Exclude Tobacco Products from Trade Agreements

The tobacco industry has a long history of using international trade agreements to force open new markets in low- and middle-income countries, sharply increasing tobacco use and the death and disease it causes. Tobacco companies are also challenging tobacco control laws as violations of trade and investment agreements, threatening the sovereign right of nations to protect the health of their citizens.

These tobacco industry tactics underscore the importance of excluding tobacco products from international trade and investment agreements. Free trade is intended to make products cheaper and more available to more consumers. However, there is a global consensus in support of reducing tobacco use. Trade agreements should not promote or increase use of tobacco products or facilitate the tobacco companies’ access to markets, thereby undermining governments’ tobacco control efforts.

International investment agreements (either as standalone bilateral agreements or included as investment chapters in free trade agreements) provide protections for foreign investors, but they were never intended to put constraints on a state’s right to implement genuine public interest regulatory measures to protect the health of its citizens.

The best approach is to exclude tobacco products entirely from trade and investment agreements. At a minimum, the tobacco industry should be prevented from bringing any challenges to tobacco control measures under the Investor-State Dispute Settlement (ISDS) provisions.

The agreed text of the Trans-Pacific Partnership (TPP) agreement, announced in November 2015, provided the first example of a way forward. It included a provision that would allow a party to the agreement to elect to deny the benefits of ISDS for any claim against a tobacco control measure. This would have prevented claims such as those against Uruguay and Australia described below. Although the U.S. has withdrawn from the TPP negotiations, other TPP nations are committed to this approach. The revised text of the Australia /Malaysia Free Trade Agreement now incorporates a similar provision.

Negotiations are currently underway to modernize and renegotiate the North American Free Trade Agreement (NAFTA). This renegotiation offers an opportunity for the United States, Canada and Mexico to acknowledge the unique harms caused by tobacco products and include provisions to ensure that the NAFTA parties do not face the threat of investor litigation by the tobacco industry.  

Special Treatment for a Uniquely Lethal Product

The rationale for excluding tobacco products from trade agreements is simple and compelling. Trade agreements are intended to promote and expand trade, increase foreign access to markets and reduce product prices. They are intended to bring economic benefits to all parties. Yet tobacco products are uniquely lethal and highly addictive.

Tobacco use is the leading cause of preventable death around the world. Globally, tobacco kills more than 7 million people annually. Without effective tobacco control policies to reduce consumption, one billion people will die from using tobacco products this century. Freer trade in tobacco products directly conflicts with the goal of saving lives by stemming this global epidemic.

The goals of liberalized trade include lowering the price of products and increasing the number of consumers for them. In stark contrast, public health measures seek to save lives by reducing consumption of tobacco products through policies such as higher taxes to increase prices, bans and restrictions on marketing, and large, graphic pack warnings that inform consumers about health risks of tobacco use.

Nations across the globe have made legally binding commitments to implement these and other measures to curb the tobacco epidemic by signing on to the world’s first public health treaty, the World Health Organization Framework Convention on Tobacco Control (FCTC).

Big Tobacco Uses Trade Laws to Fight Health Protection

Tobacco companies and their allies have been using trade and investment agreements to challenge and undermine tobacco control policies. In recent years:

  • Philip Morris International sued Uruguay under a bilateral investment treaty over its laws increasing the size of warning label on cigarettes and limiting the number of variations of each brand. Uruguay adopted these policies to counter the tobacco industry’s use of the deceptive terms "light," "low tar" and "mild." The arbitration took six years to resolve and cost Uruguay over $10 million to defend but resulted in a resounding victory for Uruguay in 2016 when the arbitration panel dismissed all claims and awarded Uruguay its legal costs. 
  • Philip Morris International sued Australia over its law requiring plain cigarette packaging under an Australia-Hong Kong bilateral investment treaty. The case was dismissed in late 2015 by an international tribunal which ruled that there was no jurisdiction to hear the case because Philip Morris’s claim was an “abuse of rights.”
  • Four countries (Indonesia, Dominican Republic, Honduras and Cuba) filed a complaint under the WTO dispute system against Australia’s plain packaging laws. This dispute has been running for five years. It was reported in May 2017 that the WTO had ruled in Australia’s favor, but a final report has not yet been issued. This is one of the most hotly disputed cases that the WTO has had to adjudicate, with 34 WTO members making third party submissions to the panel (more than any previous dispute). While the complaining countries have almost no trade in tobacco products with Australia, it is widely reported that British American Tobacco and Philip Morris have provided both financial and legal support to Honduras and Dominican Republic respectively.   
  • Indonesia brought a complaint against the United States in the World Trade Organization over a ban on clove cigarettes, which is part of a U.S. prohibition on flavored cigarettes that appeal to youth.
  • Philip Morris International's Turkish subsidiary has sued Turkey, claiming that a requirement that warnings cover 65 percent of the cigarette pack infringes on trademarks protected by treaties on intellectual property rights.

Tobacco is simply not like any other consumer product and should not be treated as one in trade and investment agreements. What’s at stake is the authority of nations to take actions that literally would save millions of lives.

In March 2015, Bloomberg Philanthropies and the Bill and Melinda Gates Foundation announced the Anti-Tobacco Trade Litigation Fund, a joint venture managed by the Campaign for Tobacco-Free Kids. This initiative provides financial and technical legal support to low- and middle-income countries that are facing claims, or threats of claims, against their tobacco control laws by the tobacco industry under international trade and investment agreements.

Last updated Sept. 22, 2017