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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.