Free Trade and Cigarettes

August 20, 2012

Free trade has been the cornerstone of peace and prosperity for much of the 20th and 21st centuries. Cigarettes, however, have been a source of concern when it comes to international trade because many argue that free trade policies often conflict with laws set forth to protect against the harmful effects of cigarettes, says Simon Lester, a trade policy analyst at the Cato Institute.

The history of cigarettes and trade in the United States is an interesting one.

  • During the 1980s and 1990s, the United States worked hard to open foreign markets to U.S. cigarette exports.
  • However, in 1997 Congress attached the Doggett Amendment to an appropriations bill.
  • It stated that funds could not be used to promote the sale or export of tobacco or removal of any restrictions that are non-discriminatory.
  • During the Trans Pacific Partnership (TPP) negotiations, the removal of tariffs on tobacco was requested because they violated the Doggett Amendment.

As a result, the U.S. Trade Representative has sought new rules related to tobacco, which includes three elements:

  • To recognize the status of tobacco products from a health and regulatory perspective.
  • Tobacco products would be subject to phase-outs.
  • There will be the ability to allow health authorities in TPP to allow governments to adopt origin-neutral, science-based restrictions on tobacco products.

It is often difficult to distinguish between laws that protect against smoking and those that seek to discriminate against foreign competitors. An example is when the United States banned clove cigarettes because it was argued that it attracted younger people. However, Indonesia filed against the measure, citing a trade violation saying that this policy discriminated against it. While the United States may have had legitimate health reasons for banning clove cigarettes, an appellate court found that it was found to be discriminatory and thus a trade violation against Indonesia.

Proponents of stricter trade rules cite this example for why it is necessary to curb free trade in favor of domestic sovereignty over health matters. What they fail to see, however, is that it is possible to pursue non-discriminatory policies and still accomplish the same health goals. Furthermore, the United States can still try to reduce cigarette use by taxing both foreign and domestic cigarettes. Both are legitimate under trade laws since they don't discriminate against one exporter or type of export, yet still maintain the core principles of free trade.

Source: Simon Lester, "Free Trade and Tobacco: Thank You for Not Smoking (Foreign) Cigarettes," Cato Institute, August 15, 2012.

 

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