In the face of trade regulations :

Tobacco companies use 19th century tactic

by Sean McElwee

The Trans-Pacific Partnership and the downside to free trade.

In 1842, the Chinese government capitulated to Western military power and signed the Treaty of Nanjing. The treaty handed over Chinese sovereignty to Great Britain, prying open China to the vicissitudes of the global market and ending the country’s ban on the import, production, and consumption of opium. The empire had struggled for decades to control the substance, trying everything from appeals to Confucian values to a Reaganesque “War on Drugs.” Some even called for a death penalty. With China’s markets again open and its public health measures overturned, opiate use soared. By 1900, 10 percent of the Chinese population used opium and 3 percent were addicted. (For comparison, the United Nations Office of Drugs and Crime estimates that the prevalence for all drugs worldwide currently is about 5 percent.)

Today the global tobacco epidemic is exhibiting a similar trend. According to the World Health Institute, “nearly 80% of the world's one billion smokers live in low- and middle-income countries.” Multinational corporations are seeking their own Treaty of Nanjing: they are using free trade agreements to usurp national sovereignty and stymy economic development. Tobacco kills six million people each year, and if current trends continue, it will kill one billion people in the twenty-first century.

Enter the Trans-Pacific Partnership (TPP). This free trade agreement between the United States, Canada, and ten Asian-Pacific countries is currently in negotiation, but has been dragged out far past its deadline (and slowed by the President’s lack of “fast track” authority). The TPP covers 40% of US exports and imports and may well be the most under-reported story this year. The agreement, which would allow corporations to sue governments directly in an investor-state dispute settlement (ISDS), will put developing countries in the hands of multinational corporations. The potential for abuse is obvious from cases like Chevron vs. Ecuador, in which Chevron is trying to evade a domestic court ruling that it owes $18 billion for mass contamination of the Amazon.

A three-person tribunal of lawyers can now choose to override the decision of the Ecuadorian court. The ISDS will also be insidious in cases like tobacco: opening countries to foreign markets for development can end up compromising public health.

Tobacco use in 3 billion individuals from 16 countries: an analysis of nationally representative cross-sectional household surveys. Gary A. Giovino, et al. The Lancet, August 2012.

Gunboat Diplomacy

In the face of international trade regulations, tobacco companies have used a tactic reminiscent of nineteenth-century British corporations in China: get the government to do the dirty work. In 1990, the GAO found that “the US government provided assistance in removing [foreign-imposed trade] barriers.” The strategy was simple.

The companies threatened to use Section 301 of the Trade Act of 1974, known as Super 301, to put countervailing tariffs on countries that did not open their markets to the multinational tobacco corporations.

Within a year, the rate of tobacco use increased by 10% in affected countries. Following public outrage, a Doggett amendment has been inserted into every budget bill since 1997. Clinton signed an executive order in 2001 to prevent executive branch resources from being used to foster tobacco exports.

Now tobacco companies are working to weaken national regulations. In 2004, 168 states signed onto the Framework Convention on Tobacco Control (FCTC).

The treaty is binding, but has no enforcement mechanism. It includes air-quality regulation, ingredient regulation, a ban on marketing, and excise taxes. Although the US has signed the treaty, it has not ratified it.

Because the treaty sets minimum standards, Chris Bostic, Deputy Director for Policy at Action of Smoking and Health (ASH), told me that the industry has “gone after any country that has pushed the norm.” They use trade supranational trade courts -which are notoriously loath to put environmental, health, or labour standards over a buck - to strike down regulations on tobacco. In 2009 Uruguay mandated that 80% of the front and back of a cigarette pack be covered by visual warnings. They also banned coloured branding, such as Marlboro “Reds” and “Yellows,” which companies had been exploiting since the FCTC banned the use of qualifiers - lite, low, or mild - intended to imply safety. Such graphic visual warnings may be useful to help prevent children from smoking.

A recent study published in Pediatricsfinds that 68 percent of children aged 5 or 6 in low- and middle-income countries can identify at least one cigarette brand logo.

Other studies show that visual warnings are more effective with children and are especially crucial in developing countries where portions of the population may be illiterate.

In response to Uruguay’s mandate, Philip Morris is currently suing Uruguay through a bilateral investment treaty between Uruguay and Switzerland.

Uruguay, which has an annual GDP less than half of Phillip Morris’s annual sales, planned to back down until Mayor Michael Bloomberg offered to pay their legal defense fees.

Among other things, this case is aimed at discouraging other countries from moving forward with similar regulations.

Australia is facing a similar case. The Australian government passed the strictest labelling law yet in 2011, requiring packets to include not only graphic health warnings but also “plain packaging” regulations, meaning that the packets would be a drab green color and the company name would be written in a font chosen by the government.

Companies would not be able to brand their products. Tobacco companies sued the government domestically, but in 2012, the High Court upheld the legislation. Now five countries are suing Australia at the World Trade Organization (WTO).

Ukraine initiated a lawsuit, even though Ukraine doesn’t sell tobacco, and British American tobacco confirmed that it is helping to pay Ukraine’s legal fees. In addition, Phillip Morris is using a bilateral investment treaty between Hong Kong and Australia to sue directly.

Third World Network Features.