In a recent article in Modern Diplomacy I summarised the ten- year negotiations of a Geographical Indications (GIs) Agreement between the EU and China, which it was my pleasure to lead for Europe. This is still the only trade agreement between the two superpowers.
By popular demand (sic!) this is the unofficial sequel in which I describe some of the more revealing moments in this negotiation, that give unusual insights into what really happens during a trade negotiation, as opposed to the Harvard Business School theories which bear limited resemblance to murky and stumbling reality.
And a quiet word from the outset to my dear EU Commission Human Resources department who may be reading this. Nothing I am describing is secret or confidential! I am bound by EU confidentiality rules till I die. But I can still recount some interesting – non-secret – details that may be useful to future negotiators. It’s my small contribution to the colleagues who follow me.
Two Dead Cats.
So where to start? Do you know the “Dead Cat” concept in negotiations? It’s the idea that when you are in a negotiation the other party suddenly arrives and flings a dead cat on the table to disorientate you. Physical or metaphorical. Ex-UK Prime Minister Boris Johnson apparently excelled in this rather gruesome negotiating ploy.
Anyway, Chinese diplomats are schooled like all of us in the Dead Cat concept. The first time I met my wonderful Chinese counterpart YANG Guohua (who will be reading this), his first words were – as if to test me – “Hello John. Will there be a third world war?”.
Not what you expect! I forgot what I said but I suppose it was that a 3rd world war was unlikely. Regional wars and civil wars are taking up the slack – and slaking politicians’ need for blood. And I recall asking him what has been the impact in China of the Warring States period? Or, to quote Chou Enlai… is it still too early to tell?[1]
Yang Guohua was a marvellous man. Still is. He teaches trade law now at China’s top university Tsinghua and introduced real debate amongst students in his seminars. As part of our efforts to build trust with him and his team, and above all demonstrate how good are Europe’s GIs, we invited them on a two day trip to St Emilion and Agen to visit the famous GIs in that region – St Emilion wines of course, some of which are now Chinese-owned – and the Pruneaux d’Agen growing region (big thanks to Christian Amblard the then head of the GI Pruneaux d’Agen consortium[2].
On the way home in the minibus Yang and I set each other a test – to write in just five minutes a sonnet praising Pruneaux d’Agen. Here is the result. First Dr Yang’s paean to this blessed corner of France:
访Agen
欧罗巴之西，法兰西之南，有地名为波尔多者，得大西洋之精华，享地中海之滋润。
其地盛产梅李，肉嫩汁多，味甘色艳，经数百年沥炼，名满世界。
有诗赞曰：天地有灵气，阳光普照人；海洋风吹形，雨露滋润心。我辈本草木，此地
亦有情；生得美味果，喜将贵客迎。
( and in translation)
Agen
West of Europe, south of France, there is a place called Bordeaux, which derives its essence from the Atlantic Ocean and enjoys the nourishment of the Mediterranean Sea. The place is rich in plums, which are tender and juicy, sweet and colourful. After hundreds of years of refinement, they are famous all over the world.
There is a poem praising as such: The heaven and earth are full of spiritual energy, the sun shines on people; the ocean wind blows the body, and the rain and dew moisten the heart. We are plants, but this place also has feelings; it produces delicious fruits and is happy to welcome guests.
And my own “Ode to a Prune” …
What is this sun-kissed, sleek and dark device
That decorates our plates and teases tongues?
Both soft and hard, smoothly rough
Brimmed with the warmth of France’s fields.
In Agen we found her, rip’ning on the tree
And there we plucked her for our pleasure.
O prune of life, the Chinese knew you
Many centuries ago. We know you now.
Fresh or dry, preserve your memory.
Wrap you in chocolate, souse you in wine.
Raise a glass, celebrate the summer
And when winter comes recall that
River sliding greenly through dense woods, our
Languid afternoon in France when time stopped still.
I relate this not to suggest either of us are great poets, we are not (well Dr Yang might be!) , but to underline how important trust, friendship, humour and imagination are in building the basis for a successful trade negotiation outcome. Dr Yang professes not to remember the details of our negotiations but to remember vividly that minibus trip and our poetry competition!
The other ‘dead cat’ was close to the end of negotiations around 2017 when the then negotiator, [VG(1] CHEN Fuli – an equally intelligent and nice guy whom I liked greatly – without warning said “John, an idea… instead of an international treaty can we make it just a non-binding Memorandum of Understanding? “. After nine years of negotiations! Naturally my immediate reaction was no way José or the Chinese equivalent of this. MoU’s are by definition are not legally binding so barely worth the paper they are written on; and for nine years we had been negotiating a bilateral international trade treaty of the kind foreseen in the WTO TRIPS Agreement; so it was inconceivable that the EU would do this.
Dr Chen accepted these arguments. Some part of the Chinese body politic at that point in time was clearly getting nervous about the implications of the first international trade agreement with the EU and had told him to test if a softer alternative was on the cards. Thankfully it wasn’t!
I have had similar experiences in my career, being asked to test the water on unacceptable concepts so we do due diligence and then report to our Superiors and with gritted teeth and an air of great regret we report that sorry Sir it did not fly. Standard Operating Procedure I’m afraid.
An ailing – if not dead! – cat was China’s request, coming out of the blue in 2017, that the Agreement be signed not by the People’s Republic of China (PRC) but by the Government of China. I smelt a small rat, if not a dead cat, but after checking with my authorities accepted this – the explanation being that treaties with the PRC as opposed to the Government of China have to be passed by the Chinese National Congress which could cause delays. I remarked ironically to my Chinese counterpart at the time that not as many delays as at the European Parliament… the NPC is somewhat nimbler!
I was never very happy about this but I have to say that China’s implementation of the Agreement has been exemplary, with or without the supervision of the NPC! If I am fully honest, I was miffed mainly because I was looking forward to meeting the Chinese National Congress delegates in person to persuade them to sign the deal! We civil servants like our place in the sun from time to time…
Cheese and Wine Parties
This subtitle has two meanings. There was a third party sitting sullenly in the background during our negotiations – Uncle Sam. The US has an almost visceral dislike of GIs (the word is verboten in US legislation) and did what it could during the negotiations to scupper our progress. I refer readers to the website of the Consortium of Common Food Names, a US lobby group paid for mostly by Kraft Foods and some other US cheese producers, as well as a subsidy from the US Department of Agriculture, and whose main aim in life appears to be to prevent EU GI names – be it “Feta”, “Gorgonzola”, “Pecorino Romano”, “Porto”, “Tokay” and others from being protected abroad, especially in Asia and South America where they see their future markets. CCFN’s annual reports and the vehemence of their criticism of Europe and its pride in GIs, are not for the faint hearted.
CCFN and its members lobbied China, to no avail, to deny protection to Europe’s iconic names. They failed. But to quote the Duke of Wellington after Waterloo, “it was a close run thing”. I need to get technical for a second here. US claimed that some key EU GIs were generic, i.e. common names worldwide, so ineligible for IPR protection. It was in their view the case of “Feta”, “Gorgonzola”, “Porto”, “Tokay”, and a handful of others. They pointed out the case of the Wisconsin etc Italian diaspora who had been making Feta for two generations– but importantly only with cow’s milk and not milk from sheep and goats reared on Greece’s biodiverse hillsides. Which is what gives Feta its unique taste. And they also claimed that “Feta” is not a place in Greece so cannot be protected!”. Wrong again! The international WTO rules on GIs do not require a name to be a place – think “Feta”, think “Cava”, think “Basmati” etc……. The WTO TRIPS Agreement and standard practice is that there should simply be a connection in the mind of the consumer between a name, and a place of production.
So given such foolish, specious arguments, in front of China’s IP lawyers – who are and were keen to show they understand and uphold international IP law – the US and its allies lost the arguments hands down. First, they made the mistake of arguing that there is such a thing as a “globally common food” name. In the world of IPR and the WTO there is not. In deciding if a name is a GI or generic: you have to look at the local market only (it’s called the territorial concept in IPR law). So China rightly decided that “Feta” and “Gorgonzola” were not common names in China, unlike say cheddar or eau de cologne which have either lost or never had that association.
And secondly China would never have pretended that its consumers had been eating gorgonzola for so long and that it was so much a part of the daily diet (of this famously lactose-intolerant race) that they thought it was the name for any blue cheese? Of course not!
And third, a big mistake of the US, Australia and others was that they were unable to provide any evidence that Chinese consumers regarded these names as generic. In most cases they were incapable of providing any trade statistics as to whether eg Wisconsin “feta” had ever been exported to China. Their statistics simply showed a few thousand tons of cheese being exported without breaking it down by type.
So they were their own worst enemy and it was easy for China to dismiss the US – and also Australian wine and cheese oppositions – on the grounds they were unable to prove the case that the names were generic in China! This was a massively valuable precedent for the EU in all subsequent negotiations – with Mexico, Chile, New Zealand, Australia, India and others…If the US cannot convince then who can? If China is strong enough to resist considerable US pressure then others should too.
This was a curiously satisfying part of this negotiation – getting the US off our backs and seeing how rigorously China’s IPR ministry correctly applied international rules and bigged up to Uncle Sam. A big shout out now for CNIPA colleagues Li Yue and the legendary GI expert Mme Pei.
Trade Negotiations are about Politics…
Politics played a big part of course in this negotiation although I did not always realise it at the time. Trade negotiations, regrettably, are rarely concluded purely on their merits, nor are negotiating arguments won on their merits either – my forty years’ experience kicking in for a second here.
I want to end this article with insights into how trade negotiations can become hostage to politics – or surf-ride them!
So, in late 2018 we had concluded negotiations at my level. China was still resisting some US pressure, but was also in parallel finalising the bilateral EU-China Investment Protection Agreement. This latter Agreement regrettably got held up in the European Parliament around the same time due to anti-Chinese statements there and some resistance to the Agreement, and the subsequent sanctioning of some MEPs. I am not making judgements here by the way, just describing the facts.
At around the same time Trump’s administration passed its Phase 1 trade restrictions against China, imposing tariffs on a swathe of Chinese goods and requiring China to open its market without any real safety checks on e.g. hormone fed beef from the US and GMO food. This caused considerable resentment in China who for good reasons dislikes “unequal treaties” to which it has been subjected since the early 19thC (something I am acutely aware of as a Chinese speaker and a former Hong Kong Govt official). So, sensing a window of opportunity I thought the time was ripe to show the US and the world that China and the EU have a more civilised relationship and can on occasion do business together.
China had probably reached the same conclusion – I think they too wanted to show the USA that they were not over dependent on them, to thumb their nose at them in a way, and that they could do business with Europe despite the blockage on the Investment Agreement – and so they decided to get their feet wet.
So we initialled the Agreement against this tense political backdrop in October 2018. Of course the GI Agreement was commercially far less significant than any investment agreement would have been; and it was also very marketable in China as a good agreement for its quality food… getting to put the EU logo on Chinese food on sale in China was presumably a vote of confidence in the safety of that food, so what’s not to like? I relate this simply to emphasise that trade negotiations have sometimes as much to do with politics as they do with economic theory or even commercial considerations. The Agreement is good for both sides commercially, but it is equally important politically as a proof that the two regions can be partners, and not solely competitors or strategic rivals. To quote the title of that marvellous novel by Han Suyin, about love between a European and a Chinese: “Love is a Many Splendoured Thing”.
[1] Chou EnLai in the 1960’s when asked by Kisssinger to say what he thought had been the impact of the French Revolution famously replied that it was still too early to tell. Later scholars suggest however that he thought he was being asked about the 1968 student riots in France.
[2] https://www.pruneau.fr/ligp-pruneaux-dagen/
[VG(1]Same comment as above, please harmonise between capital letters or not.