Champagne and Freedom Don't Go Together

This morning on National Public Radio's Morning Edition you may have heard this broadcast about the European Union's decision to uphold a monopoly on the use of the term "champagne."

We all know that real vin de champagne comes from the exclusive Champagne Production Area in France, just as bourbon whiskey comes originally from an area that was once called Bourbon County, Kentucky.

However, it is one thing for the producers from a historic region to take justifiable pride in their heritage, and quite another for the government to seize and smash the products from potential rivals in order to stifle competition.

If grapes from Champagne, France are so much better than those from California or other parts of the world, then consumers should be able to make their own decision on the subject and will choose only champagne that says it is from France, and spurn those whose labels reveal they are from New York or Napa Valley.

The NPR piece quotes the EU's Agriculture Commission "spokesperson" Michael Mann as saying "I mean, we're all for choice" but that currently anything from outside of France calling itself champagne cannot be marketed in the EU (or so much as land in an EU port on its way to a country outside of the EU), and that in the future the Commission will be pushing to prevent a sparkling wine produced anywhere else from calling itself champagne at all, even if it is grown in California and marketed only in California.

It may seem ironic that the EU is smashing bottles to defend a monopoly on a product at the same time they are leveling massive fines against Microsoft and hardening their stance against supposed anticompetitive behavior by US companies. At least Microsoft doesn't use government officials to seize the software of competitors and physically destroy it.

But actually, the use of EU government force against Microsoft and the use of EU government force against makers of non-French champagne are consistent in that both are restrictions of free markets. Both are restrictions against consumer choice, imposed by irresistible government force.

Although the EU argues that companies such as Microsoft prevent free choice by the configuration of their products, in fact if a company chooses to make a system that is restrictive in some way, then they are opening themselves up for competition from competitors who can address a perceived desire for products that are not restrictive, and this sort of competition has in fact developed into a serious threat to Microsoft.

One of the most important factors we consider in analyzing the investment environment is the level of global freedom, and the direction different economies are moving -- towards greater freedom or away from it. The champagne story is just one anecdotal indicator of rising opposition to free trade and free markets among some members of the European Commission.

Unfortunately, this trend is not confined to Europe but finds expression in the US and other nations (America, in fact, passed legislation in 1964 stating that only whiskey distilled in the US can be called "bourbon"). Of course, there are also indicators of movement towards greater freedom in the US and in other parts of the world, including parts of Europe. But it is important to be aware of the conflict and to identify it when you see it.


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