Word Game Moves to the Forefront in Wine Showdown

Times Staff Writer

For decades, Europeans have put up with seeing the names of their renowned winemaking regions splashed across labels of inexpensive American jug wines like Gallo Hearty Burgundy and Almaden Mountain Chablis.

But now they are digging in their heels and want to set limits, even if it threatens to disrupt the $2-billion-a-year wine trade between the United States and Europe.

In the midst of talks to renew a bilateral wine trade agreement, the United States put forth a last-minute proposal that the Europeans say would allow American wine companies carte blanche to use such geographic names as Champagne, Chianti, Madeira, Port and Sherry.

"This looks like the first shot in a wine war," said Tommy Bruce, director of Champagne USA, a lobbying and marketing arm of the French industry.

The rift over the place names could derail a long-running arrangement, set to expire Dec. 31, in which Europe has annually waived its highly specific rules for winemaking to allow the importation of U.S. wine. (Europe has never formally accepted U.S. methods for making wine that differ from its own.)

After walking away from the negotiating table Nov. 14 over the place-name controversy, the European Commission is weighing whether to continue talks or to allow the trade agreement to lapse -- a move that could close European markets to U.S. wine, at least temporarily.

Such a dramatic action would be tantamount to a declaration of war between the world's wine superpowers, something both sides say they do not want but acknowledge is a distinct possibility.

Jim Murphy, the assistant U.S. trade representative for agriculture who has been leading the negotiations for the United States, did not return repeated calls for comment. His European Commission counterpart, Francis Fay, declined to comment.

From the American perspective, the decades-long history of trade proves that Europe has no substantial objections to U.S. winemaking methods and that the issue is being used as a bargaining chip in the dispute over the use of place names, or geographic indicators as they are called by negotiators.

"We have to work through this difficulty," said Arancha Gonzalez, a trade spokeswoman for the European Commission.

The American wine industry, which has been the driving force behind the U.S. position at the negotiating table, insists that companies should be free to continue to use European place names on their wine labels.

The Europeans have said they would allow existing U.S. trademarks to be protected. For instance, Gallo Hearty Burgundy may not be objectionable, according to sources close to the negotiation, because it is a bona fide trademark.

But Europe's wine industry is wary that other trademarks incorporating the continent's celebrated wine regions would arise as generic names of inexpensive American wines if new limits aren't set.

Under the U.S. proposal, Fairport, N.Y.-based beverage giant Constellation Brands -- which holds a trademark for Cook's, a sparkling white wine described on the label as California Champagne -- could create a new protected trademark for Cook's Champagne simply because the word "Champagne" appears on the bottle.

Letting existing trademarks stand "is very, very generous," said Joel Castany, president of Europe's powerful wine grape growers association.

"Nevertheless," he added, "the exceptions must stop there."

The geographic designations, Castany said, are "deeply anchored in European culture, part of the gastronomic tradition of the countries."

If anything, some California winemakers argue, American trade officials should be working to create a similar ethos in the United States and safeguard its position as a world-class wine producer by strengthening regulations for using geographic names such as Napa and Sonoma.

"If our system is viewed as inauthentic, which a brand-name system is, then we can't compete," said Tom Shelton, president of Joseph Phelps Vineyards, a vintner working with others to protect "Napa Valley" as a place name.

In fact, out of respect for the geographic significance of quality wine, Napa Valley's Schramsberg Vineyards dropped the term "Champagne" from labels on its sparkling wine several years ago.

The one thing that does not seem to be in dispute is that the vast majority of the wines in question are throwbacks to another era, brand names that are losing cachet in a wine market in which even "Two-Buck Chuck" is identified by an American place name -- Napa.

Nonetheless, generic wines that use European place names remain a substantial market. Wine industry officials say that there are no firm numbers but suggest that sales of this category could be as high as $1.5 billion a year. Yet it is a shrinking percentage of sales.

Most of the wines in question are owned by giant wine conglomerates, in particular Constellation and E&J; Gallo -- the world's No. 1 and No. 2 wine companies.

Modesto-based Gallo said the company supported the position of the Wine Institute, a San Francisco-based trade group for California's $14-billion wine industry that is working closely with U.S. trade officials. Constellation declined to comment.

Yet even the largest wine companies could ill afford any interruption to sales in Europe while vintners are struggling with a worldwide glut of wine. American wineries exported $306 million of wine to the European Union in 2002, according to the Wine Institute.

If that wine isn't sold in Europe, it would add to the excess inventory in the United States, deepening the already widespread discounting occurring at the wholesale and retail levels and probably prolonging the reign of Two-Buck Chuck -- $2-a-bottle wine that has helped to wreak havoc within the industry by depressing prices.

But that's nothing compared with the consumer backlash that could erupt if the United States retaliated by blocking European wine imports. When there is no French Bordeaux or Italian Chianti on the shelf, the hue and cry could be deafening.

"No one wants to stop commerce," said Joe Rollo, an international trade expert with the Wine Institute. The United States hasn't drawn a line that it absolutely refuses to cross, he said, striking a conciliatory note.

But Rollo was quick to point out that in a trade war, European winemakers would have more to lose than the Americans. The United States imported $1.7 billion of European wine in 2002, or more than five times American exports to the EU countries.

Total wine sales in the United States were $21.1 billion in 2002, according to the Wine Institute.

The battle over Americans' use of European place names dates back a generation, and this latest round of bilateral negotiations spans five years, with meetings alternating between Washington and Brussels and, recently, daily teleconferences.

Both sides believed that an agreement was imminent before the U.S. trade representative's office put forward the proposal protecting U.S. wine companies' usage of European appellations.

After several sessions to discuss the proposal, European negotiators left Washington two weeks ago, doubtful that any agreement could be reached.

If the current trade arrangement was allowed to expire, and Europe blocked U.S. wine imports, the United States probably would file a complaint with the World Trade Organization, Rollo said, kicking off a process that could take a year or more to resolve.

But with the U.S. facing at least $2.2 billion in international sanctions over President Bush's decision to impose tariffs on imported steel, concern is growing that wine could become embroiled in the increasingly poisonous U.S.-European trade environment.

In the meantime, wine sales between the continents could come to a halt.

"For lack of a better word, it's greed," said Bob Maxwell of the National Assn. of Beverage Importers, whose members would be caught in the crossfire of any wine trade war.

"The loser will be the consumer."



Wine words

With a U.S.-European Union wine trade arrangement set to expire Dec. 31, the United States is trying to broaden the rights of American companies to use these 15 European terms, which are mostly famous wine-growing regions. The European Commission is hoping to limit the number of new trademarks that incorporate these names.

















*Not a geographic designation

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