Smoke Signals: Plans of Big Tobacco Plain to See


IT’S easy to laugh at Big Tobacco. Fresh from defeat in Australia’s High Court, it has taken its fight against plain cigarette packets to New Zealand where British American Tobacco warns such legislation could expose the nation to legal challenges (no kidding), and to Hong Kong where Philip Morris moved the shares of its Australian subsidiary – presumably to take advantage of an obscure 1993 Hong Kong-Australia investment treaty.

Philip Morris Australia, now known as Philip Morris Asia, will argue the treaty prevents Australia from depriving a Hong Kong entity of its investments or subjecting it to ”measures having effect equivalent to such deprivation”. Which it does, with a caveat. As a party to the treaty, Australia is permitted to deprive a Hong Kong company of its investments so long as it does so ”under due process of law for a public purpose related to the internal needs of that party on a non-discriminatory basis”. So Australia ought to be in the clear.

But the almost comic attempt to get mileage out of the treaty (moving from Australia to Hong Kong in order to complain that it was being discriminated against because it was from Hong Kong) masks a broader, more serious attempt to turn trade treaties into instruments that allow corporations to sue governments.

The World Trade Organisation allows no such thing. Its disputes settlement procedure allows a nation to haul another nation before a disputes settlements panel, but not corporations to do so.

That could be why on Friday it will be Ukraine that will ask the WTO to set up a panel to hear its plain-packaging dispute with Australia rather than a tobacco company. There’s a suspicion that Ukraine is acting on behalf of a tobacco company, perhaps fuelled by its ranking on the Transparency International Corruption Perceptions Index (at the corrupt end of the scale, sandwiched between Russia and Zimbabwe) and by the fact that it has next to no tobacco trade with Australia.

The dispute will take four months to hear. With appeals, it could take up to 14 months. But it won’t unduly trouble Australia. A member of the WTO rather than a corporation will be taking action, it will have to show clearly how Australia’s plain packs law offends against WTO rules (which allow non-discriminatory measures that benefit health) and because Ukraine’s national interests are not at stake it is likely to run out of enthusiasm before Australia does.

Big Tobacco, and fellow travellers in surprising places, want much more. They want what is known as an Investor State Dispute Settlement Mechanism. They want it in order to allow them to drag Australia and other sovereign governments before specially constituted international courts.

They don’t usually put it that bluntly. Here’s how Philip Morris International put it in a briefing note for the US trade representative negotiating the so-called Trans-Pacific Partnership with 11 nations including Australia: ”Philip Morris International considers the availability of an investor-state dispute settlement mechanism – including the right for investors to submit disputes to independent international tribunals – a vital aspect of protecting its foreign investments.”

It is clear what Philip Morris is getting at. Four of the 30 paragraphs in the briefing note seen by BusinessDay complain about Australia’s plain-packaging law. As it happens, the US trade representative is unable to do the bidding of Philip Morris. US law prevents federal agencies from promoting the sale of tobacco overseas. But the trade representative is willing to do the bidding of other corporations that would like to sue foreign governments in supranational courts.

In fact in all but one of the 13 free trade agreements negotiated by the US, its representatives have managed to insert such a clause. The exception is the free trade agreement with Australia. Although criticised at the time for giving too much away to the United States in return for very little, on the question of an outside Investor State Dispute Settlement Mechanism the Howard government stood firm.

The Gillard government is standing firm, too. The multinational nature of large Australian corporations means it would effectively be giving them (but not our citizens) an international right of appeal against laws approved by the High Court.

The US is unlikely to give up. It already has such a clause in its agreements with Canada, Chile, Mexico, Singapore and Peru – five of the nations that would form part of the Trans-Pacific Partnership.

Its best hope would be that a new Abbott government saw things differently. It would, if it succumbed to lobbying from Australia’s own Chamber of Commerce and Industry. ACCI is lobbying hard, putting out a statement this month headed crudely: ”Australian Foreign Investment Requires Right to Sue Foreign Governments”.

It says its ”campaign” is backed by the International Chamber of Commerce, which is hardly surprising but also hardly a sign the backers have Australia’s interests at heart.

Julia Gillard and Trade Minister Craig Emerson are standing up to them. Will Tony Abbott?

By Peter Martin

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