[Ip-health] Bridges Weekly: Disputes Roundup: Public Health Cases Move Forward at WTO

thiru at keionline.org thiru at keionline.org
Wed Apr 11 15:18:01 PDT 2012


Bridges Weekly Trade News Digest ? Volume 16 ? Number 14 ? 11th April 2012
Disputes Roundup: Public Health Cases Move Forward at WTO

The debate over how to balance public health concerns against  
protectionism fears again featured at the WTO last week, with the  
Appellate Body issuing its ruling in the Indonesia-US row over clove  
cigarettes. Meanwhile, another dispute has also been launched against  
Australia?s controversial cigarette packaging law, with Honduras  
filing a request for consultations on Wednesday 4 April.

Appellate Body finds US anti-smoking law discriminatory against  
Indonesian imports

Last Wednesday, the global trade body?s highest court confirmed that  
the US ban of flavoured cigarettes illegally discriminates against  
foreign products (DS406).

The Appellate Body ruling was a vindication for Indonesia, which had  
argued that the US Family Smoking Prevention and Tobacco Control Act  
from 2009 unfairly targets clove cigarettes imported from Indonesia  
while menthol cigarettes - produced in the US and in direct  
competition with the Indonesian cigarettes - are not banned.

The US legislation had prohibited cigarettes with fruit,  
confectionery, or clove flavours, arguing that these encouraged young  
people to smoke. While flavours such as toffee and strawberry were  
banned, menthol flavoured cigarettes remained on the market.

?The United States is very disappointed with the outcome of this  
dispute,? said Nkenge Harmon, a spokeswoman for the US Trade  
Representative (USTR). ?The ban on cigarettes with flavours is part of  
landmark US legislation to combat the public health crisis caused by  
tobacco products.?

As the world?s top producer of clove cigarettes and main source for  
clove cigarettes smoked in the US, Indonesia welcomed the decision.  
?With this ruling, we expect other countries will not follow the US?  
move,? Iman Pambagyo, director of the Ministry of Trade?s department  
of international trade co-operation, said in a statement last Thursday.

Indonesia won the first round in this case last year, when a  
three-person panel determined that clove and menthol flavoured  
cigarettes were ?like products? within the meaning of the WTO?s  
Technical Barriers to Trade (TBT) Agreement (see Bridges Weekly, 7  
September 2011).

Since the US law banned cloves but not menthols, the panel concluded  
that the US law was inconsistent with the TBT Agreement?s requirement  
that imported products receive the same treatment as ?like? domestic  
products, the so-called ?national treatment obligation.?

Different interpretations, same result

In its ruling last Wednesday, the Appellate Body ultimately agreed  
with the panel?s September decision, albeit through different  
interpretations of the TBT Agreement.

The Appellate Body said that ?likeness? should be determined by the  
competitive relationship between the products, rather than the purpose  
of the regulation at issue. Its interpretation of the TBT Agreement?s  
national treatment requirement also differed from that of the panel.

If a measure makes a legitimate regulatory distinction, said the  
Appellate Body, a resulting detrimental impact on imports does not  
automatically mean these imports are accorded ?less favourable?  
treatment than like domestic products.

Although these legal nuances did not change the outcome in this case,  
they are important clarifications in the WTO rules governing the  
restriction of trade for the purpose of furthering public policy  

This case is one of three on-going TBT disputes against the US that  
are currently at the WTO appellate stage. The two other disputes being  
considered, US-Tuna II (DS381) and US-COOL (DS384), also involve  
Washington?s regulation of consumer information in this context.

Last year?s panel ruling had drawn an outcry from advocacy groups,  
which coloured the result as an attack on US public health regulation;  
the result of the Appellate Body ruling drew similar criticism.

?The Obama administration and Congress must not bow to yet another  
ruling from a so-called trade agreement tribunal demanding that the US  
get rid of yet another important health or environmental policy,? said  
Lori Wallach, director of Washington-based Public Citizen?s Global  
Trade Watch, in a statement.

Next steps

In response to the Appellate Body decision, the California Democrat  
who sponsored the Act vowed that the clove cigarette ban would remain.

?The law made no distinction in where a cigarette is manufactured  
because a cigarette - no matter where it is made - is addictive and  
deadly,? Representative Henry Waxman said in a statement. ?I am  
committed to working with the Administration to advance our shared  
goal of ending the tobacco epidemic among our young people and  
ensuring that the US ban on clove and candied-flavoured cigarettes  
remains in place.?

The USTR is currently examining its options for compliance. If the  
discriminatory ban remains, Indonesia could seek trade countermeasures  
against the US, and retaliation could amount to US$16 million per year  
because of lost trade, some analysts claim.

Honduras challenges Australian cigarette packaging law

Meanwhile, the controversy over Australia?s new plain packaging  
requirements for cigarettes has now become the subject of a second WTO  
dispute, with Honduras lodging a complaint at the global trade arbiter  
last week (DS435). The challenge comes just weeks after Ukraine filed  
its own request for consultations over the Canberra legislation (see  
Bridges Weekly, 21 March 2012).

?The industry employs several hundred thousand people directly and  
indirectly throughout the supply chain in Honduras,? Dacio Castillo,  
Honduras? Ambassador to the WTO, said in an emailed statement to  
Bridges. ?This translates into tens of millions of dollars for the  
Honduran economy.?

Canberra has given tobacco companies until December 2012 to comply  
with its Plain Packaging Act, which requires that all cigarettes sold  
in Australia be packaged with one colour and shape and that a  
significant portion of the packaging be used for health warnings.

Australian officials have defended the law as necessary to protect  
public health, with Australian Trade Minister Craig Emerson stating  
that the requirement is ?not anti-trade; it?s anti-cancer.?

Although its written consultations request was not available as  
Bridges went to press, Honduras argues that the Australian law is  
inconsistent with WTO obligations to respect intellectual property  
rights and is an unnecessarily restrictive technical barrier to trade.

As a state party to WHO Framework Convention on Tobacco Control,  
Honduras ?is in favour of legitimate measures to reduce smoking  
prevalence,? says Castillo.

However, ?Australia?s plain packaging requirements would defeat the  
basic function of a trademark, which is to allow consumers to  
distinguish between products of different companies,? he said.

Experts note that the decision also demonstrates a strengthened WTO  
dispute settlement capacity on the part of Honduras. The small Central  
American country has lodged three other dispute series at the global  
trade arbiter since the WTO?s birth in 1995, and recently secured a  
victory - together with three other complainants - against the  
Dominican Republic over the latter?s safeguard duties on plastic bags  
and tubular fabric (see Bridges Weekly 8 February 2012).

ICTSD reporting; ?WTO dents U.S. ban on clove cigarettes,? REUTERS, 4  
April 2012; ?Indonesia wins tobacco dispute with US,? THE JAKARTA  
POST, 9 April 2012.


Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)

thiru at keionline.org

Tel: +41 22 791 6727
Mobile: +41 76 508 0997

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