Commentary

Trade, Tobacco, and the TPP

Recently, controversy has erupted over the treatment of tobacco in the Trans Pacific Partnership trade negotiations. Writing in the New York Times, New York Mayor Michael Bloomberg accuses the Obama administration of “caving” on tobacco. He alleges that Obama “bowed to pressure from the tobacco industry.” Along the same lines, Lydia DePillis of the Washington Post’s WonkBlog says that “a secretive trade deal could help American tobacco companies hook new smokers.” What’s going on here? Having pushed for strong domestic regulation of tobacco early in the first term, is the Obama administration getting in bed with a sworn enemy?

In terms of the trade technicalities, the basic story here is the following: Anti-tobacco campaigners have been calling for a “carve out” of tobacco from trade agreements. At first, the U.S. Trade Representative’s office (USTR) seemed willing to support a mildly strong proposal in this regard, which would have included exceptions language for tobacco that would be easier to meet than the standard trade law provisions. Recently, however, USTR abandoned this approach. Instead, it adopted a much weaker set of provisions that simply clarify that existing exceptions apply to tobacco, and call for an additional set of consultations before tobacco-related trade disputes proceed. It seems fairly clear that the new proposals are unlikely to have much impact on the application of existing rules. (Subsequently, Malaysia entered the fray, with a proposal to completely carve out tobacco from all TPP rules.)

The reaction from anti-tobacco groups to the weaker USTR proposal has been very negative. The Campaign for Tobacco-Free Kids says this “is a missed opportunity for the United States to lead the fight against this global epidemic.” At the same time, business groups are still concerned that the weaker proposal goes too far, stating that: “We believe this text will undercut longstanding US insistence that regulatory measures be based on evidence, including sound science, and encourage other countries to propose additional product-specific references.”

Anti—tobacco campaigners have been calling for a “carve out” of tobacco from trade agreements.”

On this issue, it seems impossible to make either side happy. One side wants much more; the other side wants much less.

But perhaps this is not really a “more” or “less” issue, and we need a different framework for thinking about it all. I wrote about the treatment of tobacco in trade rules last year. In my paper, I argued that protectionism for tobacco makes no more sense than it does for any other industry. Why create a domestic monopoly/oligopoly by keeping out foreign competitors? Thus, trade rules that prohibit protectionism are useful here, and there is no need for a “carve out” from such rules. To the extent that anti-tobacco groups want the carve out in order to allow tariffs on cigarettes, they are misguided. Why use discriminatory tariffs here? If you want to discourage smoking by raising the price of cigarettes, you can just tax the product with a non-discriminatory tax that applies to all (i.e., both imported and domestic) products. This is perfectly legal under trade rules.

At the same time, there are also some trade rules that go beyond fighting protectionism, and may interfere with non-protectionist tobacco regulation. Such rules include strong intellectual property protections that prevent interference with trademarks, and certain aspects of rules on foreign investment that “protect” foreign companies by allowing them to sue governments in international tribunals based on vague and broad legal obligations.

As for applying a tobacco carve out to these rules, anti-tobacco critics may be missing the larger picture here. Their underlying argument is that these rules interfere with national autonomy, by prohibiting legitimate, non-protectionist domestic regulations. But this is a problem that applies beyond tobacco; it applies to all domestic policy. If it is a problem for tobacco regulation (and it may be), it is worth pushing the issue more broadly. An argument that these rules are a problem only for tobacco, and thus a carve out for tobacco is required, is a strange one. In a sense, it is an argument that it is fine for international trade law to interfere with non-tobacco public health regulation (or other regulation), but it is unacceptable for it to interfere with public health regulation related to tobacco.

Trade agreements are full of battles over the scope of the general rules and the treatment of specific products. Drawing the appropriate balance is difficult, particularly in the case of a controversial product such as tobacco. Ultimately, tobacco is not as unique as some suggest, though, and coming up with special rules is more of a distraction than a solution.