OCT. 1, 2015
U.S. Proposes Provision on Tobacco in Trade Pact
By JACKIE CALMES and SABRINA TAVERNISE
ATLANTA -- The United States proposed this week to bar tobacco companies from using special trade tribunals to sue or threaten countries that passed antismoking laws, hoping to remove one roadblock to what would be the largest regional trade agreement in history.
The tobacco provision remains tentative, but its inclusion in the 12-nation Trans-Pacific Partnership being negotiated here would be a major victory for public health advocates and could set a precedent for other trade pacts. Tobacco companies have been using existing global trade agreements to counter antismoking laws, especially in poorer nations, and advocates fear that the Pacific trade accord could provide another legal weapon.
Public health experts said the tobacco industry's use of so-called Investor-State Dispute Settlement tribunals had become so widespread that many poorer countries were abandoning their antismoking efforts. Those underdeveloped nations are also the newest markets for tobacco companies, which are struggling to offset big declines in smoking in the United States and other rich countries.
The Obama administration had originally refrained from proposing such a provision, prompting fierce criticism from anti-tobacco activists who had urged the administration to use the trade talks to stop the practice. But late Wednesday, President Obama's chief trade negotiator, Michael B. Froman, offered the proposal as an alternative to broader ones from Australia and Malaysia. American officials said the other nations' plans could affect not only tobacco companies but also tobacco farmers and the alcohol and soft-drink industries, which would provoke political opposition in Congress and other nations.
The tobacco proposal will still meet opposition in Washington, where Mr. Obama would need bipartisan support to approve any trade agreement next year.
"I'll not only vote against it, I'll work hard to have it defeated if it goes in the final agreement," said Senator Thom Tillis, a Republican from the tobacco state of North Carolina, who supported the Trans-Pacific Partnership effort. "Once you carve out someone from dispute settlement agreements, then who's next?"
Mr. Tillis's Republican colleague from North Carolina, Senator Richard Burr, also complained. And Mr. Tillis said Senator Mitch McConnell of Kentucky, the Senate majority leader, had expressed reservations. Mr. McConnell had no comment.
Tobacco consumption more than doubled from 1970 to 2000 in the developing world, which is now home to more than three-quarters of the world's smokers.
"Countries want to put a stop to the abuse of the trade system by the tobacco companies," said Matthew Myers, president of Campaign for Tobacco-Free Kids, an anti-tobacco advocacy group. "This language sounds like it does that."
Companies declined to comment on the provision on Thursday, saying it was not final. A group of business trade organizations, including the National Association of Manufacturers and the U.S. Chamber of Commerce, said in a statement this week it would oppose "a wide range of product and industry exclusions from core rules."
The tobacco exception is one of a number of changes that would be made in such trade arbitration panels largely in response to widespread criticisms. On the left and right, critics have complained that the settlement process favors big corporations and threatens the sovereignty of nations to take actions and pass laws safeguarding public health and safety.
The trade agreement, if reached, would put the burden of proof on companies that sue through the tribunals. Also, a company would no longer be able to challenge a country's laws or regulations simply by arguing that these laws would hurt the company's "expectations" of profit.
Lawyers named to serve as arbitrators on the trade panels would be subject to a code of conduct and could be challenged about possible conflicts of interest. Some variation of the Investor-State Dispute Settlements tribunals has been part of trade agreements for decades, including about 50 to which the United States is a party. The settlement process gives companies the right to sue governments directly, instead of having to persuade a foreign state to take their case. A small panel of lawyers decides the matter, not a country's courts, under the theory that the courts might be biased against foreign investors.
In the worst case, such tribunals exist to protect against foreign governments' expropriation or nationalization of an industry. More often, these tribunals are intended to give foreign investors a sense of financial security. But critics say they are increasingly abused by deep-pocketed multinationals -- notably the tobacco companies.
Philip Morris International has sued Australia and Uruguay for antismoking efforts under such agreements. This week, the head of the World Health Organization noted that Australia had spent $50 million to defend its mandate for plain packaging of cigarettes against industry opposition. In Africa, at least four countries -- Namibia, Gabon, Togo and Uganda -- have received warnings from the tobacco industry that their laws run afoul of international treaties.
"This is a brave step for the administration to take," said Thomas Bollyky, a trade lawyer and a fellow at the Council on Foreign Relations.
Gregg Haifley, the federal relations director at the American Cancer Society's advocacy arm, said the provision would bring American trade policy in line with United States health policy. "The tradition in trade has been to treat tobacco as just another business, just another product," he said, adding, "This proposal changes that dynamic."
Trade ministers for the Pacific nations stretching from Canada to Chile and Japan to Australia will meet for a third day on Friday in what could be the conclusion of six years of negotiations toward the largest regional trade alliance ever, one that opens long-protected markets and ends thousands of tariffs. But differences linger on pharmaceutical drugs, autos and more.
Still, the cautious optimism was enough to elicit bipartisan concern on Capitol Hill that the talks here are moving too fast toward agreement.
Republican and Democratic leaders of Congress's two committees with jurisdiction over trade -- the Senate Finance and House Ways and Means committees -- cautioned against a hasty deal in a letter to Mr. Froman and to Treasury Secretary Jacob J. Lew.
Senator Orrin G. Hatch of Utah and Representative Paul D. Ryan of Wisconsin, the committees' chairmen, and Senator Ron Wyden of Oregon and Representative Sander Levin of Michigan, the panels' ranking Democrats, demanded greater communication with Congress and "stakeholders," including business, labor and consumer groups.