Remember Indonesia's concern that clove cigarettes (kreteks), which they produce a lot of, would be banned under U.S. tobacco legislation? (See here and here). Well, Congress has passed this legislation and it looks like the clove cigarette ban will soon be upon us.
The problem is not the clove ban by itself. Rather, it is that the law does not ban certain other, arguably similar, tobacco products. As Bloomberg reports:
While other flavors including cloves and strawberry would be banned from the market, menthol would remain unless the FDA later determined it to be a health risk.
So, clove cigarettes are banned, but menthol cigarettes are allowed (at least for now).
Paul Smalera explains the clove/menthol issue as follows:
The next most popular flavored cigarette, clove, accounts for .09 percent of the market. Those cigarettes will be banned under the bill. Indonesia, which provides 99 percent of the clove cigarettes to the U.S. market, has complained to the U.S. trade representative about the disparity with menthol. If Indonesia brings a protectionist complaint to the World Trade Organization, it would compel our government to prove cloves were banned for health reasons. Namely, the United States would have to show that the flavor of cloves enhances cigarettes' addictive properties. If it can't, the ban could be considered a trade violation.
It's a lose-lose proposition. If the United States proves it banned clove cigarettes strictly for health reasons, it would be admitting that menthol cigarettes, manufactured domestically, are getting a free pass despite their clovelike increased health risks. Which puts the FDA, as the tobacco regulator, in the position of justifying a ban on cloves but not menthols. ...
In other words, the United States will have two choices in the above scenario, both hairy: protect the FDA's independence by admitting it banned cloves but not menthols only to protect Philip Morris' market share or let the FDA manufacture an explanation, contrary to recent studies, by which menthol cigarettes, which are used to lure children to smoke, are just as safe as unflavored cigarettes.
This passage hints at some of the issues that will come up in the context of examining the measure under WTO rules, such as: "less favorable treatment" (it appears that Indonesia is the predominant supplier of clove cigarettes); "likeness" (menthol and clove cigarettes have similar characteristics and health effects); and "necessity" exceptions in relation to health (same as previous).
Will Indonesia file a complaint? That seems quite possible:
Menthol cigarettes will not be included in the ban, however, which has angered Indonesian trade officials who point out that a ban on kretek but not menthol is discriminatory and are threatening to complain to the World Trade Organization. Government officials’ comments on the ban make it likely that WTO action will now proceed.
In a related matter, from the Department of "What Comes Around Goes Around," apparently U.S. producers have similar concerns about a Canadian tobacco regulation bill:
Tobacco growers in Kentucky have launched a protest against the Harper government over a new anti-smoking bill they argue will lead to a ban on the vast majority of U.S. cigarette exports to Canada.
Two U.S. congressmen have taken up the cause of 8,100 Kentucky farmers who grow burley tobacco — used in popular American-style cigarettes like Camel and Winston — and have warned International Trade Minister Stockwell Day that Canada's legislation violates NAFTA and other trade agreements.
The U.S. grievance was sparked by the introduction last month of Bill C-32, an amendment to the Tobacco Act which would ban the addition of certain flavours and additives to cigarettes and cigarillos that Ottawa said are marketed primarily at children and teenagers.
Health Canada said the legislation will prohibit the tobacco industry from adding fruit and candy flavours such as chocolate, grape, banana and peach to make their product more appealing to youth. Menthol cigarettes are exempt from the ban.
But Kentucky tobacco growers contend the legislation has been written so broadly it could also bar American-blend cigarettes that include burley tobacco, which they say has flavouring added during normal processing to mitigate its naturally harsh taste.
Thus, the proposed Canadian ban may target U.S. "burley" tobacco in the same way that the U.S. law targets clove cigarettes (the Canadian bill also has the menthol exemption).
As a final point, I hate to sound defensive here, but I just want to emphasize to trade skeptics out there that this issue does not mean that countries can't regulate tobacco. It just means that they can't insert protectionist components into their tobacco regulation measures. 99.9% of these measures are fine under trade rules. The main problem area is the part about (possibly) treating foreign products less favorably than domestic ones.
