In response, anti‐tobacco groups called for a total exclusion of tobacco from trade agreements, including from tariff reductions. While they did not achieve this in the TPP, they were able to get a carveout of tobacco control measures from TPP investor‐state claims.
The problem with this narrow approach is that it ignores the larger problem and creates new difficulties going forward.
The core of the conflict between trade and investment obligations, on the one hand, and space for domestic policymaking, on the other, is the scope of the obligations. If the international obligation says that domestic regulations must not be protectionist, there is unlikely to be much impact on a government’s ability to regulate. All regulation is permitted as long as it is not protectionist. By contrast, if the obligation says that domestic regulations may not be arbitrary, as some investment rules appear to do, a wide range of domestic measures may violate international obligations, if for no other reason than careless drafting, not to mention politically influential lobbying.
Of course, even if the obligations are stated so broadly, they can be reined in with an exception that makes clear that measures for legitimate policies are permitted. Such exceptions are a standard part of most trade agreements.
So why not just have an exception of this kind that applies to investor‐state dispute settlement (ISDS) in the TPP? Why carve out tobacco rather than create a general exception for public health and other policies? Most likely, the answer is politics. Business groups who support investment obligations prefer to have an open‐ended obligation, without any exceptions. This gives them more flexibility to bring claims. On the other side, anti‐tobacco groups might have been happy with the broader exception, but they did not have the political influence to get it. So, rather than try to balance out the different policy goals, the TPP carveout simply balances out the political lobbying. Two groups with strong passion about their issue were each able to get most of what they wanted.
Politically, this compromise works; in terms of policy, however, it makes little sense, and the end result of a tobacco carveout is unfortunate. The overbroad obligations (and lack of a general exception) stay, which is a bad approach to the economic liberalization versus domestic policy balance, and keeps the controversial cases coming. And in addition, the carveout could create a new set of problems for future trade negotiators: Having declared tobacco to be a particularly harmful product, deserving of a special exclusion, what other products might also fall into this category? 40 years ago it might have been butter. How about today? Should we carve out trans fats? Sugar? Bacon?
The TPP was a missed opportunity to develop a sensible balance for trade and investment agreements. The tobacco carveout solves nothing — the chances of Philip Morris winning its claims are uncertain anyway — and ignores the larger problem. Interest groups should have their say, of course. But ultimately we need to look past parochial interests and come up with real solutions.