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Big tobacco bullies the global south. Trade deals are their biggest weapon

The industry has a long history of using trade to force their products into new markets. This has led to at least a 5% increase in cigarette deaths

https://www.theguardian.com/commentisfree/2017/jul/17/big-tobacco-trade-deals-new-markets-bat

Cigarette packets often carry the warning to “protect children: don’t make them breathe your smoke”. In 2014, the Kenyan government attempted to do just that – banning the sale of single cigarettes, banning smoking in vehicles with a child and keeping the tobacco industry out of initiatives aimed at children and young people.

But as the Guardian reported last week, British American Tobacco, in an effort to keep Kenyans breathing their smoke, fought the regulations on the grounds that they “constitute an unjustifiable barrier to international trade”.

In fact, big tobacco has a long history of using trade and investment rules to force their products on markets in the global south and attack laws and threaten lawmakers that attempt to control tobacco use.

Back in the 1980s, as cigarette consumption fell off in North America and western Europe, US trade officials worked aggressively to grant American companies access to markets in Asia, demanding not only the right to sell their products, but also the right to advertise, sponsor sports events and run free promotions. Smoking rates surged.

In the 1990s, World Trade Organisation agreements led to a liberalisation of the international tobacco trade, with countries reducing import tariffs on tobacco products. The impact, according to a joint study of the World Health Organisation and the World Bank, was a 5% increase in global cigarette consumption and accompanying mortality rates.

Big tobacco’s lawyers were quick to discover the value of “next generation” trade agreements. In the 1990s, Canada dropped a plain packaging initiative after US manufacturers threatened a suit using the first next-gen trade deal, the North American Free Trade Agreement (Nafta). A few years later, Philip Morris threatened Canada again after it prohibited terms such as “light” and “mild” cigarettes. Philip Morris argued it would be owed millions in compensation for damage to its brand identity.

Philip Morris was able to credibly wield this threat because of the extraordinary powers that Nafta grants international corporations: the right to sue governments in private tribunals over regulations that affect their profits.

A toxic combination of far-reaching and poorly defined “rights” for investors, eye-watering legal costs, and tribunals composed of corporate lawyers with the power to set limitless awards against governments makes investment arbitration and the modern “trade” agreement a formidable weapon to intimidate regulators.

And what big tobacco learned in the global north it has been replicating in the global south, where threats carry greater force against poorer countries that may lack the resources to see down a legal challenge.

In 2010, Philip Morris launched a $25m claim against Uruguay after it introduced graphic warnings on cigarette packs. Though Uruguay successfully defended the measure, it still faced millions in legal costs. And Philip Morris effectively won, as Costa Rica and Paraguay held off introducing similar measures.

Such are the fears around big tobacco’s aggressive use of trade and investment rules that the US-negotiated Trans-Pacific Partnership trade deal featured a carve-out excluding big tobacco from investment protections – an explicit admission of the problem.

But this does not go far enough. The important thing to realise is that the problem goes beyond big tobacco. Big oil, big pharma and big mining follow the same playbook, launching investment arbitration cases to defend their business models from governments that would regulate to protect public health, the local environment or the climate.

Rather than target individual companies or sectors, we must push our governments to reform trade and investment rules that grant such extraordinary powers to corporations. That means removing special investor rights and investment courts from trade agreements. It means removing limits on the freedom of governments to protect public health, labour and human rights and the environment.

Of course, this is easier said than done. Robert Lighthizer, US trade representative, served as deputy in a Reagan administration that pressured countries to open their tobacco markets to US exporters in the 1980s.

Vice-President Mike Pence’s record includes opposing smoking regulation, taking huge campaign donations from big tobacco, and denying the causal link between smoking and lung cancer. The EU commission, meanwhile, has been criticized for its meetings with big tobacco while it was negotiating EU-US trade talks.

The good news is that from Brazil to India to Ecuador, countries are stepping away from outdated trade and investment rules. In the UK, the Labour party manifesto opposes parallel courts for multinationals and proposes to review the UK’s investment treaties.

But until we scrap the powers that we grant big tobacco and others to frustrate and bypass our laws, efforts around the world to protect public health will continue to go up in smoke.

Big investors warn against tobacco investment on World No Tobacco Day, but smoking in Europe is still stubbornly high

Today marks the passing of the 30th World No Tobacco Day, designed to encourage smokers to abstain for a day in the hope that they might quit.

http://www.cityam.com/265672/big-investors-warn-against-tobacco-investment-world-no

Yet it seems the annual event is doing little to help people kick the habit, despite support from big investors such as Axa and Calpers who are using the day to encourage a reduction in tobacco investment.

According to a survey of EU citizens, published by the European Commission to coincide with World No Tobacco Day, there has been no decrease in the number of daily smokers since 2014 – and even an increase among 15- to 24-year-olds.

“The increase in youth smoking rates illustrates the urgency for member states to enforce the provisions of the Tobacco Products Directive, which forbid attractive cigarettes aimed at enticing young people,” said EU commissioner for health and food safety Vytenis Andriukaitis.

The directive, which came into force in May this year, forbids tobacco manufacturers from marketing products as flavoured and requires them to cover 65 per cent of the packaging in health warnings.

Yet the overall smoking rate in the EU has remained at 26 per cent since 2014 and has risen from 25 per cent to 29 per cent in people aged 15 to 24.

Smoking in the UK sits fairly well below the European average, with 17 per cent of the population taking a daily puff.

Greece, Bulgaria, France and Croatia all rank highly, with smoking rates in each country above 35 per cent. Yet in Sweden, only seven per cent of people will regularly smoke a tobacco product.

Axa, Calpers, Scor and AMP Capital are putting their weight behind the push to quit, sponsoring the world’s first global investor statement on the subject.

It aims to “make visible the strong support within the financial community” for the World Health Organisation’s (WHO) framework on tobacco control and encourage stakeholders to act against tobacco investment, Axa said.

Axa and AMP Capital divested from tobacco last year, while Calpers did so 17 years ago and has since widened its ban to include externally managed funds.

The substance kills more than seven million people each year according to WHO, which has coordinated World Tobacco Day since the first event in 1988, and costs households and taxpayers more than $1.4trn (£1.1trn) in healthcare expenditure and lost productivity.

Tobacco Taxation in the European Union: An Overview

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Standardised Packaging and Tobacco Products Directive

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Cautious on heat-not-burn

The European Commission is in favor of a cautious approach to heat-not-burn products because it believes that there is a lack of evidence relating to the short- and long-term health effects of using such devices.

This was part of the answer given by the Commission to questions raised by the Belgian MEP, Frédérique Ries.

In a preamble to her questions, Ries said that Philip Morris International had said that it intended to market its new ‘device for smoking’ in the UK, following its initial launch in Japan, Italy and Switzerland.

‘The distinctive feature of this new product, which has been named iQOS, is that it stands on the borderline between traditional cigarettes and electronic cigarettes,’ she said.

‘The major difference between iQOS and electronic cigarettes is that while the latter use a liquid transformed into vapor, IQOS heats the tobacco and keeps it burning [iQOS has been designed so as not to burn the tobacco it contains, only to heat it, as is implied in part of the Commission’s reply], which is very harmful to health.’

Ries asked whether the Commission concurred with health experts who claimed that marketing a hybrid tobacco product of this kind was a ploy to circumvent legislation in force and, in particular, all the requirements laid down in Article 19 of Directive 2014/40/EU concerning novel tobacco products.

‘What steps will the Commission take to thwart the strategies employed by cigarette manufacturers to sell alternative products that are still just as harmful to people’s health?’ she asked.

‘Will the Commission take this opportunity to alter its negative views on electronic cigarettes, which, as a growing number of cancer experts in the EU are now pointing out, do not contain any tobacco or tar and are helping many people to stop smoking?’

In reply, the Commission said it was closely monitoring the developments related to new tobacco products, including “heated not burned” tobacco products.

‘Currently, there is lack of evidence relating to short-term and long-term health effects and use patterns of these products,’ it said. ‘Therefore the Commission is in favour of a cautious approach.

‘At the same time, the Commission would like to underline that with regard to the sale, presentation and manufacturing of these products within the European Union, the relevant provisions of the Tobacco Products Directive apply and should be enforced. This includes the ban on misleading elements foreseen by Article 13 and notably any suggestions that a particular tobacco product is less harmful than others.

The Commission oversees whether member states fully and correctly apply the provisions of the directive.

‘With regard to e-cigarettes, given the lack of conclusive evidence relating to the long-term health effects, use patterns and potential to facilitate smoking cessation, Article  20 of the directive contains their regulation with an emphasis on safety, quality and consumer protection.

‘The rules for e-cigarettes nevertheless allow these products to remain widely available to consumers. A recent Commission report COM (2016) 269 underlines a number of  potential risks to public health relating to the use of ecigarettes, at the same time highlighting the need for further research.’

EU Comes Up With A Plan To Prevent Illicit Cigarette Trade

http://www.nasdaq.com/article/eu-comes-up-with-a-plan-to-prevent-illicit-cigarette-trade-cm727157

A draft report commissioned by the EU has stated a Europe-wide system should be developed to track cigarettes , which should be run by the industry together with independent third parties, according to the Financial Times. This new program should be up and running by May 2019 in order to prevent the smuggling and counterfeiting of cigarettes, which costs €10 billion a year, according to the European Commission. As per the new laws, European Union countries must ensure that all tobacco packets are “marked with a unique identifier,” as well as a security stamp, so that the packet can be tracked from the factory to the shop floor. The Commission is yet to decide whether the tracking and tracing program should be implemented by the tobacco industry itself, or if it should be given to a third party.

While the commission says that the tobacco companies must work with numerous third parties to implement this system, the tobacco industry has maintained that it should be allowed to run the system by itself, arguing that external influence would cause disruption. Meanwhile, anti-tobacco groups have asserted the need for outside help to tackle this problem, given past allegations that some tobacco groups have benefited as a result of smuggling of, and illicit trade in, cigarettes. This recommendation comes after the ending of a $1.25 billion tracing deal between the EU and Philip Morris International ( PM ) this year, which was agreed in 2004, following criticism by lawmakers.

What Are Illicit Cigarettes?

Illicit cigarettes enter or are sold in a market in violation of certain rules and regulations, such as without payment of import duties, excise tax, or VAT. Such products can be genuine products manufactured by a official tobacco company, and sold without payment of applicable taxes, or else counterfeit cigarettes, made without the consent of the trademark owner. A number of regulatory measures and actions have been taken up by the government in response to this. Such trade harms governments, consumers, and manufacturers. According to World Health Organization (WHO) estimates, the illegal, unregulated black market in cigarettes amounts to 11% of the global consumption. Tobacco manufacturers themselves have taken a series of measures to ensure their brands are protected and consumers receive genuine products.

How Bad Is The Situation?

Counterfeit and Contraband (C&C) cigarettes declined by 6% in 2015 in the EU, over the previous year. This was against a backdrop of improved economic conditions and increased measures undertaken to counter the illicit trade activities. According to the Economic Intelligence Unit, personal disposable income rose at an average of 2.6% in 2015 across all EU member states. This may have prompted consumers to increase the consumption of Legal Domestic Sales (LDS). Furthermore, after a rise in tobacco taxes to meet the minimum EU excise requirements in a number of countries in 2014, 2015 was a year of more stable prices, which contributed to the decline in the sales of C&C cigarettes; prices rose by three percentage points less in 2015 than in 2014.

eu-cig-consumption

However, C&C still accounts for close to 10% of the total consumption, with high consumption in countries such as Greece, Norway, UK, and Ireland, which have the highest prices within Europe. In Eastern EU, high levels of C&C were seen in those regions bordering non-EU countries, where average prices tended to be four times lower. France was noted to have the largest volume of C&C, though it did not have the highest level as a proportion of consumption.

eu-top-10-cc-countries

The major source of C&C are non-EU countries, with Belarus being the largest contributor, followed by Ukraine, Algeria, and Russia. The volume of counterfeit cigarettes continued to decline from EU countries, accounting for just 12.2% of the total in 2015.

eu-cc-consumption

Illicit Whites (IW), which are cigarettes manufactured legally in one country, but which are smuggled across borders, accounted for over a third of C&C, of which 5.3 billion cigarettes has Belarusian labeling. These have grown as a proportion of total C&C from 7.8 billion in 2009, to 18.8 billion in 2015. Further, counterfeit cigarettes increased 28% during 2015, but remain less than 9% of the illicit consumption in Europe.

forcast-pmi

During 2015, Philip Morris reported revenue, net of excise, from its EU segment of $8.07 billion. If we consider the rate of illicit trade in EU to be 10%, this would amount to over $800 million in lost revenue for the company. In May, the company pledged $100 million to fund projects to confront this problem. The company has come up with a new initiative – PMI IMPACT – to combat illicit trade practices. Besides expending the aforementioned sum, the initiative will also raise funds from public and non-governmental organizations. Given the large amount of lost revenue annually for Philip Morris from just the EU region, this is definitely a move that would be beneficial to the company.

eu-cig-market-volume

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Philip Morris International .

 

Estonian govt planning to ban display of tobacco products in stores

The Estonian government is planning on Thursday to approve a draft legislation of Health and Labor Minister Jevgeni Ossinovski which would substantially increase sales restrictions of tobacco products, including restricting the display of tobacco products and their brands at points of sale, reports LETA/BNS.

http://www.baltic-course.com/eng/markets_and_companies/?doc=126223

The changes to the Tobacco Act would expand the regulation sphere of the law to prevent and reduce the spread of addiction and health damage as a result of tobacco and tobacco products, it is written on Thursday’s agenda of the government.

Among the biggest changes are banning the display of tobacco products and their brands at points of sale. The exceptions are specialized retail stores, ships sailing on international routes as well as stores located in the closed territories of the airport and port.

The bill also seeks to reduce the accessibility and consumption of e-cigarettes. For instance, in the future the use of e-cigarettes would be banned, in addition to children’s institutions, also in all places where smoking is banned, like restaurants and stores. In addition, it would not be possible to buy tobacco products or e-cigarettes online or from a catalogue.

Estonian govt planning to ban display of tobacco products in stores

The Estonian government is planning on Thursday to approve a draft legislation of Health and Labor Minister Jevgeni Ossinovski which would substantially increase sales restrictions of tobacco products, including restricting the display of tobacco products and their brands at points of sale, reports LETA/BNS.

http://www.baltic-course.com/eng/markets_and_companies/?doc=126223

The changes to the Tobacco Act would expand the regulation sphere of the law to prevent and reduce the spread of addiction and health damage as a result of tobacco and tobacco products, it is written on Thursday’s agenda of the government.

Among the biggest changes are banning the display of tobacco products and their brands at points of sale. The exceptions are specialized retail stores, ships sailing on international routes as well as stores located in the closed territories of the airport and port.

The bill also seeks to reduce the accessibility and consumption of e-cigarettes. For instance, in the future the use of e-cigarettes would be banned, in addition to children’s institutions, also in all places where smoking is banned, like restaurants and stores. In addition, it would not be possible to buy tobacco products or e-cigarettes online or from a catalogue.

In Greece’s tobacco culture, passive smoke a serious problem

http://www.ekathimerini.com/214387/article/ekathimerini/news/in-greeces-tobacco-culture-passive-smoke-a-serious-problem

Nearly two-thirds of Greeks are inhaling someone else’s tobacco smoke on a daily basis, making Greece the worst nation in the European Union in exposing its people to the health risks of passive smoking.

The European Union’s statistical office Eurostat said Wednesday that 64.2 percent of Greeks suffered daily exposure to tobacco smoke indoors. Second in the EU is Croatia with 44.7 percent, followed by Bulgaria with 40.5 percent. At the other end, Sweden best protects its people from secondhand smoke with only 5.9 percent exposed, even better than Finland with 6.3 percent.

In a tally of EU smokers aged 15 and over, Bulgaria tops the rankings with 34.7 percent, ahead of Greece with 32.6 percent. Sweden only has 16.7 percent who smoke, with Britain the second-lowest with 17.2 percent.

1 in every 4 persons aged 15 or over in the European Union is a smoker

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