Huffing, and puffing along tobacco road

As we journey we look for the wondrous benefits of sugar-sweetened beverages, junk food, and tobacco, and have as companion a question, ‘Why should they be allowed to, if it is…’ A country, still developing and lacking in resources and institutions, and with pressing social and economic issues to address. Worse, an impoverished country.

For some context, we start with Uruguay, a small but well-developed country with fairly strong institutions. And we look at one significant, yet totally unnecessary and time- and resource-consuming, with which it had to contend. That challenge was not one of failure to adhere to bona fide terms of some ‘free’ trade agreement, as we will see.

A brief excerpt from Wikipedia on the case.

The Philip Morris v. Uruguay case (Spanish: Caso Philip Morris contra Uruguay) started on 19 February 2010, when the multinational tobacco company Philip Morris International filed a complaint against Uruguay.[1]


Uruguay had received accolades from the World Health Organization and from anti-smoking activists for its anti-smoking campaign.[5]

On 8 July 2016, after 6 years, the ICSID ruled in favor of Uruguay, forcing the demandant to pay the expenses of the defendants and the court.[6][7][8]

The Guardian, at the time, would also weigh in on the decision. Among its superb set of articles, is this one,  Who really won the legal battle between Philip Morris and Uruguay?, which examined the decision, a decision many consider Pyrrhic. An excerpt,

Philip Morris filed its controversial $25m (£19m) claim for damages at the World Bank arbitration court six years ago, saying it had “no choice but to litigate” due to Uruguay’s introduction of graphic warnings on cigarette packets. On 8 July, two of the three arbitrators ruled that Uruguay had the right to continue its anti-cigarette campaign, and that Philip Morris should reimburse $7m (£5.3m) in legal costs.


In this case, although Philip Morris was required to contribute $7m for legal costs, Uruguay will still have to pay a further $2.6m in financial costs and much more in terms of the non-material resources it has taken to fight this.


The arbitration panel’s decision to hear the case put a brake on the adoption of similar tobacco control measures in Costa Rica, Paraguay and New Zealand, among others.

That business of arbitration panels, investor-state dispute settlement (ISDS), capricious drain on the public purse. Inescapable is the rich harvest for corporate law firms when such extra-territorial tribunals accept such cases.

Again, aside the fact that the tobacco company was required to pay no more than court costs of US$7m, a mere pittance, clear evidence that this is no deterrent, especially financial or criminal, to such egregious corporate behaviour, there is the fact that such companies initiate litigation whereas the target states cannot.

So, from 2010 to Jul2016, Uruguay, a small country, has had to stave off ruthless, unrelenting corporate attacks against its independence.

That size, and relative importance, of country is irrelevant in the designs of ruthless, predatory MNCs is obvious with the case of Australia. The issue, again, tobacco and labeling of cigarette packages. And the company? Philip Morris.

As RT reports with this, US tobacco giant to pay Australia after losing arbitration over packaging An excerpt,

Philip Morris has been ordered to pay millions of dollars in compensation to Australia after unsuccessfully challenging the nation’s tobacco plain packaging laws.

That case, from 2012 to Jul2017. Plus, the size of the compensation is ‘small potatoes’ compared with the wealth of such MNCs. One obvious and significant deterrent to ‘small fry’ countries who dare defy is the subtle message, a massive claim for damages filed by the company.

Which brings us to the dilemma of the politically and economically vulnerable countries. The Guardian has published a treasure trove of articles on tobacco and smoking, and the major, and minor, players. This is one such, Big tobacco bullies the global south. Trade deals are their biggest weapon

Cigarette packets often carry the warning to “protect children: don’t make them breathe your smoke”. In 2014, the Kenyan government attempted to do just that – banning the sale of single cigarettes, banning smoking in vehicles with a child and keeping the tobacco industry out of initiatives aimed at children and young people.

But as the Guardian reported last week, British American Tobacco, in an effort to keep Kenyans breathing their smoke, fought the regulations on the grounds that they “constitute an unjustifiable barrier to international trade”.

And the clincher,

In fact, big tobacco has a long history of using trade and investment rules to force their products on markets in the global south and attack laws and threaten lawmakers that attempt to control tobacco use.

Of course, big tobacco is not alone in using such ‘free’ trade agreements so aggressively promoted to countries that lack the resources necessary to ferret out the subversiveness of such deals buried deep in the fine print, a subversiveness that invariably keeps the target country in thrall, in dependence, in the process undermining, thwarting economic and social development.

In the light of experience, should plain-paper packaging with legitimate warnings prove too daunting, one strong weapon to counteract such corporate power is the state’s power to tax. Economic studies confirm the efficacy of such a policy – from developed to developing countries – as disincentive to smoke or to curtail smoking. This is also the recommendation by the World Health Organisation (WHO) as a way to circumvent these threats.

US economist Tim Taylor in a 23Jun17 post, Tobacco Taxes in Low- and Middle-Income Countries, on his blog, in which he cites from the study by the National Cancer institute (NCI) and the World Health Organisation (WHO), states in these two excerpts,

Of course, the responsiveness of tobacco use to tax policy varies by group. For example, the immediate effect of a tobacco tax increase over the short-run of a year or two will be smaller (a common finding is about half as large) than the long-run effect over time. Smoking by younger people, not yet as well-established in the habit, tends to be more responsive to higher tobacco taxes than smoking by older people. And people in lower- and middle-income countries (LMICs) tend to respond more strongly to higher tobacco taxes than those in higher income countries…


One difficulty for economists in thinking about tobacco policy is that many of the effects of smoking are felt by the smoker. If people choose to smoke, with knowledge of the health consequences, then who are economists or public health experts to say they are wrong?…

On the vexing moral question of individual rights, that ‘internality’, one can include not just productivity costs but also health costs to the individual, to the family and friends, to the health services, and to the society as a whole. Easily understandable, widely disseminated and constantly repeated health advice and warnings should serve as precursor to any (increased) taxes on tobacco products.

To be remembered is that such corporations wield massive financial and political power and influence. That is especially so in the US, home country for most – even if ‘headquartered’ – a tax evading ploy – elsewhere such as Luxembourg, Switzerland and Ireland. That means the threats to countries that seek to protect the welfare of their citizens will not go away anytime soon, more so as markets are exhausted in some countries, especially in the West, and others beckon in many more vulnerable countries.

Thus, to spark that vigilance and robust policy such countries could consider incorporating as context that infamous action of key Western countries against the Chinese, the Boxer Rebellion and opium episode. No better incentive to purposeful action.


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