Select Committee on Scottish Affairs Appendices to the Minutes of Evidence


Memorandum from the World Trade Organization

  1.  We acknowledge receipt of your letter dated 25 July 2000 requesting information on any difficulties or questions that have arisen in international trade with respect to the export of Scotch Whisky and what is being done to resolve them. Your queries cover a large number of issues and we have had to coordinate the responses from the various WTO Divisions specialising in those areas of interest to you. For further information on any specific area we would advise you to contact directly the Division concerned. We hope that the response provided will be useful for the future work of the Committee.


  2.  In terms of background information, whisky is classified under the six-digit tariff line number 2208.30 of the Harmonised System Convention, which is the nomenclature used by the majority of WTO Members. Under the WTO Agreement on Agriculture, products contained within Chapters 1 to 24 of the Harmonised System are considered to be agricultural with some exceptions including fish and fish products (Chapter 3). During the Uruguay Round of negotiations, it was agreed that Members should bind all products covered by the Agreement on Agriculture. In GATT/WTO parlance, a bound rate or binding is defined as the maximum level of duty that may be applied by a Member on a product.

  3.  To examine the commitments made by WTO Members on whisky, you will need to consult Members' Uruguay Round schedules which are available in electronic form (CD-ROM format) and hard copy. In this connection, I have taken the liberty of enclosing a brochure which lists WTO publications which may be of some interest to you such as the "CD-ROM: Complete Results of the Uruguay Round" on page 11 or the volumes containing the Uruguay Round Schedules on pages 13-14. If, however, the information you seek targets specific markets and is not required urgently, then we would be pleased to prepare the documentation for you and send it to you by fax or by post, as necessary.

  4.  In parallel with the multilateral tariff negotiations under the Uruguay Round, countries interested in certain sectors participated in what were called "sectoral initiatives" which were tariff cutting schemes targeting certain sectors. One such sector pertained to distilled spirits, more particularly brown spirits. Under this agreement, tariffs on whisky were to be reduced in stages to zero in 10 years. From the information available to us, it would appear that Canada, EU, Hong Kong, China, Iceland, Norway and the US were among the countries which participated either fully or partially in this initiative. For those countries participating fully in this initiative, it is expected that by 2004 at the latest, tariffs on whisky will be at zero per cent. However, nothing prevents a country from implementing reductions at an accelerated pace and for example, whisky imported into Canada is to be bound at zero per cent as of 2000.

  5.  Lastly on this subject, you are also perhaps aware that agricultural negotiations have been launched and further liberalising results may be achieved in this area.


  6.  From the information available to us which is based on notifications made by Members themselves, it would appear that certain Members continue to maintain import restrictions on the import of whisky. Such restrictions have been justified on the basis of religious or moral grounds, permissible under Article XX of GATT 1994 or for balance-of-payments reasons under Article XVIII:B of GATT. Unfortunately due to the confidential nature of this information we are unable to be more specific.


  7.  Members are pursuing their exploratory and analytical work on this issue. Delegations are in agreement that the simplification of trade procedures has the potential for considerable savings in time, money, as well as human and other resources and could result in substantial benefits for each and every economy. Numerous proposals are under discussion regarding concrete measures that would enhance transparency and reduce red tape in the trading process. However, no clear-cut conclusions of the work programme should be expected in the near future.


  8.  With respect to dispute settlement, you might recall that there are three WTO dispute settlement cases involving distilled alcoholic beverages in which the European Communities was the complainant. These are: Japan—Taxes on Alcoholic Beverages (WT/DS8); Korea—Taxes on Alcoholic Beverages (WT/DS75); and Chile—Taxes on Alcoholic Beverages (WT/DS87 and 110).

  9.  In all three of these disputes, Scotch Whisky was determined to be directly competitive with or substitutable for the products of the domestic industry within the meaning of Article III:2, second sentence, of the GATT 1994. As such only de minimis differences in levels of taxation of the imported and domestic products is permissible. There has been compliance with the DSB rulings and recommendations in the first two cases and Chile is still within its "reasonable period of time" for implementing a system in accordance with its obligations under Article III.

  10.  Of course, the dispute settlement system is only invoked by a complaining WTO Member. As such, it is impossible to determine at this time whether further complaints will arise or whether they would be determined to be justified.


  11.  The TRIPS Agreement is an integral part of the Marrakesh Agreement establishing the WTO, and all Members are bound to implement it in full, although least-developed country Members may delay implementation of the substantive provisions until 2006, with the possibility of an extension.

  12.  The TRIPS Agreement sets out minimum standards for the protection of intellectual property rights and requires governments to put in place procedures and remedies to enforce those rights when they are infringed. It also creates a forum for further negotiations. Disputes between Member governments about implementation of the TRIPS Agreement can be settled through the WTO dispute settlement mechanism just like disputes under GATT or GATS.

  13.  Two intellectual property rights of particular interest to Scotch whisky exporters are trade marks and geographical indications, because they are critical to the way in which they market their products and distinguish their products from their competitors'. The TRIPS Agreement sets the minimum standards that permit Scotch whisky exporters to protect the rights to their trade marks and geographical indications in other WTO Member jurisdictions against counterfeiters and other infringers.

Trade marks

  14.  Trade marks can refer to producers, such as "William Grant & Sons", as well as product ranges, such as "Ballantine's", or particular products, such as "The Famous Grouse". They can consist of words or images, such as the picture of Johnnie Walker, combinations of both, or any other distinctive sign.

  15.  In the area of trade marks, the Agreement requires all Member governments to permit private parties to apply to register their marks. It sets out what may be protected as a trade mark, lists the exclusive rights conferred by registration, provides that trade marks shall be renewable for terms of at least seven years indefinitely, and deals with certain other matters. It also incorporates pre-existing provisions on registration procedures contained in the Paris Convention. See Articles 15 to 21 of the TRIPS Agreement (attached).

  16.  Well-known marks are of particular interest to exporters of famous brands of Scotch whisky. Article 6bis of the Paris Convention, and two provisions of the TRIPS Agreement address the problem of third parties registering a trade mark in a country where the true foreign owner has not yet used or registered it, and then demanding payment when the owner wants to expand into that market. The provisions ensure that promotion of the product, and not just actual use in the country concerned, should be taken into account, and extends the rules to dissimilar goods or services, not just identical or similar goods or services. See Article 16.2 and 16.3 (attached).

Geographical indications

  17.  Geographical indications identify goods by their geographical origin where a given quality, reputation or other characteristic is essentially attributable to that origin. These can refer to a whole country or region, such as "Scotch whisky", and places and regions, such as "Campbeltown", "Islay" and perhaps "Highland" and "Lowland".

  18.  In the area of geographical indications, the Agreement requires all Member governments to provide the legal means to prevent certain uses of geographical indications and to prevent their registration as a trade mark. There is one standard of protection relevant to goods generally in Article 22, which is basically intended to prevent use which would be misleading or constitute an act of unfair competition. It also requires Member governments to refuse or invalidate the registration of a trade mark which contains or consists of a geographical indication with respect to goods not originating in the territory indicated, if use of the indication in the trade mark would be misleading as to the true place of origin. There is a higher standard of protection for geographical indications for wines and spirits in Article 23, which is intended to prevent use of geographical indications on goods not having the origin indicated, without having to prove that it is misleading or constitutes an act of unfair competition. It also requires Members to refuse or invalidate the registration of a trade mark which contains or consists of a geographical indication identifying wines or spirits with respect to wines or spirits not having this origin, without having to prove that it is misleading. This would apply to so-called "Scotch whisky" that is not actually from Scotland. See Articles 22 to 24 of the TRIPS Agreement.

  19.  The TRIPS Agreement "grandfathers" certain practices, so that users of geographical indications and owners of registered trade marks that consist of geographical indications since before the Agreement entered into force may continue to enjoy these rights, even for wines and spirits. See Article 24.4 and 24.5. Trade marks and geographical indications can become "generic" and cease to be protected if buyers come to understand them as an ordinary trade description, rather than an indication of a particular trade source or geographic source. See Article 24.6.

  20.  These exceptions to the protection of geographical indications took a great deal of negotiation in order to find a suitable balance among competing interests. However, to date, there has only been one complaint formally notified to the WTO dispute settlement system concerning these exceptions. That is a complaint by the United States alleging that EC regulation 2081/92, as amended, does not provide national treatment with respect to geographical indications concerning agricultural products and foodstuffs, and does not provide sufficient protection to pre-existing trade marks that are similar or identical to a geographical indication. The complaint was filed on 1 June 1999 but there have been no request for the establishment of a panel.

Other rights

  21.  Other intellectual property rights protected under the TRIPS Agreement, such as patents, industrial designs and copyright, are also of value to Scotch whisky exporters. In fact, the mass production of grain whisky was made possible by the continuous still, which appears to have been patented. Whilst any patent on that invention has long since expired, new inventions useful in the production of Scotch whisky can also be patented. Original or novel bottle shapes, such as the Dimple bottle, can be registered as industrial designs. Labels and the shape of bottles can be protected by copyright: in one famous case the producer of Bailey's Irish Cream prevented infringement of its rights in Australia by enforcing its copyright in the drawing on its label. Naturally, labels and shapes of bottles can also be protected by trade marks.


  22.  In respect of all intellectual property rights covered by the Agreement, including trade marks and geographical indications, Part III of the Agreement requires Member governments to permit right holders to take legal action against infringement to obtain injunctions, damages and disposal or destruction of infringing goods. These should include provisional or urgent measures in suitable circumstances. It also requires Member governments, in respect of counterfeit goods, to put in place criminal procedures and remedies, and allow right holders to obtain the assistance of customs in preventing importation of goods.



  23.  All Member governments are required to notify the legislation by means of which they implement all the provisions of the TRIPS Agreement, at the latest by the time at which the corresponding obligation enters into force. Developed country Members were required to implement the Agreement by 1996 and all their notified implementing legislation has been circulated to Members. Information on what they notified is available at our website at using the document code IP/N/. Legislation on trade marks and geographical indications is coded "T" and "G", or "I" where it is part of general industrial property legislation. Developing country Members were required to implement the Agreement by the beginning of 2000, and we are in the process of receiving and distributing copies of their implementing legislation. Least-developed country Members have until 2006 to implement their legislation, and we have not yet received notifications from them. All legislation notified to us is gradually being made available electronically in full text by the World Intellectual Property Organization on its website at

Review of legislation

  24.  The TRIPS Council is the subsidiary body of the WTO made up of all Member governments which is responsible for the day-to-day operation of the TRIPS Agreement. It is in the process of conducting a review of implementing legislation in the form of questions and answers among Member governments. These always include questions about the protection of trade marks and geographical indications which could be relevant to Scotch whisky brands. So far, the TRIPS Council has reviewed the legislation of 51 Members and these records are made available after a period of restriction on our website at using the document code IP/Q/.


Review of the section on geographical indications

  25.  The TRIPS Agreement requires the TRIPS Council to keep under review the application of the provisions on geographical indications. It drew up a questionnaire (document IP/C/13 and Add.1) to which Members were invited to respond indicating how they protected geographical indications in their respective jurisdictions. To date, 34 Members, mainly developed countries, have responded. All these responses can be accessed at our website using the document code IP/C/W/117.

Multilateral register

  26.  The TRIPS Agreement also requires the TRIPS Council to undertake negotiations on the establishment of a multilateral system of notification and registration of geographical indications for wines. The 1996 WTO Ministerial Conference decided that these negotiations should include preparatory work on a system for spirits as well. There have been two proposals so far as to how this system might work. The EC proposal (document IP/C/W/107/Rev.1) envisages a binding register for those Members choosing to participate, which would oblige them to prevent the use and registration as a trade mark of geographical indications included in the register for wines, spirits and possibly other goods. The joint proposal by the United States, Japan, Canada and Chile (document IP/C/W/133/Rev.1) envisages a database of geographical indications to which trade mark examiners would refer in deciding whether or not to register a geographical indication as a trade mark.

  27.  The World Intellectual Property Organization already administers an international register known as the Lisbon Agreement for the Protection of Appellations of Origin and their Intellectual Registration, but it only has 19 States parties to it.

  28.  Negotiations on both issues relevant to geographical indications continue at the regular meetings of the TRIPS Council, and were also a topic of much discussion at the Seattle Ministerial Conference last year.


  29.  Another recent development, outside the WTO, is important for those Scotch whisky producers who have begun trading across the internet, (although we notice—with regret—that many do not accept orders across the internet from outside the United Kingdom). It is important that they retain the rights to their trade marks in cyberspace as well as in the real world, but there is no guarantee in the system for registering internet domain names that third persons will not deliberately attempt to register Scotch whisky producers' trade marks as domain names without authorisation. The potential for such conflicts has led to the establishment of a speedy administrative procedure to resolve domain name disputes that involve trade marks. The World Intellectual Property Organization is one of the bodies that administers this procedure.


  30.  The objective of the Agreement on Technical Barriers to Trade (TBT) is to ensure that regulations, standards, testing and certification procedures adopted by the Members do not create unnecessary obstacles to trade and do not discriminate between the like products originating in any other country. Therefore, while the Agreement acknowledges the right of WTO Members to develop technical requirements and to ensure that they are complied with, it also contains a number of provisions governing the preparation and application of mandatory and voluntary requirements and conformity assessment procedures. In order to prevent too much diversity, the TBT encourages harmonisation through the use of international standards where these are appropriate.

  31.  The TBT Agreement has a significant feature—transparency, which comprises notification obligations that provides possibility for the Members of WTO to follow the development of the regulatory legislation and voluntary standards for the product concerned in markets where they have export interests. Notifications about the proposed technical regulation, standard or conformity assessment procedure, together with a brief indication of its objective and rationale, are channelled through the WTO Secretariat.

  32.  The TBT notifications received regarding the trade in alcoholic beverages since WTO was established relate to:

    —  labelling provisions (mostly but not solely requiring the necessity to put warning statements for health, driving ability or the prohibition to drink alcohol before reaching certain age);

    —  provisions on spirit production, storage, registration and distribution to prevent deceptive practices;

    —  the definition and classification of alcoholic beverages (like defining that whisky belongs to the group of distilled liquors obtained by ageing, or requiring by definition that whisky should contain not less than 40 per cent of alc/vol, or that Scotch whisky can be sold freely if it is produced according to the domestic standard of a country of origin);

    —  the container of alcoholic beverages in order to avoid misleading of consumers;

    —  product quality testing methods.

  Detailed information is available directly from notifications (with codification G/TBT/Notif...(example: G/TBT/Notif.95.205)) that are published and can be viewed in the

Market Access Division
World Trade Organization

September 2000

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 5 April 2001