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Protest by Tobacco State Politicians, Business Groups May Snuff Out Obama Administration Trade Move

Facing vehement protest from tobacco state lawmakers and business groups, the Obama administration appears to have retreated from efforts to keep cigarette makers from using trade treaties to attack countries that adopt strong anti-smoking rules.

At issue is whether a pending free trade deal should include language protecting the authority of nations to enact tough regulations to reduce smoking. In recent years, tobacco companies have invoked trade agreements to challenge the most stringent rules, such as requiring large graphic warnings on packs of cigarettes.

The announcement last year that administration officials would seek such protective language in the Trans-Pacific Partnership—a sweeping trade deal being negotiated between the U.S. and 11 other Pacific Rim nations—drew a storm of protest from powerful business groups, including the U.S. Chamber of Commerce, National Association of Manufacturers and American Farm Bureau Federation. They warned that seeking special treatment for tobacco could lead to similar exceptions for products vital to U.S. trade. Joining the chorus of opposition was a group of former U.S. Trade Representatives, including three employed by top law firms with tobacco industry clients.

Stung by the attacks, the Office of the U.S. Trade Representative—the branch of the White House that coordinates trade policy—put the proposal on hold. Fifteen months and eight negotiating rounds have passed since then without U.S. officials presenting the proposal or revealing their plans. “We…are still considering stakeholder input,” said Carol Guthrie, an assistant U.S. Trade Representative.

But with the possibility the treaty will be completed this fall, health advocates who seemed confident at first that the delay was temporary are voicing concern. Raising the stakes for business interests and tobacco foes alike is that talks have begun on a major European trade agreement, the Transatlantic Trade and Investment Partnership. Whatever policy the White House pursues in one treaty it’s likely to follow in the other.

Tobacco companies have “very strategically remained behind the scenes…They’re such a pariah industry that it sometimes goes against their interests to come out for or against something.”–Chris Bostic, deputy director for policy with the advocacy group Action on Smoking and Health 

As FairWarning has reported, with many countries ramping up their fight to reduce smoking, trade agreements have become a weapon of choice for tobacco companies seeking to thwart the toughest rules. For example, an Australian law requiring that cigarettes be sold in drab generic packs—eliminating distinctive brand logos and colors–has been attacked as violating treaty protections for intellectual property. Top cigarette makers Philip Morris International and British American Tobacco not only challenged the law in Australian courts, but have paid legal fees for three countries—Ukraine, Honduras and Dominican Republic– that have dragged Australia before the World Trade Organization.

However, the impetus for the trade office proposal was a dispute closer to home. Indonesia had charged that a U.S. ban on candy and fruit-flavored cigarettes was discriminatory because it included Indonesian clove cigarettes but exempted the menthol flavoring in some popular U.S. brands. In April, 2012, a WTO dispute panel upheld the complaint.

The case triggered intense discussions between senior Obama administration health and trade officials about the risk of cigarette makers using trade agreements to block tobacco regulation by the Food and Drug Administration. The upshot was the trade office’s announcement in May, 2012, that it would seek to include a special tobacco provision in the Trans-Pacific Partnership, which includes Canada, Mexico, Japan, Australia, New Zealand, Peru, Chile, Malaysia, Vietnam, Singapore and Brunei Darusaalam. The so-called “safe harbor’’ provision would ‘’explicitly recognize the unique status of tobacco products from a health and regulatory perspective,’’ the trade office said, “providing greater certainty” that treaty provisions won’t become a weapon to thwart legitimate regulations.

The trade office floated the proposal within days of the start of a negotiating round in Dallas. Letters and emails obtained by FairWarning under the Freedom of Information Act show the announcement triggered a full-court press to block the move.

In a May 10, 2012 email to the trade office, a senior official with the Chamber of Commerce said Chamber President and CEO Thomas J. Donahue was trying to reach U.S. Trade Representative Ron Kirk. “I believe Tom had a couple of things to raise, including urging that the tobacco text not be submitted at this Round,” the email said.

The next day, Calman Cohen, president of the Emergency Committee for American Trade, spoke to Kirk “about business concerns with the TPP tobacco proposal,” according to an email from Cohen. Also on May 11, a letter to President Obama from Senate Republican Leader Mitch McConnell, R-Ky., and House Majority Leader Eric Cantor, R-Va., and another to Kirk from 22 tobacco states congressmen urged that the proposal be dropped.

Former U.S. Trade Representative Michael KantorCreating a “safe harbor” for tobacco regulation “would have seriously negative implications for broader U.S. trade interests and the long-term efficacy of the trading system itself.”–Joint letter from former U.S. Trade Representatives Michael “Mickey” Kantor, Bill Brock, Susan C. Schwab and Clayton Yeutter(Photo courtesy USC Annenberg Center on Communication Leadership & Policy)



Though some of the business groups have tobacco industry members, cigarette makers themselves have kept a low profile. They “very strategically remained behind the scenes,” said Chris Bostic, deputy director for policy with the advocacy group Action on Smoking and Health.

“They’ve been allowing the business organizations like the Chamber of Commerce to carry water for them,” Bostic said. “They’re such a pariah industry that it sometimes goes against their interests to come out for or against something.”

Some former trade representatives who attacked the tobacco proposal have had industry ties.

The former trade representatives– Michael Kantor, Susan C. Schwab, Clayton Yeutter and William E. Brock III– warned in a joint letter that creating a tobacco exception would have “seriously negative implications for broader U.S. trade interests.” The provision was unnecessary, they said, because trade agreements already give governments leeway to adopt rules to protect public health. And it could lead to “other governments attempting to justify their protectionist measures in the name of health or safety,” the letter said.

Kantor, who served as trade representative under President Clinton, previously had lobbied for the tobacco industry as a partner at Manatt, Phelps, Phillips & Kantor. His current law firm, Mayer Brown, has represented Philip Morris USA before the U.S. Supreme Court. Schwab, who was trade representative under President George W. Bush, serves as a strategic adviser to Mayer Brown.

Brock and Yeutter were trade representatives under President Reagan and during the 1980s led a successful push to open Asian markets to U.S. cigarettes. Yeutter went on to serve as a director of B.A.T. Industries, now called British American Tobacco, during the 1990s. He’s currently a senior adviser to Hogan Lovells LLP, an international law firm that has represented Philip Morris International before the FDA.

Whether the tobacco industry had a hand in arranging the letter is uncertain. Kantor and Schwab declined to comment. “The letter speaks for itself,” Kantor told FairWarning. “I’m not going to go beyond the letter.’’ Brock said in an email that he was contacted about the letter by one of the former trade representatives and not by a tobacco company. Yeutter could not be reached.

In an email to FairWarning, Anne Edwards, spokeswoman for Philip Morris International, said the tobacco proposal “risks unnecessarily undermining decades of international trade principles.” She declined to say if the company had a hand in the letter.

Public health and anti-smoking groups have been equally vocal in support of the proposal. The American Medical Association, American Cancer Society, American Lung Association, and Campaign for Tobacco-Free Kids, among others, have urged the trade office to move forward, saying the mere threat of expensive trade litigation could deter poorer countries from taking strong action to fight smoking.

With nearly 6 million people dying annually from smoking-related causes, tobacco products “should not be treated as other consumer goods’’ in international trade, a letter from several health groups said. Nor should trade rules “inhibit any nation from exercising its sovereign authority to protect the health of its citizens.”

Tobacco foes at first attributed delays in introducing the proposal to the looming 2012 presidential election, and the battle for electoral votes in the tobacco strongholds of Virginia and North Carolina. Later, speculation focused on other possible reasons for not rocking the boat, including the administration’s effort to win confirmation for Michael Froman to succeed Kirk as U.S. Trade Representative.

But “I think it’s fair to say they’ve run out of excuses,” said Matt Myers, president of the Campaign for Tobacco-Free Kids. “You keep hearing rumblings that they’re committed to doing it, but at some point you’ve got to get a little skeptical.”

No clarity was offered when Froman, at his confirmation hearing, was asked by Sen. Richard Burr, R-N.C., if he would seek special treatment for tobacco. “If confirmed,” he said in his written answer, “I will work to ensure that handling of tobacco… is consistent with our trade policy objectives while preserving our ability to implement appropriate public health measures.”

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