The Edge Markets | 2 October 2015
US pushes anti-tobacco compromise in Pacific trade deal
Governments will be allowed to block tobacco companies from suing over anti-smoking measures under a US proposal being considered by Pacific trading partners as part of a free trade deal involving a dozen countries.
The exemption proposed in Atlanta, Georgia, where ministers are trying to close the Trans-Pacific Partnership trade deal, would allow any of the 12 member countries to opt out of rules aimed at protecting foreign investors from harmful government policies with regard to tobacco control measures.
The TPP seeks to cut trade barriers and set common standards for 40% of the world economy.
If governments trigger the exception, they would have free rein on tobacco regulation without being challenged in a trade tribunal.
The US proposal, seen by Reuters, could prevent companies like Marlboro maker Philip Morris and Japan Tobacco Inc from using rules, which aims to protect foreign investors, to push back.
One of the most high-profile cases using the rules that protect foreign investors involves Philip Morris suing Australia over tobacco plain-packaging laws that ban branded cigarette packs. The company said this undermines its intellectual property.
The language on the table in the trade talks would cover tobacco control measures covering the manufacturing of tobacco products, as well as their distribution, labeling, packaging, wrapping, advertising, marketing, promotion, sale, purchase, or use, and any enforcement measures.
It would exempt tobacco leaf, in a bid to mollify tobacco farmers, and falls short of a sweeping total carve-out of anti-smoking measures which was also debated.
The proposal upset US industry and some lawmakers but is likely to have traction among TPP partners. New Zealand is mulling its own plain packaging laws and Malaysia had proposed a complete exemption for tobacco from the TPP, which would keep import duties as high as 90% on US tobacco exports.
Australia has called for a broad exemption for health and environment regulations from the investor-state provisions of the pact.
The top Democrat on the Senate Finance Committee, Ron Wyden, said an opt-out was appropriate and would help win support among trading partners.
"The administration should not spend a dime of negotiating capital protecting the tobacco companies, and it is clear to me that several countries would insist on significant concessions from the United States were we to refuse to address their concerns," he wrote in a letter to US Trade Representative Michael Froman on Thursday.
But the compromise may still undermine support among some US lawmakers from tobacco-growing states for the TPP, which needs to be approved by Congress before it can be implemented.
North Carolina senator Thom Tillis, a Republican, said the move was discriminatory and he would work to defeat the TPP in Congress if the clause was included.
Seventeen members of the House of Representatives agriculture committee also voiced their concerns, along with US business representatives.
The move "would be counterproductive in that it would open the way for other exemptions for other rules to be put in place," said Cal Cohen, president of the Emergency Committee for American Trade.
Although health and human rights lobby group Corporate Accountability International blasted the opt-out as inadequate, the American Cancer Society Cancer Action Network backed the proposal.