjeeling tea, and Kalamata olives. But what of the near-developed economies?

There is another school of thought here. If India is keen on becoming a near-developed economy, it has to move beyond the GI tag, and look towards the future i.e., Intellectual Property (IP) protection in the form of patents. The Trans-Pacific Partnership (TPP) doesn’t focus on GI, instead, it has moved ahead to this sort of IP protection. This is one of the reasons it will be a long time before India can even think of becoming a part of this historical trade pact.

[caption id="attachment_45494" width="650"] Naga Mircha (also known as bhut jolokia or raja mircha) was recognised as the world’s hottest chilli by the Guinness Book of World Records in 2007. It got a GI tag in 2008. Today, it is exported to Australia, EU and Venezuela.[/caption]

Let us go back to the fact that India recognises a mere nine foreign products with GI tags, which goes on to show just how important it is for your GI tag to even be recognised in other countries. If other nations do not acknowledge the GI tags of Indian products, why even give the product that tag to begin with? In order to have your GI recognised around the world, you can either approach the direct jurisdiction concerned, or agree to protect each other’s GI tags as part of a bilateral agreement (as is the case of EU and China – both recognise ten of the others’ GI products). If neither of these two ways are followed, one can refer to the Lisbon Agreement (appellation of origin can be subjected to international registration) or the Madrid system, where one application can ensure that your product is protected in more than ninety nations.

Export Differentiation

Advocates of GI tags claim that it is a tool in the hand of exporters, which can be used to classify your produce and supplies at levels above your foreign competitors’. “GI can be a valuable tool for export differentiation. As much as 85% of French wine exports use GIs on their labels, as do 80% of all spirits exported from EU. In exporting, GI can be valuable by ‘setting the bar’ or becoming the standard reference for that product in its distribution chain. In certain instances, national and international retailers have made the designation a condition of their agreeing to carry the product,” states a WTO report titled, ‘Geographical Indications: Linking products and their origins’. But this very ‘quality’ attribute of GI tags can be a double-edged sword. Imagine two exporters of the Bangalore rose onion, a product that got GI tagged in 2014. Say, if one of the producers’ onions are of inferior quality. If a foreign importer pays the necessary premium for the GI product and gets the inferior quality onion, the experience will translate into loss or greater difficulty for the seller of genuine product.

It all boils down to this – GI tags are good to have, but don’t ensure success in exports. Economics has always had much to do with prices, and perceptions with quality. But at the same time, these tags are like certificates that give India’s smaller producers, spread across our less-heard export temples, a greater assurance of business beyond borders. Growers, manufacturers and exporters of Toda Embroidery, Naga Mircha pickles, Coorg Orange marmalade, Alleppey coir, Coorg green cardamom, Jaipur’s blue pottery, etc., may not realise it, but the fact that their produces are GI tagged mean that convincing overseas buyers gets easier than usual. It also means having the power to be a price maker.

If India wants to use the GI tags for gaining a toe-hold in the world market, the government must first encourage awareness amongst those producing these goods. There is a need to create a policy framework for it. While there is no doubt that GI status in itself is a brand building tool, the government will need to provide funding, tax breaks and education to make GI tags count.