WORLD: Tobacco's Impact on the International Community

According to the World Health Organization, in 25 years tobacco related disease will kill 8.4 million people annually -- more than 3.5 times the number of people it kills today. Most of this increase will occur in developing countries where the Tobacco Industry has been working hard to open markets to promote its product, especially to women and youth, to ensure its profits.

The transnational tobacco companies advertise and market their products in ways long banned in the United States, such as selling cigarettes without health warnings, advertising on television, and selling cigarettes with higher tar content. (1) In addition the transnational tobacco companies interfere with the national public health laws of countries via political and commercial pressures to open markets and to promote their product under the guise of free trade agreements and economic help. According to a study by the National Bureau of Economic Research, price competition and advertising, both introduced by the US tobacco companies,caused cigarette consumption to increase by nearly 10 percent in some Asian countries.

In addition to the health effects due to tobacco related disease, the tobacco production affects the health of the country by depleting enough land worldwide to feed 20 million people and increasing the cost of food due to increased reliance on imported food. These topic are explored in more detail in Tobacco's Impact on the Environment.

The following is a summary of a four-part series in the Washington Post, "Big Tobacco's Global Reach" (2), which illustrates how the transnational tobacco companies have turned towards the international community to ensure its growth and profits.

Threats of Trade Sanctions: Japan, South Korea, Taiwan, and Thailand

In 1985, the Office of the U.S. Trade Representative (USTR) discovered a key to opening up foreign markets to tobacco by using Section 301 of the 1974 Trade Act. Under Section 301 the USTR could put governments on notice that the US was investigating unfair trading practices and that if the issue was not resolved in a year, Washington would invoke retaliatory sanctions.

The US tobacco industry saw this as the golden key to opening up markets in Japan, South Korea, Taiwan, and Thailand. Japan had high tariffs and discriminatory distribution which kept American brands out, South Korea had a law that made it a crime to buy or sell foreign cigarettes. Taiwan and Thailand remained tightly shut. Each of the governments justified its ban on imported cigarettes for public health reasons while at the same time manufacturing and selling cigarettes by state-controlled tobacco monopolies.

The USTR took one look at this situation and declared that health was simply a red herring and that the governments had unfair trade practices. What the USTR did not take into account was that the cigarettes produced by the state-controlled monopolies were expensive and poor quality. This combined with little or no advertising seemed to keep per capita consumption low, with the exception of Japan, and smoking limited to older men with money.

Japan was the first target and after one year of unrelenting pressure, the government signed, in 1986, an agreement allowing American-made cigarettes. Today imported brands make up 21% of the Japanese market and earn more than $7 billion in annual sales. Female smoking is at an all time high. It took only six weeks to force the Taiwanese government to reduce its barriers on the import of beer, wine, and cigarettes.

South Korea was next. South Korea passed legislation banning tobacco ads a few months before the Section 301 case opened in which the USTR defined "fair access" as including the right to advertise. In 1988 the Korean government agreed to open its doors to American brands by allowing cigarette signs and promotions at shops, tobacco ads in magazines, and tobacco company sponsorship. Within a year, US tobacco companies had 6% of the market.

The industry was not so successful in Thailand. Thai health officials were able to plead their 301 case before the World Trade Organization (WTO). In 1990. the WTO concluded that Thailand's ban on imported cigarettes was a clear violation of Article XI of the General Agreement on Tariffs and Trade (GATT). However the panel, found that Thailand could restrict cigarette sales and advertising to both domestic and foreign brands. Thailand now has some of the strongest anti-smoking legislation in the world and imported cigarettes only hold 3% of the market.

The tobacco industry was the big winner in these battles. The National Bureau of Economic Research estimates that sales of American cigarettes were 600 percent higher in the targeted countries in 1991 than they would have been with out US intervention.

The Rise of Capitalism: Eastern Europe and Soviet Russia

The transnational tobacco companies are not using the USTR office to gain entry into Eastern Europe or the republics of the dismantled Soviet Union. Instead they are using the "tobacco industry as a powerful force for improving the economic and social well-being of this part of the world".

Phillip Morris, RJ Reynolds, and Reemtsma, the German tobacco conglomerate, now own 75% of the Ukraine's tobacco manufacturing capacity. The companies launched advertising campaigns which were soon banned when the anti-smoking movement pressured the government to pass a ban on tobacco ads. Rather than turn to the USTR or the WTO, the industry poured money into a lobbying campaign using such tactics as signing a voluntary code of advertising conduct and an information campaign which stated that the economy would lose $400 million in the next five years if the ban were put into place. The campaign was successful and the ban was overturned making way for the Marlboro man to roam the streets of Kiev once more.

China: the Last Frontier

The China National Tobacco Corporation, which produces 1.7 trillion cigarettes a year for the 350 million smoking customers, wants the advanced technology and marketing strategies of the transnational tobacco companies. In 1992, China agreed to eliminate tariffs and other barriers to American cigarettes, but has not honored this agreement. The tobacco companies have not sought for intervention on their behalf by the USTR. Instead they are being patient as China moves to join the WTO which will require them to require them to significantly open up their markets to foreign products such as tobacco.

Sources

1. US Tobacco Export to the Third World: Third World War, McKay, J., Journal of the National Cancer Institute Monograph, 12:25-28, 1992

2. Big Tobacco's Global Reach, Four Part Series, Frankal, G., Washington Post, November 17-20, 1996, pg AO1

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