[A2k] Bloomberg: Philip Morris Leads Plain Packs Battle in Global Trade Arena

Thiru Balasubramaniam thiru at keionline.org
Wed Aug 28 06:23:10 PDT 2013


*Philip Morris Leads Plain Packs Battle in Global Trade Arena*

By Andrew Martin - Aug 22, 2013 6:01 AM GMT+0200

The war between the tobacco industry and anti-smoking forces is heating up
as cigarette makers intensify efforts to use treaties to block labeling

Philip Morris International Inc. (PM)
<http://www.bloomberg.com/quote/PM:US>has pressed the U.S. for
language that would make it tougher for countries
in a proposed Pacific Rim trade pact to require plain packaging or other
limits on company logos. Australia’s packaging law is being challenged at
the World Trade
and U.S. senators from tobacco-growing states, including Senate Minority
Leader Mitch McConnell <http://topics.bloomberg.com/mitch-mcconnell/>,
recently warned the European Union that smoking controls it’s considering
could endanger a U.S. trade deal.

Cigarette makers defend the efforts as necessary to safeguard the
intellectual property protections embedded in treaties. To anti-smoking
forces, the tobacco lobby is working a strategy of intimidation.

“They are in this to convince governments it’s not worth the cost” to enact
laws to reduce tobacco’s appeal, said Chris Bostic, deputy director for
policy at Action on Smoking and Health, a Washington-based nonprofit. “It’s
about chilling countries from moving forward.”

The U.K. recently postponed instituting strict cigarette-pack mandates so
it could assess Australia’s law.

The Trans-Pacific Partnership being negotiated by Australia, the U.S.,
Japan, Chile and eight other nations will be a test of sovereign states’
freedom to regulate tobacco, said Gary Fooks, a University of Bath research
fellow who has written<http://tobaccocontrol.bmj.com/content/early/2013/06/19/tobaccocontrol-2012-050869.full>
the industry’s efforts to influence the pact. The next round of talks is
scheduled to begin tomorrow in Brunei.

*Safe Harbor*

Anti-smoking activists were encouraged last year when the Obama
administration wrote a draft proposal to strengthen protections for
anti-smoking regulations from challenges. It would have created “a safe
harbor” for U.S. Food and Drug Administration tobacco rules, according to a
government summary of the draft.

The safe harbor proposal died last week after running into opposition from
lawmakers, former trade representatives and business groups, including the
Grocery Manufacturers Association. They contended it would set a bad
precedent that could lead to other products being singled out in trade

Instead, the U.S. will ask for a clause requiring that before a case
against a tobacco regulation can be filed under the treaty, health
authorities of the countries involved must “discuss the measure.” U.S.
negotiators will also ask for a provision affirming that tobacco control
initiatives are covered by a general exception, typical in trade
agreements, that allows countries to enact measures necessary to protect
human health.

*Industry’s History*

“This proposal will, for the first time in a trade agreement, address
specifically the public health issues surrounding tobacco,” U.S. Trade
Representative Michael Froman
<http://topics.bloomberg.com/michael-froman/>said in a statement, and
won’t “create a precedent for excluding
agricultural products.”

Anti-smoking activists characterized the new proposal as a retreat. It
simply “states the obvious,” according to an Aug. 16 statement from five
nonprofits, including the American
Academy<http://topics.bloomberg.com/american-academy/>of Pediatrics
and the American Lung Association.

“It’s hard for me to see that it makes any difference at all,” said Gregg
Haifley, associate director of federal relations at the American Cancer
Society Cancer Action Network.

Representative Henry Waxman <http://topics.bloomberg.com/henry-waxman/>, a
California Democrat, said he was “very disappointed” that the
administration was taking a “significant step backwards” from the safe
harbor proposal. While the substitute might “be helpful on the margins” if
it becomes part of the pact, it won’t do much to prevent challenges to
anti-smoking measures, he said.

*Suing Thailand*

Waxman said he urged Froman to press for a safe harbor, saying tobacco
deserves special attention because it can kill when used as intended. “I
pointed out to him that tobacco
companies<http://topics.bloomberg.com/tobacco-companies/>have a
history of using trade agreements to undermine laws,” he said.

Companies including New York-based Philip Morris International, which sells
Marlboro outside the U.S., and British American Tobacco
(BATS)<http://www.bloomberg.com/quote/BATS:LN>Plc, whose brands
include Dunhill and Lucky Strike, are in a global battle
against moves to curtail branding and make cigarettes unappealing.

The $756 billion industry isn’t focusing only on trade deals. in Japan
Tobacco Inc. <http://www.bloomberg.com/quote/2914:JP>June sued Thailand in
its courts over a plan to order that health warnings cover 85 percent of a
pack cover. In the U.S., five companies successfully sued the FDA to block
a plan to require that packs to show a graphic image of cigarettes’
effects, such as a photo of a smoke drifting out of tracheotomy hole or
chest staples on a cadaver.

*Plain Packs*

While the industry says it supports evidence-based regulations that are
effective in reducing harm from smoking, companies have made it clear
they’ll go after laws such as Australia’s, which requires cigarettes be
sold in uniform drab brown packs and limits the size of brand names.

“These policies do not meet the minimum standards that there will be a
clear benefit to public health, and at the same time risk fueling the black
market,” said Julie Soderlund, Philip
vice president of communications.

Will Hill, a spokesman for British American Tobacco, said the company would
“take every action necessary to protect our valuable brands and our right
to compete as a legitimate commercial business selling a legal product.”

The industry’s treaty strategy goes back to at least 1993, when nine
companies were invited to work together in what became known as the Plain
Pack Group. The plan was to combat “the encroachment on the packs of
‘health-related’ information and the possibility of the ‘generic’ pack,”
according to a letter <http://legacy.library.ucsf.edu/tid/rur96a99> from an
official at Rothmans International Tobacco, now part of British American

The letter surfaced in litigation between U.S. states and tobacco companies
and is in a University of California San Francisco archive.

*Uruguay’s Case*

The group argued that packaging mandates violated trademark rights and
treaties, documents in the archive shows.

Not everyone in the industry agreed with the tack. “We are advised that
there is no basis for any legal challenge against State and Territorial
Governments on these grounds,” according to a memo from W.D. & H.O. Wills
(Australia), a tobacco manufacturer, that is in the archive.

While packaging restrictions in Australia and Canada were rejected in the
mid-1990’s, they’ve recently gained momentum. Philip Morris International
is challenging mandates in Uruguay, including one that health warnings
cover 80 percent of the front and back of packs.

*Helping Honduras*

The company is making its case under Uruguay’s investment treaty with
Switzerland, which, like most such pacts, includes an arbitration clause
allowing companies to dispute policies that affect their interests. Philip
Morris International subsidiaries in Switzerland and Uruguay brought the
complaint. The private charity of New York Mayor Michael
founder and majority owner of the parent of Bloomberg
is paying for some of Uruguay’s defense.

The company is also using investor-state arbitration to contest Australia’s
packaging law, claiming it “virtually eliminates Philip Morris’ branded
business by expropriating its valuable intellectual property.”

The law is being
the WTO by Ukraine, the Dominican
Republic <http://topics.bloomberg.com/dominican-republic/>, Honduras and
Cuba. Philip Morris is covering some legal costs for the Dominican
Republic, which Soderlund said is “common practice in WTO litigation,” and
British American is doing the same for Ukraine and Honduras.

The U.S. last year lost a case at the WTO when appellate judges at the
Geneva-based organization upheld a ruling that a law banning clove
cigarettes is discriminatory because it “accords clove cigarettes less
favorable treatment than that accorded to domestic menthol-flavored
cigarettes.” Indonesia, the largest maker of clove brands, brought that

*Photo Warnings*

In Europe, the industry opposes some parts of a proposed update to the EU’s
Tobacco Products Directive. It calls for text and photo warnings to cover
as much as 75 percent of the space on the front and back of packs, bans
promotional elements and allows member
states<http://topics.bloomberg.com/member-states/>to pass
plain-packaging laws.

At Philip Morris International’s annual meeting in May, Chief Executive
Officer Andre Calantzopoulos called some elements of the EU update “frankly
illogical and devoid of scientific evidence.”

The U.S. senators who oppose it said in a May 7 letter to Joao Vale de
Almeida, the EU’s ambassador to the U.S., that the proposed directive would
impact “transatlantic trade relations” and could weaken the EU’s ability to
“credibly address” barriers to intellectual property rights.

It “calls into question the EU’s ability to deliver on regulatory
commitments to the United States that it will have to make under a
comprehensive U.S.-E.U. trade agreement,” the letter said. It was signed by
McConnell and three of his colleagues, Republicans Rand Paul of Kentucky
and Richard Burr <http://topics.bloomberg.com/richard-burr/> of North
Carolina and Democrat Kay Hagan <http://topics.bloomberg.com/kay-hagan/> of
North Carolina.

*Threaten, Bully*

The industry’s goal is discourage countries from strengthening anti-smoking
measures, said Thomas J. Bollyky, a senior fellow at the Council on Foreign
Relations <http://topics.bloomberg.com/council-on-foreign-relations/> and a
former negotiator for the U.S. Trade Representative’s Office.

“Tobacco companies are using trade and investment agreements to threaten,
bully, and bring trade disputes against developing
countries<http://topics.bloomberg.com/developing-countries/>seeking to
implement the very same advertising and labeling restrictions
that already exist in most developed countries,” he said.

The global smoking prevalence rate among adults has been gradually
declining, to 20.6 percent in 2012 from 22.7 percent in 2002, according to
Euromonitor International.

*More Smokers*

At the same time, the number of smokers increased about 7 percent to at
least 869 million because of population
particularly in developing regions with relatively lax anti-smoking
regulations, said Shane MacGuill, a Euromonitor tobacco analyst in London.

Tobacco companies have been consistently profitable, even as anti-smoking
efforts have become more aggressive. “They can weather these kinds of
events,” said Thilo Wrede, an analyst at Jefferies & Co. in New York. “They
have shown in the past that they are successful in challenging regulatory

Philip Morris International spent $9.8 million on lobbying Congress and
agencies in 2012 on trade and other issues, according to disclosure
records. So far this year, the company has spent $5.1 million.

“Unfortunately the environment in which we operate has become more
challenging given the ever-growing proposals and actions to introduce
arbitrary measures,” Calantzopoulos said at the annual meeting. “We will
continue to vigorously oppose unreasonable and irrational regulatory

To contact the reporter on this story: Andrew
Martin<http://topics.bloomberg.com/andrew-martin/>in New York at
amartin146 at bloomberg.net

To contact the editor responsible for this story: Gary Putka in Boston at
gputka at bloomberg.net

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