The Trade & Environment Database (TED)¹

TED Case Study Template

I. Identification

1. The Issue

Sake is a Japanese rice wine, which becomes famous along with Sushi, Teriyaki, Tofu and other Japanese food worldwide. Now, its flavor becomes popular among Japanese-food lovers, and many bars and liquor stores have Sake as people’s favorites. Indeed, there are 5% growth of exportation of Sake to other countries such as US, Hong Kong, Taiwan and Britain.(Matsuzaki) However, Sake faces a major problem; the protection of cultural property rights. Because of saving cost, tariff, and process of exportation, it is more efficient in own country rather than exporting from Japan. Sake is one of the difficult alcoholic drink to make; in the traditional ways, the unique climate and good quality of rice and water come from its nature in the each region. Each Sake comes from different region is geographically indicated, like Scotch in Scotland or Champagne in France. Can we call rice wine made in different country can be called Sake? Not only about cost, but at the same time, quality of rice wine and cultural uniqueness is also threatened by this tendency. The market of Sake brand in the different regions struggles with the emerging low cost rice wines. Since Sake is a part of Japanese culture, its property rights should be protected to conserve Japanese cultural values while introducing the enjoyment of Japanese flavors to the people all over the world. I am going to especially focus on issues of Sake trade in the United States, where plays an important role to expand Sake market overseas.

2. Description

The listed below is the reason why emerging low cost rice wines is threats to original Sake.

1. Protection and Cultural Brand of SakeFirst, low cost Sake made in the each country is not REAL Sake. The process of making Sake involves many traditions which have passed on over the generations, and other countries does not have those. Also, the climate of each region in Japan makes different flavors, so Sake brand is the indicator of peculiarity of each prefecture. It projects the climate, nature, culture of these regions. Thus, it is important for Sake to be indicated geographically so that people know where it comes from, and enjoy the flavor of that region. Sake is mixture of a blessed nature, appropriate climate and wisdom of local people and their culture.(2)In the US, some kind of Sake is called House Sake to distinguish from imported Sake. House Sake is often Gekkeikan, which is brewed inside the U.S. It is much cheaper than imported one. If you go to the restaurant, and the menu just says Sake, not specific name such as Otokoyama and Suishin, it is probably a Gekkeikan. It does taste like Japanese rice wine, but if Japanese people who are familiar with Sake drink it, they can recognize it is not from Japan. American people might not notice the difference, but like wine made from grape, there are different kind of taste: sweet, dry, smooth and rich.There are laws to cover alcohol regulations in general and there are some associations which deals with this issues, such as Sake Origin Control, SOC, though. In the U.S., people rarely pay attentions which prefecture Sake comes from. (SOC)The things are weather it comes from Japan or U.S. made. What Japanese people values, and what is essential to Sake are not taken into consideration. Sake is the symbol of Japanese culture. Trying food or beverage from different country is almost the same as experiencing the part of different culture. It would be more enjoyable if Japanese cultural flavor is more respected and there is more firm federal system for geographic indication for Sake both in Japan and U.S.

2. Process of ExportationCost is the hurdle for Sake exportation to the U.S., since normally Japanese tariff is expensive especially on alcoholic beverage. Thus, U.S. made Sake is growing for low cost. Also, the licensing is also another problem. The company needs the exporting and importing license. It is not really hard to get them, but it limits what kind of Sake can be imported and what company to deal with. In the U.S., the regulations and the criteria of licensing are different, which also makes the process of exportation difficult. In the different states, if the percentage of alcohol increases, it might double the price.(4)In addition, Sake is really sensitive drink, and temperature of preservation during importing has to be taken into consideration to keep good quality. In fact, Sake in the liquor stores are often not kept in the required conditions, which lower the quality of imported Sake. Thus, it is better to develop U.S. made-Sake for the efficient business.This tendency of developing low-cost Sake is actually threats to Sake market inside Japan. While the demand of Sake overseas is increasing, the demand in Japan is decreasing because of importing all different kinds of wines and liquors from different countries.(5) Now, Japanese people do not drink only Sake. People who engage in these traditional jobs are decreasing as well. Moreover, due to low cost Sake made in U.S., Hong Kong and Taiwan, where are the three largest consumer of Sake other than Japan now export low cost Sake to Japan. Japanese people prefer the cheaper products as long as it tastes similar to Sake. Japanese Sake company has to compete with these external companies, which makes more severe for Japanese brewers to survive in this industry. Due to the cost inefficiency, that leads to threats to Japanese Sake market as well as maintain the quality of Sake. If low cost Sake prevails, it lessens the uniqueness of Sake from different areas in Japan.

3. Related Cases

The followings are related cases to Sake. They are geographically indicated products in different parts of the world. These products are often symbols of their food cultures, which is really unique to each region. While spreading these products by entering to global market introduces the enjoyment of cultural products worldwide. For the increased demands, low cost similar products are made which is not originated in the area. This creates the threats to intellectual property of each culture. For example, Kimchi is the products which made in Korea, but Japanese also made Kimichi due the demand inside Japan. Also, Scotch is whiskey, made in Scotland. It is not just whiskey, but contains cultural values as well. The property rights in the specific country products should be respected; there is cultural values that low cost substitutes made in the different places can not provide to us.

Asia: Kimchi/Baiju/Basatami/Nata de Coco

Alcoholic Drink: Scotch/Bacardi/Canola/Tequila/Grappa/Pisco

Key Words:Asia /Food /Culture /Intellectual Property

4. Author and Date: Mayumi Kudo July 9, 2004

II. Legal Clusters

5. Discourse and Status: Disagreement and In Progress

Agreement on Trade-Related Aspects of Intellectual Property Rights(TRIPS) protect the property rights and require the WTO member countries to enforce it at national level.(TRIPS) For Sake, there is some national laws to require geographical indication. However, TRIPS is like international law, which does not have actually enforcement, since each national law is the legal process for each countries. This causes the big argument on enforcement of TRIPS between European Countries and other countries, such as U,S, Canada, Australia, Chile and Japan.The discussion among these three option still continues how multilateral system for the protection of property rights for wine and spirits should function. Table 1. shows the different arguments.

Table 1. Different Arguments for the function of the registration for geographic indicator through multilateral system (1)

6. Forum and Scope: WTO / Multilateral

In 1953, Japan signed the Madrid Agreement for the Repression of False or Deceptive Indications of Source on Goods. In 1955, Japan joined GATT, and continued to be member of World Trade Organization since 1995, after the Uruguay Round of Multilateral Trade Negotiation.(OECD) In this negotiation, there was an international agreement for intellectual property aspects for trading goods for the first time: Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) covers all WTO member countries to protect geographical indicator. Sake is in the category of wine and spirits, and Article 22 in TRIPS tells about protection for geographic indicator, and in Article 22, especially for wine and spirits. (WTO)

[Article 23 provides that interested parties must have the legal means to prevent the use of a geographical indication identifying wines for wines not originating in the place indicated by the geographical indication. This applies even where the public is not being misled, there is no unfair competition and the true origin of the good is indicated or the geographical indication is accompanied by expressions such as “kind”, “type”, “style”, “imitation” or the like. Similar protection must be given to geographical indications identifying spirits when used on spirits. Protection against registration of a trademark must be provided accordingly.] (WTO)

7. Decision Breadth:4(major trading countries) or more

Japan implement the national laws under the TRIPS. Change of TRISP affects to other countries, but the change of national law for Sake does not affect all WTO member, but it does have impacts on major trading countries; Korea, U.S. , Taiwan, and Hong Kong.(Goshima) Also, it might be a little effect on other countries, but trading Sake have significant effect on those 4 countries. Foreign market is growing for Sake, the trade rules and regulation for wines and spirits have great effect on Sake market. Joining to WTO changed significantly the trading system in Taiwan .Taiwan’s entry to WTO have great impact on Sake market in Taiwan. Since Taiwan is one of the growing economic countries, this has effects on many other countries. Taiwan Times reports, according to the Import Trade Administration under the Board of Foreign Trade, once Taiwan joins the WTO, taxes on imported hard liquor will be reduced 8 percent and the tariff will drop to zero, h and before joining WTO, Taiwan could import only 6 or 7 different brands, but now 100-200.(Taipei Times) This also great contribution to Japanese Sake brewers that they can expand consumption overseas while many Sake brewers make little progress to expand market inside Japan, and serious problem of survival in the industry. Introducing many different brands of Sake means that it needs protection of property rights for original place of Sake. It needs to be geographically indicated to protect Sake’s cultural values of locality. Under WTO rules, geographically indicator is one of the major requirements, it just need worry Sake from Japan can be protected from imitation of Sake brands. (Taiwan is famous for loose policy for imitation goods, compared to U.S. and other countries. )Taiwan is the second largest share of Sake importation. In addition, Taiwanese people are greatly interested in Japanese culture, so Taiwanese demands for Sake is not only the amount, but also the good quality of Sake.(Matsuzaki) Thus, it is not too much to say that liberalizing trade regulation for alcohol beverage definitely decided the future of Sake consumption.This seems to affect to Japan’s decision and strategies to 4 major trading countries.

8. Legal Standing:Treaty/National laws

WTO rules and TRIPS are major sources for International Treaty for the protection of property rights for Sake. With TRIPS, Japan implement national laws, which various agencies are responsible for that.

The followings are national laws to protect geographic indicator. In this way, exported Sake needs to undergo this process for the protection of property rights of Sake brewers in practice at national level. Some Department is responsible for protection of property rights before the exportation. Japan Patent Office/Ministry of Finance (Custom Office)/Ministry of International Trade and Industry/ Ministry of Agriculture, Forestry and Fisheries/ Fair Trade Commission. Also, National Tax Agency, which are responsible for law of tax for alcoholic beverage decides types of Sake; the basic criteria related to the determination of tariff and licensing for trade.(OECD)

Table 2.National Laws for the protection of property rights(2)

III. Geographic Clusters

9. Geographic Locations

a. Geographic Domain: Asia

b. Geographic Site: East Asia

c. Geographic Impact: Japan

10. Sub-National Factors: Yes

Since all Sake comes from the different prefectures, sub-national factors matter to the geographical indication, like other wines. For example, Otokoyama, which is often seen in the restaurant in the U.S., is from Hokkaido, which is the Northeast island of Japan.(Otokoyama)

11. Type of Habitat: Temperate

IV. Trade Clusters

12. Type of Measure: Intellectual property/Licensing/Import or Export Standard

1.Intellectual PropertySake is the cultural products of Japan, but now the growing number of locally made Sake or imported from other country such as Korea, Hong Kong prevails. Sake is geographically indicated products, and its property rights belong to Japan. Especially, Sake has different flavor depends on where it comes from. In the U.S, there is no specific regulation to protect property rights of Sake. In Japan, there are no national laws for that. Indeed, there is association of Sake brewers to put the label so that it says about the original place of Sake. This means a lot to Sake brewers in Japan, since Sake is one of the products to represent the locality. Flavor represents tradition, nature, and climate of the area. It is a cultural product in some scene. Sake Origin Control was established to protect cultural values of Sake. There are some associations in Japan to promote this protection. However, in American bar, some times Sake is just Sake, which is often House Sake or called Gekkeikan, the U.S made rice wine, and does not mention the specific name of Sake and origins. These property rights should be protected more in the systematic way.2.Import/ Export Standard and Licensing In the case of U.S, The kind of Sake that U.S can import has limitation since the U.S have different regulation to deal with Alcoholic beverage, and also the licensing is required to Japanese company to export. Japanese company has to have license to deal with importation, and that license only allow exporting to deal with only the specific company in the U.S. Also, since different States has different regulation on alcohol, some types of Sake can not be imported to the particular states. Some regulation for importing and exporting standards is the measure for Sake.

13. Direct v. Indirect Impacts: Direct

14. Relation of Trade Measure to Environmental Impact

a. Directly Related to Product: Yes

b. Indirectly Related to Product: No

c. Not Related to Product: No

d. Related to Process: Yes

The process have impacts the licencing and trading standards. Since Sake is sensitive alcohol, it needs the transportation method to be cared, the process of determination of the standards according to what is add other than rice, water and Sake yeast. This decides what kind of Sake can be exported from Japan. The standards also depends on importer’s criteria as well.

15. Trade Product Identification: Wine and Spirits/ Alcoholic Beverage

16. Economic Data

Japan export Sake mainly to U.S, Taiwan, and Hong Kong. The percentage of exportation to these three countries is nearly 70 %( Table 3). Also, New Zealand, Thai, Korea and Brazil have steady increase of importation of Sake from Japan. 99.3% of Sake is consumed within Japan, and only 0.3% is consumed overseas. However, the demand of Sake overseas is increasing, according to Table 1 and expanding market overseas is potential growth for increasing Sake consumption. Table 1. shows the quantities and values of Sake exportation except to U.S and Taiwan (U.S and Taiwan has steady growth, so here it is extracted to see).

Table 3. Importation from Japan (3)

Also, major exporter of Sake is of course Japan, but actually Japan is importing low cost Sake from other countries as well. Such as Korea, Australia, and Vietnam is growing as exporter of Sake. Especially, Korea is growing as the second largest exporter of Sake. Last year in 2003, Korea exported 1,395,970 (L) of Sake to U.S, compared to Japan exported 2,189,193(l), out of 4,273,578(L), the total exportation of Sake.

Table 4. Quantity of Importation to Japan(4)

.

17. Impact of Trade Restriction: High

High tariff for alcoholic beverage is always problem in many countries.

18. Industry Sector: Food

19. Exporters and Importers:

Main Exporters: Japan, Korea, Australia, Viet Nam, U.S

Main Importers:U.S, Taiwan, Hong Kong

V. Environment Clusters

20. Environmental Problem Type: Pollution/ Habitat Loss/Worker

1.Pollution As mentioned before, Sake is really sensitive to the environment of the area where brewers are; it needs good quality of water, rice and suitable temperature change over the year. It is not too much to say that environmental factor of the region decide the quality of Sake. Industrialization made the quality of water worse and worse. Moreover, the rapid economic growth in 1960s causes the serious health problem by air pollution. There were 4 major diseases prevailed in the different places due to water pollution from factory. For example, Minamata disease prevailed around Nigata Prefecture, where is the one of the best place for rice and Sake.It was because from mercury leak from the factory to the Agano River. This has great effect to the use of water for Sake. Since that time, Japanese government works to improve the quality of water, and passed the law for environmental protection (table 5) as well as local government regulation. Industrial pollution has great impact on water, air, and ground which is costly to Sake brewers.

Table 5. The Major Law toward Water Pollution in Japan (table 1)

2.Habitat Loss Since Sake market is expanding overseas, Sake is now made not only in Japan. Such as Korea, Taiwan, and U.S is growing exporters of Sake. Sake is geographically indicated products. Since unique flavor of each local brewer is the one of the amusement to Sake drinkers, the tendency that Sake is made in other countries is the loss of habitat of Sake. It also relate to cultural property. Since the consumption inside in Japan is decreasing, the loss of Japanese-made Sake is losing its originality3.WorkerOne of the serious problems that all Sake brewers in Japan face is the scarcity of successors. This indicates that Sake brewers will lose traditions, faces serious problem of extinction of skills. Unlike before, Japan is not agricultural country anymore; goods and service industry are growing more than agricultural sectors (table 6). Since Sake has a very long history, which other parts of the world do not have, it needs efforts to preserve its cultural values.

Table 6. Number of employee in the different industry(6)

21. Name, Type, and Diversity of Species

Name: Rice(main ingreditens of Sake)

Type: Palant/Oryza sative /Gramineae

Diversity: 20 species in Asian area

IUCN category: Vulnerable

22. Resource Impact and Effect:

Impact: High

Effect: Product

23. Urgency and Lifetime: High(10 more years)/20-30 years(available as Toji)

Despite the pollution, the extinction of rice does not seem to occur unless something happens. What is showing here is that the leader of brewers, Toji. Toji is important to distinguish the good quality of rice and have traditional skills. Without Toji, Sake brewers can not make good Sake.One of the head brewers in Hyogo Prefecture predicts that there would be no more Toji (head brewers, who knows all traditional skills) within 10 years. Every year, 50-60 Toji all over Japan are retiring. Notable number of Toji think that they will retire within 5-6 years. Normally, Toji can do their job for 20-30 years old or to be the head, it takes that amount of years, Because of lack of successor, there is serious problem of lacking Toji.

24. Substitutes: Conservation efforts

Some association hold the seminars and try to encourage the young people to get involved in the Sake brewing. These efforts can protect the loss of tradional skills.

VI. Other Factors

25. Culture: Yes

Sake is the one of Japanese traditional products. The cultural factor is important in the case of Sake in trading. Some Sake brewers send people to the country which imports Sake, and train and introducing Japanese culture to them so that they know how to treat Sake properly to enjoy its cultural flavors. Trading of cultural products also involves the cultural exchange.

26. Trans-Boundary Issues: No

27. Rights: Yes

Sake involves intellectual property rights of Sake brewers. It needs to display where is comes from. In some countries such as U.S, sometimes there is not distinction of Sake. In the menu, it’s just Sake. it should display the brand of Sake.Sake is not one kind of drink, but it have so many different kinds of taste depends on where it comes from as red and white wine do.Since the taste and quality of Sake depends on the climate of the area, it needs to be distinguished. Sake brewer’s property rights so they can protect uniqueness of Sake‘s taste.

28. Relevant Literature

Works Cited Goshima Shinya,.Reports on Sake Consumption in Other Countries. 2004. University of Shizuoka <http://phys.u-shizuoka-ken.ac.jp/semi/goshimamokuji.html>

Matsuzaki, Haruo Seminor for Opening Market of Sake. Japanese External Trade Organization(JETRO) 2002.

<http://www.jetro.go.jp/ove/tks/tnews200212c.html>

OECD <http://www.oecd.org/dataoecd/59/51/23526073.doc>

Otokoyama <http://www.otokoyama.com/english/index.html >

Sake Origin Control<http://www.sakejapan.com/jsoca/>

Taipei Times Foreign Liquor get WTO boost. . 2001 November

<http://www.taiwanheadlines.gov.tw/20011108/20011108b5.html> TRIPS World Trade Organization <http://www.wto.org/english/thewto_e/whatis_e/eol/e/wto07/wto7_19.htm#note4>

Tables

(1) Table 1 based on International Centre for Trade and Sustainable Development<http://www.ictsd.org/weekly/03-05-07/story2.htm>

(2) Table 2 based on OECD <http://www.oecd.org/dataoecd/59/51/23526073.doc>

(3) Table 3 extracted from Goshima

(4) Table 4 extracted from Goshima

(5) Table 5 based on 

Jun Ui. Industrial Pollution in Japan .1992 .Tokyo; United Nations University Press http://www.unu.edu/unupress/unupbooks/uu35ie/uu35ie00.htm Enviromental Monitoring System <http://www.unu.edu/unupress/unupbooks/uu35ie/uu35ie00.htm>

(6) Table 6 based on Ministry of Public Management Statistics Bureau, Japan. <http://www.stat.go.jp/info/guide/asu/2002/8-06-04.htm>

1/2001 “

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1. Once again please excuse the wonky F’d up legacy HTML content here. This was originally on the American University website, then deleted by them, and only available on Archive.org – so I took the alcohol and drink related research and made it public again (original authors names intact).[↩]