As mentioned the other day, Indonesia is moving ahead with a WTO complaint against the U.S. clove cigarette ban, having now filed a consultations request. I thought I'd do a short post on the GATT Article III:4 claim.
Here's the Article III:4 part of the consultations request:
(a) Discrimination under Article III:4 of the GATT 1994 between clove cigarettes and menthol cigarettes which are deemed to be "like products": Indonesia sees that these measures discriminate against imported clove cigarettes where clove cigarettes sold in the United States are imported (primarily from Indonesia), while virtually all of the menthol cigarettes sold in the United States are produced domestically (imports are negligible).
Article III:4 states:
The products of the territory of any WTO Member imported into the territory of any other WTO member shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.
There are two aspects of Article III:4 that I wanted to talk about: (1) less favorable treatment, and (2) like products.
With regard to the less favorable treatment issue, let me first point out that this is a de facto discrimination claim, as there is no explicit reference in the statute to treatment of foreign or domestic products. As to the nature of the discrimination claim, Indonesia appears to be making an argument based on the comparison of the group of imported products to the group of domestic products. Indonesia sees the relevant group of like products as clove cigarettes (which are banned) and menthol cigarettes (which are not banned, at least not yet). Because the banned clove cigarettes "are imported" ("primarily from Indonesia"), whereas the permitted menthol cigarettes are "virtually all" from the U.S. (and imports "are negligible), there is a disparate impact against Indonesian products. Hence, there is less favorable treatment for imported products. (Note that Indonesia does not seem to be making an argument based on the individual product approach, under which a violation would be found as long as an individual Indonesian product was treated worse than an individual U.S. "like" product.)
Assuming the facts are clear in terms of the distribution of clove and menthol cigarette production and sales in Indonesia and the U.S., the U.S. seems to have a difficult task here. Perhaps it could make an argument based on the Appellate Body's statement in Dominican Republic - Cigarettes that "the existence of a detrimental effect on a given imported product resulting from a measure does not necessarily imply that this measure accords less favourable treatment to imports if the detrimental effect is explained by factors or circumstances unrelated to the foreign origin of the product, such as the market share of the importer in this case." (See para. 96) Or maybe it can put forward an argument about the intent of the measure. But I think these are difficult arguments to win, and thus its focus will probably be on like products, which I turn to now.
The likeness of the products is going to be a difficult factual issue, and my discussion here is not going to do it justice. These are just some general thoughts, not rooted in any actual research.
From the law itself:
Beginning 3 months after the date of enactment of the Family Smoking Prevention and Tobacco Control Act, a cigarette or any of its component parts (including the tobacco, filter, or paper) shall not contain, as a constituent (including a smoke constituent) or additive, an artificial or natural flavor (other than tobacco or menthol) or an herb or spice, including strawberry, grape, orange, clove, cinnamon, pineapple, vanilla, coconut, licorice, cocoa, chocolate, cherry, or coffee, that is a characterizing flavor of the tobacco product or tobacco smoke. Nothing in this subparagraph shall be construed to limit the Secretary's authority to take action under this section or other sections of this Act applicable to menthol or any artificial or natural flavor, herb, or spice not specified in this subparagraph.
So, the law identifies a bunch of sweet/fruit/candy/otherwise desirable flavors, and also cloves, that may be used in cigarettes, and bans these flavors. It then explicitly permits action to be taken against menthol or other flavors, but does not ban them right away. (The FDA recently began considering a menthol ban).
Thinking about the scope of the like products at issue here, my sense is there are a number of possibilities, including the following:
(1) all flavored cigarettes are like products;
(2) flavored cigarettes with flavors not likely to attract children to smoking is one group of like products, and flavored cigarettes with flavors likely to attract children to smoking is a separate group of like products; or
(3) menthol cigarettes are not like the other flavors, either the cloves or the sweet/fruit/candy flavors.
From Indonesia's perspective, it might make the most sense to argue that clove and menthol cigarettes are "like," in the sense that they are both flavored cigarettes of a kind not that likely (or at least, not as likely at the sweet/fruit/candy ones) to appeal to children. (On the other hand, given the Washington Post article cited below, which indicates that menthol products appeal to children, perhaps Indonesia should just argue that all flavored cigarettes are "like.")
By contrast, the U.S. will try to make the case that clove and menthol cigarettes are not like, and thus their treatment should not be compared for the purposes of Article III:4. I'm not quite sure how the U.S. plans to make this point. From what I vaguely recall (although I don't have a particular source I can find), I don't think it can credibly claim that clove cigarettes cause children to smoke (and thus should be grouped with the sweet/fruit/candy ones). In fact, it might be just the opposite -- the harsh taste is a deterrent. It's actually menthol that is more of a problem in this regard. According to this Washington Post article:
Menthol cigarettes are especially popular among young smokers. According to the National Survey on Drug Use and Health, 62 percent of middle-school students who smoke begin with menthol cigarettes, whose minty taste can mask the harshness of tobacco.
One option is to talk about how clove cigarettes have been shown to be more harmful generally than menthols and other cigarettes. I once came across a study suggesting that was the case, but it wasn't something I could evaluate with any degree of confidence.
