Tobacco Asia

Volume 18, Number 2

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12 tobaccoasia FRONT PAGES 卷首新闻 AUSTRALIA WTO Disputes Against Australia to Start Process After two long years of slow procedures, Australia and the five countries bringing cases against its plain-packaging laws have agreed on the conditions that will allow the process to start and a ruling to be made within six months of the appointment of WTO panelists in early May. Australia had agreed to the first request by Indonesia to establish a World Trade Organization (WTO) dispute panel against it in an attempt to bring together five disputes against its tobacco plain-packaging law. Under Australia's 2011 public health measure, which took effect in December 2012, all tobacco products have to be sold in drab green boxes, use the same typeface, and contain graphic images of diseased smokers. Politicians hope this will help lower the number of smokers. The five countries bringing cases against Australia to the WTO are Indonesia, Ukraine, Honduras, the Dominican Republic and Cuba. Indone- sia, which exports more than US$670 million worth of tobacco a year, is the fifth country to take Australia to the WTO. The three Latin American countries, all cigar producers, had cited concerns that the legislation covers all tobacco products and not just cigarettes. All five cases argued that Australia is in breach of international trade rules and the intellectual property rights of brands – the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the Agreement on Techni- cal Barriers to Trade. While Indonesia had just won its first request in late March 2014 for a hearing in the dispute, expert panels had already been given permission to hear Ukraine (September 2012) and Honduras (September 2013) cases. But two years after the first dispute was filed, no panel proceedings had yet started. WTO's dispute settlement process can take years, amid appeals, counter- appeals, and assessments of compliance. Australia's acceptance of Indonesia's first request was an effort to put the various cases together and move forward to pave the way for other nations to implement similar anti-smoking mea- sures. A longer delay would have implications not only on the cases themselves, but would also delay other countries waiting for the outcome of the cases against Australia before implementing their own anti-tobacco measures. New Zealand, Uruguay and Canada have come out in support of Australia, raising the same concerns about delays in forming a panel and broader implica- tions for the dispute system. Uruguay also raised the importance of govern- ments being able to take actions on behalf of their population's health. New Zealand has expressed interest in the disputes as it is currently working on draft legislation meant to implement similar measures to Australia. Tobacco plain-packaging is also a hot issue back in the UK, with British American Tobacco (BAT) threatening to take the British government to court over proposals to enforce plain packag- ing on cigarette products. BAT said it was prepared to legally challenge restrictions to protect its rights to compete and the consumer's rights to choose should regulation come into place. Illicit Trade Skyrockets, Supports WTO Challenges The recently published report by accounting firm KPMG shows that illicit tobacco as a percentage of total con- sumption now stands at 13.9%, well above the September 2013 level of 13.2%. Even more telling is the fact that overall tobacco consumption is up, however slightly, with illicit whites corresponding to approximately 2.3% of the total volume. This increase clearly shows the ineffectiveness of implement- ing plain packaging as a measure intended to reduce tobacco consump- tion, and will most certainly be of relevance to the upcoming WTO dispute resolution hearings. Sales Up Despite Plain Packaging According to the latest industry data provided by Philip Morris International, tobacco companies in Australia sold the equivalent of 21.074 billion cigarettes in 2013, a 0.3% increase from 2012. Last year was the first full year of sales under the new draconian plain packaging laws aimed at deterring smokers, forcing companies to remove their branding and logos and replace them with graphic images of smoking- related diseases on a plain background. It was also the first time in at least five years of sales declines that the trend was reversed and deliveries of tobacco to retailers in Australia actually rose. The industry figures showed that while Australian sales of factory-made cigarettes slightly declined (just 0.1% to 18.75 billion cigarettes) for the whole year, loose tobacco sales actually rose by 3.4% to 2.32 billion cigarettes. Anti-tobacco activists and groups are flabbergasted by this turn of events. However, none of this came as a great surprise to tobacco companies who have always insisted that the standardized packaging would lead to smokers trading down to cheaper products, which would allow them to purchase more of them. According to Eoin Dardis, director of corporate affairs for Philip Morris in the UK, "when you commoditize a product, people go after the price." Another unfortunate effect of plain packaging would be a jump in sales of illicit tobacco, since the packs are easier to counterfeit, which poses a much bigger health concern and a de facto security threat. Accounting firm KPMG estimates that illicit tobacco, whether smuggled, counterfeit or illegal, jumped from 11.8% of the Australian tobacco market to 13.3% from June 2012 to June 2013. Australia's plain packaging program is being closely watched by other countries including Ireland, New Zealand and the United Kingdom, who are looking at the possibility of imple- menting similar measures. Worldwide Tobacco Control Science at All-Time Low Dr. Michael Siegel expressed his opinion that tobacco control science has deteriorated to the point where research- ers in the field are now discrediting

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