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Malaysia Poised To Table Complete Carveout From TPP For Tobacco Measures

BANDAR SERI BEGAWAN, Brunei – The Malaysian government is poised to table a proposal here that would completely carve out tobacco control measures from having to comply with any obligations in a Trans-Pacific Partnership (TPP) agreement, according to informed sources.

The proposal, which would effectively shield TPP governments from any state-to-state or investor-state challenge against their tobacco control measures, is the latest twist in the debate over tobacco regulation in TPP.

The Malaysian carveout would go far beyond a U.S. tobacco proposal expected to be tabled here that has come under fire domestically from business groups who oppose it and public health organizations who think it does not go far enough. Both sides are planning to press TPP countries here to back their respective demands.

Malaysia’s language also goes farther than the “safe harbor” from dispute settlement for tobacco regulations that the U.S. had considered last year but ultimately scaled back to the proposal it will table this week. The “safe harbor” would have only applied to tobacco control regulations — not legislation — and would not have protected governments from investor-state challenges, only state-to-state dispute settlement cases.

It is not completely clear whether the Malaysian proposal would have a market access component that would require TPP countries to refrain from lowering their tariffs on tobacco products. Under the U.S. proposal, the U.S. would still press other TPP countries to phase out tariffs on tobacco products.

Sources said the U.S. and Malaysia are expected to table their competing tobacco proposals simultaneously some time during the round here, and one informed source said that could happen as early as tomorrow (Aug. 26).

The proposals are expected to be tabled in the chief negotiators’ group, where they will be discussed in general terms during this round. One source speculated that real negotiations may not begin until an intersessional meeting on legal issues that is slated to be held in Washington during the second week of September.

The forthcoming Malaysian proposal has already garnered the support of a key U.S. anti-tobacco group, the Campaign for Tobacco Free Kids.

“We applaud the Malaysian tobacco control community for their strong advocacy to convince the Malaysian government to table a tobacco carve out, and we will encourage the U.S. and other TPP countries to adopt the Malaysian proposal,” Susan M. Liss, the group’s executive director, said in e-mail to Inside U.S. Trade.

“In addition, because the weaker U.S. proposal will also be under consideration, we cannot let up on our efforts to strengthen it, and we will continue to urge other countries to improve the U.S. approach,” she added.

Malaysia had already decided to move forward with its tobacco proposal when the U.S. announced last week that it intended to unveil its tobacco-specific language at the Brunei round, according to an informed source. Malaysian public health groups were worried that if the U.S. tabled its proposal first, it would become the basis for negotiations and Malaysia would get squeezed out of the discussion, this source said.

The groups urged the Malaysian government to table its proposal first, but ultimately the chief negotiators from both countries worked out an arrangement where they would table to the two proposals at the same time, sources said.

The Malaysian proposal originated in the Ministry of Health, which also drafted its legal language, according to one informed source. The Malaysian Ministry of International Trade and Industry (MITI) deferred to the health ministry on the tobacco carveout, the source said.

Malaysia’s proposal responds to calls from the Malaysian Council for Tobacco Control (MCTC), a civil society group, to completely carve out tobacco control measures from TPP obligations. MCTC President Molly Cheah made that demand in a stakeholder presentation at the 18th round of TPP talks held last month in Kota Kinabalu, Malaysia.

“The carveout means that the tobacco industry will not be able to use any provisions in the TPP to sue governments or to threaten governments, and that’s what they have been doing,” Cheah said in an interview here.

She pointed to the investor-state challenge and World Trade Organization dispute against Australia’s plain packaging law, among other cases. “We want to ensure that the proposal is broad enough not to allow loopholes … for the tobacco industry to take advantage of,” she added.

One of goals of the MCTC in pressing its government for the carveout was to ensure that nothing in the TPP would prevent countries from implementing the World Health Organization Framework Convention on Tobacco Control (FCTC). All TPP countries have ratified the FCTC except for the United States, which has signed the deal but not ratified it.

The FCTC requires parties to adopt and maintain price and tax measures to reduce the demand for tobacco, as well as non-price measures such as regulation of the contents of tobacco products as well as packaging and labeling requirements.

Anti-tobacco groups do not expect Australia to lead the charge on including tobacco-related language in TPP due to the fact that its plain packaging law is currently being challenged both in the World Trade Organization and in an investor-state case brought by tobacco giant Phillip Morris.

Australia fears that advocating for new language in TPP to protect anti-tobacco regulations would give the impression that current trade rules are insufficient to protect a country’s right to regulate tobacco, which could undermine its legal argument that the plain packaging law is consistent with WTO rules, sources said.

During the course of the TPP negotiations, anti-tobacco groups have met with all participants except Japan to discuss the possibility of including specific language protecting tobacco regulation, and none of these countries has been “hostile” to that idea, one source said.

This source acknowledged that Japan may be skeptical of any tobacco proposal in TPP given that it has a large and influential tobacco industry, led by Japan Tobacco Company, which is partly owned by the Japanese government and is a major exporter to other Asian countries. Vietnam also has a state-owned tobacco company, another source pointed out.