Champagne, wine snobs will tell you, comes from France, not from California. Now, they are “officially” correct. Last September, after two decades of arguing, the United States and the European Union reached an agreement forbidding the use of European place names such as Burgundy, Sherry, and Champagne on American wine labels. In exchange, American wines made using nontraditional methods—oak chips instead of barrels or special filtration processes—will be sold in Europe like any other fine wine.

That is welcome news for American wineries, who have long sought to pry open the European market. The California-based Wine Institute estimates U.S. wine sales in Europe at just $487 million for 2004, small grapes compared to Australian sales of more than $1 billion. For its part, Europe seemed to be more concerned with protecting the integrity of its heritage. Champagne producer Bruno Paillard complains, “Mislabeling is unfair for consumers, particularly as it hits the most vulnerable ones, those who haven’t the knowledge to understand the difference.”

The Americans did seem to understand a good deal when they saw one. For the first time, American Viticultural Areas will get the same protections as European appellations. And the Americans insisted on a grandfather clause that allows companies that already use European place names to continue to do so until at least 2009. That hasn’t gone down well with European producers. “This is dishonest for the producers from the true regions from whom the geographical indications are bastardized,” says Paillard.

This deal should help the United States pour a little more into Europe’s cup. Since striking a similar agreement with Brussels in 1994, Australia has seen its market share in the Old World expand, including almost tripling sales in Britain,...