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September 09, 2011

What Big Bird Could Teach the WTO

When I was a kid, a particular Big Bird sketch on Sesame Street made a strong impression on me: "One of these things is not like the other":

It turns out that Big Bird could teach the WTO a thing or two.

As we wrote earlier this week, and have been discussing over at the IELP blog, the WTO ruled against a rare public health victory: namely, the Family Smoking Prevention and Tobacco Control Act of 2009 (FSPTCA).

This legislation included a number of provisions, but one that attracted a lot of attention was its ban on flavored cigarettes that often serve as starter cigarettes for teenagers because of their sweet taste. The ban included candy, cola and clove flavored cigarettes, but did not include menthol flavored cigarettes in its initial ban.

You or I can disagree with the reasoning, but there was a reason for that particular design: while some kids smoke menthols, so do large numbers of adults, specifically in the African American adult community. As the Obama administration documented in its submissions in the case (quoted at length below in language that would make University of Chicago, Cass Sunstein and the Freakonomics crowd blush), immediately withdrawing menthol from the market would increase hospital visits, and overnight create a massive black market for the cigarettes.

(And not that the administration argued this in its legal case, but can you imagine the political blowback of banning a product (menthol cigarettes) that is predominantly smoked by blacks, that will increase crime and smuggling in predominantly African American neighborhoods (many of which are already struggling), while leaving untouched regular tobacco products that are more often smoked by whites, whose neighborhoods are often less crime-ridden? This would be a pretty harsh blow to race relations in the U.S., and undermine support for public health regulation period.)

By my read, the architects of the FSPTCA had some pretty sound logic for their incremental approach, which contemplated restrictions on menthol in the future, after the efficacy of the teenage-targeted measures could be tested.

Returning to the clip above, as Big Bird shows us, one of the bowls of birdseed is substantially larger than the other three. The WTO panel did not study up on their Sesame Street when ruling against the FSPTCA. In the ruling, the panel decided that menthol and clove were "like products," and that (because Indonesia exported the latter to the U.S.) a ban on the latter was "discriminatory" within the WTO's Agreement on Technical Barriers to Trade (TBT).

While menthol and clove are both "flavored cigarettes," so are cola- and candy-flavored cigarettes. The U.S. argued, plausibly in my mind and to paraphrase Big Bird, that "one of these things is not like the other." Specifically, menthol. Why? Significant numbers of adults smoke them, particularly in the African American adult community. For that reason, it poses significant adverse effect risks that the others did not.

Cloves and candy flavored cigarettes, however, are not only flavored, but they are trainer cigarettes that appeal to teenagers in significant numbers, but not to adults in significant numbers.

This distinction should have drawn some significant weight in the "consumer tastes" plank of the four-plank likeness test imported from the longer-standing rules of the General Agreement on Tariffs and Trade (GATT). Moreover, since the panel was trying to not automatically import the GATT test, they could have considered the TBT-specific objectives relating to consumer regulations, and given even more weight to the regulatory imperatives.

In short, the WTO should have compared the treatment of domestic candy- and cola-flavored cigarettes to imported clove cigarettes - both banned under the FSPTCA. It was only by choosing to compare menthols to cloves that the panel could come up with a finding of differential, let alone discriminatory, treatment.

(And even if there were a reason for the panel to compare menthol to cloves, the fact that there was no intentional discrimination and the fact that Congress had sound reasons for regulating the way they did should have have led the WTO to drop the case.)

#WTOFail, my friends.

++

And, as promised, here is some of the Obama administration's explanation of the reasoning behind the FSPTCA:

If Members are to be able to begin to ban categories of cigarettes within their borders – as called for under the World Health Organization (“WHO”) Framework Convention on Tobacco Control (“WHO Framework Convention”) – they must be able to identify and target, based on public health criteria, those cigarettes that they can effectively prohibit. Such a measure cannot be deemed more trade restrictive than necessary solely because it does not, standing alone, eliminate smoking entirely. In addition, such measures cannot be deemed to treat imported products less favorably than domestic products simply because one type of imported cigarette falls under the ban and one type of domestic cigarette does not fall under the ban, as suggested by Indonesia. To the contrary, in adopting the WTO Agreements, Members contemplated that measures that draw legitimate distinctions among products to protect the public health, such as the distinctions drawn by section 907(a)(1)(A) [i.e. the FSPTCA ban], are not inconsistent with WTO obligations simply because they may have an effect on trade....

The distinct health risk posed by “trainer” cigarettes, such as candy, fruit, clove, and the other cigarettes banned under section 907(a)(1)(A), does not derive from the effect of these cigarettes on an individual user. Rather, the health risk derives from the public health perspective of how these products are used. These products are used disproportionately by young people, and not in large numbers by adults. The banned cigarettes contain characterizing flavors that entice young people to try them, resulting in them becoming addicted smokers. Accordingly, as discussed below, from a public health perspective, it is both desirable and appropriate to eliminate these products from the market.

11. The evidence on the record in this dispute shows that clove and other flavors are especially attractive to young people in the age window of initiation, and therefore tend to contribute to addiction. As detailed in the Tobacco Control Act, a number of factors supported a product standard that resulted in a ban on clove and other flavors, but that did not result in a ban on all cigarettes. Those factors include:

• “the risks and benefits to the population as a whole”;
• “the increased or decreased likelihood that those who do not use tobacco products will start using tobacco products”; and
• “the countervailing effects of the tobacco product standard on the health of adolescent tobacco users, adult tobacco users, or nontobacco users, such as the creation of a significant demand for contraband or other tobacco products that do not meet the requirements of this chapter and the significance of such demand.”

12. As reflected in the Tobacco Control Act, it may not be appropriate for the public health simply to entirely ban a harmful class of products, such as all cigarettes. Public health policy is not simply a matter of enshrining into law ideal scenarios and outcomes. If it were, laws would require drugs to have no side effects, regardless of their benefits, and new cars to have every available safety feature, regardless of how many people would continue to drive their existing, and less-safe, cars due to the high cost of buying a new car. Public health policy involves a balancing of a complex set of factors, including the relative harms of certain products, how those products are used by consumers, and the possible shortcomings or countervailing factors of proposed measures. Ultimately, public health policy is guided both by what is desirable and by what is appropriate, taking into account the multiple relevant public health considerations, which often do not point to the same result.

13. The Tobacco Control Act establishes that tobacco product standards, including section
907(a)(1)(A), should be adopted when they are appropriate to protect the public health – including whether they are technically achievable, feasible, and effective. The WHO Tobacco Convention captures this principle as well by stating that countries should “aim to implement the most effective measures that they can achieve.”

14. The Tobacco Control Act takes into account both what is optimal or desirable with respect to the health of individuals and what is appropriate with respect to the population as whole. It may be desirable to remove all cigarettes from the market, as all cigarettes are harmful to individual smokers. However, for the reasons the United States has explained, it is not currently appropriate to do so.

B. Incremental Regulation Is a Normal and Sound Manner of Regulating Smoking

15. Indonesia argues repeatedly that the United States has acted inconsistently with its obligations by prohibiting some, but not all, cigarette products. Specifically, Indonesia contends that the United States may not eliminate clove cigarettes from the market without also taking the same action against tobacco and menthol flavored cigarettes, which, for all practical purposes, means all U.S. cigarettes. This argument is a key contention for Indonesia, and it relies heavily on this contention throughout its national treatment and TBT Article 2.2 claims. As discussed below, however, Indonesia’s position ignores that: (i) Members often regulate incrementally; (ii)
Members make regulatory distinctions between products that have differing effects on public health; and (iii) Members often use more than one type of regulatory tool to address a public health problem. Indonesia’s position further ignores that the United States has taken this approach with smoking for the past half century (reducing smoking prevalence as a result), as well as the fact that the United States has a sound public health basis for not prohibiting all of the different types of cigarettes.

16. It simply cannot be that the WTO Agreement prevents Members from addressing part of a problem in a step by step manner, making distinctions among products based on sound public health considerations. Indonesia ignores this obvious truth and attempts to use the international trade rules to hold the United States hostage to the fact that tens of millions of adults are addicted to smoking tobacco and menthol flavored cigarettes.

1. The United States Often Addresses Difficult Issues Incrementally

17. The United States does not represent that either the challenged measure or the Tobacco
Control Act as a whole will eliminate the problem of smoking. Rather, all of the Act’s provisions, including section 907(a)(1)(A), work to reduce the problem of smoking and tobacco use. Section 907(a)(1)(A) specifically addresses the problem of certain products with characterizing flavors of candy, fruit, clove, etc., that are used by young people disproportionately and whose precipitous withdrawal from the market can be done effectively without the potential for negative consequences. This provision, along with the other provisions of the Act, build upon the many other measures during the past half century.

18. Contrary to Indonesia’s argument, the United States has taken an incremental approach to the complex problem of smoking for the last fifty years. For example, the very first nation-wide law related to tobacco prohibited advertising by the cigarette companies, but only prohibited advertising on television and radio. Since the television and radio ban in 1971, restrictions on advertising were expanded by the Master Settlement Agreement (“MSA”) in 1998, which restricted advertising on billboards and the use of cartoon images. The Tobacco Control Act adds further restrictions, such as prohibiting tobacco brand name sponsorship of any athletic, musical, or other social or cultural events,12 and gives FDA authority to enact additional regulatory controls, such as additional restrictions on the sale, distribution, advertising, and promotion of tobacco products that are appropriate for the protection of the public health. Federal restrictions on where a smoker can use the product started with a ban on smoking on some domestic airline flights in 1988 and all flights to and from the United States by 2000.

19. The incremental effect to addressing the public health effects of smoking may also be seen in U.S. state and local laws. Over the last 10 years, state and sub-state measures protecting individuals from secondhand smoke in workplaces and public places have become more common throughout the country. Currently, 25 states, Puerto Rico, the District of Columbia, and over 400 other communities have smoke-free laws that are considered comprehensive (i.e., laws that prohibit smoking in all indoor areas of workplaces, restaurants and bars). Several of these states and communities that have achieved comprehensive status did so incrementally, either by first prohibiting smoking in certain workplaces or public places or by enacting less restrictive (and less effective) measures such as requiring smoking take place in designated indoor smoking areas. It is also common that these state measures gain momentum and lead to federal legislation. In that regard, efforts taken by the states with respect to cigarettes with characterizing flavors, such as the 2006 Consent Agreement, could be seen as setting the stage for regulation at the national level.

20. Such an approach is neither unusual nor surprising. The United States notes that other countries have regulated particular smoking-related issues in such a manner, and the United
States has regulated other difficult issues through the same incremental approach, including the restricting of ozone depleting products. The WHO’s Tobacco Convention is consistent with an incremental approach. The WHO Tobacco Convention does not attempt to impose rules that will eliminate smoking entirely, but to set rules that will assist countries in reducing the smoking rates of their domestic populations.

2. The United States Has a Sound Public Health Basis for Regulating Incrementally in Addressing the Issue of Characterizing Flavors

21. As we have previously discussed, the United States has not banned all cigarettes because the prohibition of the heavily-used tobacco and menthol flavored products may cause negative consequences. Indonesia not only disregards – but attempts to belittle – the public health consequences for the individual addict, the U.S. health care system, and the society at large through an expansion of an already existing black market that would result from banning all of the different types of cigarettes. Indonesia’s stance is unsupportable – it is self-evident that the elimination from the market an entire class of products that is as addictive as heroin or cocaine, and to which tens of millions of people are in fact addicted, would have, at the very least, some
consequences.

22. Cigarettes are a unique class of products – they are highly addictive, heavily used, harmful to public health, and legal. The combination of these factor creates complex problems for governments charged with protecting the public of their citizens. This is not to say that some regulatory measures cannot apply across-the-board to all of the different types of cigarettes. For example, the United States requires health warnings on all packages of cigarettes and smokeless tobacco products. Other types of measures, however, call for a more tailored approach.

23. In addition to the epidemiologic concerns, Members may legitimately elect to concentrate on those products that, even though they have a limited segment of the market, present distinct public health concerns from other products, and available information indicates that such action will not have significant negative public health consequences. Other, perhaps more commonly used, products might be set aside temporarily for further study with regard to the consequences of particular proposals. This is precisely what the United States has done, by banning most characterizing flavors, but assigning menthol-flavored cigarettes to intensive study by the Tobacco Products Scientific Advisory Committee (“TPSAC”) to better understand the public health issues related to possible future restrictions.

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