Law profs Sergio Puig and Greg Shaffer want to get tobacco out of the TPP:
The Obama administration is poised to finalize the Trans-Pacific Partnership (TPP) agreement. If Congress passes the current trade promotion authority bill, the TPP will become subject to a simple up or down vote, without possibility for any amendment. The Obama administration refuses to tell the public what's in the agreement and Congress seems pressed to accept provisions that many Americans might deplore. This is a problem. Consider the TPP's secretive advocacy for big tobacco.
The U.S. government is supporting big tobacco companies by negotiating dozens of international trade and investment agreements, but largely without the public's knowledge. Historically, the U.S. has supported big tobacco to expand their profitability abroad, despite known health risks. For example, dating back to the 1990s the U.S. Government Accountability Office (GAO) reported that US tobacco trade surpluses doubled after "the U.S. government provided assistance in removing [trade] barriers." The GAO report also notes how the prevalence of smoking in "Taiwan and South Korea had increased since the removal of U.S. cigarette export barriers," which resulted in "the opening of Asian cigarette markets, [and increased] cigarette advertising..."
These agreements reduce tariffs on tobacco products around the world and grant big tobacco companies the right to sue governments that post aggressive warning labels on cigarettes. For example, Australia enacted a "plain packaging law" that depicts disquieting, smoking-related images on cigarette packages sold in its country above the brand of the cigarette. Tobacco companies sued. But it's not just the big nations these companies go after -- it's also the poorest.
I've weighed in on this before. I don't see any more reason for tariffs on tobacco products than on any other products. Protecting domestic producers from competition is never a good idea. As for ISDS and IP, those are general problems that need reform; they are not tobacco-specific issues. Thus, I don't see any reason to exclude tobacco from trade agreements.
Sergio and Greg say this on tariffs:
... Vietnam now has a 135 percent tariff rate on cigarettes (for a list of other countries, see here), arguably in part to protect local state-owned producers, but also because cigarette imports serve no useful purpose for its economy. ...
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More importantly, there is no justifiable reason for including tobacco in the TPP, whatever one thinks of free trade or global economic integration. Mainstream economists contend that free trade makes more goods available at cheaper prices and thus increases a country's welfare and its consumers' standard of living. However, this core argument does not apply to tobacco. Predictably, consumer welfare will decline with increased tobacco consumption; we have seen this in the U.S. With tariff rates at zero, big tobacco companies will not only increase exports, but also bombard poor countries with advertising. Based on their record, how appealing do you think their ads will be?
Of course, after Vietnam reduces its tariff rates to zero, it could increase its domestic sales tax to 135 percent. But anyone who has visited a developing country and seen their outdoor markets knows that collecting sales taxes is much more difficult And Philip Morris certainly knows that, which is why it wants the tariff rate at zero.
This issue can be tested empirically, and someone gave it a shot here. My sense is that in the early 1990s, lower tariffs might have led to lower cigarette prices, but now with the spread of tobacco control, lowering tariffs in a country like Viet Nam would probably lead to high taxes and tougher regulations. So, I'm a little skeptical that Viet Nam could not deal with this as a domestic issue, but I'll see Greg next week and he can try to convince me otherwise!
