Plain Packaging Cigarettes – Smoke Turns to Fire

By on 13/06/2014
Plain packaging for cigarettes in Australia - has the law improved outcomes?

Australia’s law bringing in plain packaging for cigarettes may be copied by several governments. But the latest developments and data show this is a complex area to legislate on.

In our post on behavioural economics we charted the ways the Australian Government tries to influence behaviour. The three interventions were Pure Nudge, Assisted Nudge and Shove. In December 2012 they used the Shove technique to force all tobacco companies to display their products in plain packaging. Now, 18 months on, we are seeing data on the consequences.

At the time of the ban there were some encouraging signs for the Australian Government. There was a marked increase in callers to the Quitline, and also one trend that was not expected. Kylie Lindorff, Chair of Cancer Council Australia’s Tobacco Issues Committee confirmed that many smokers had complained that they did not like the taste of the cigarettes in the new packaging.

Yet the tobacco industry confirmed that the contents were exactly the same, only the packaging had changed. The power of suggestion as well as the power of sophisticated marketing clearly has to be factored in to policy decisions.

Packets of Data

A further surprise has come with the release of the first data since the ban came into effect. There has been a small increase in the number of cigarettes sold, an increase of 59 million cigarettes or roll-your-own equivalents. This is just a 0.3% increase and so it could be argued that this comes well within any reasonable margin of error.

But this is set against a background of tobacco sales falling by 15.6% over the previous four years. With Ireland looking to become the second country to adopt this law, and with countries from the UK to India already discussing such a law, the implications of this data are clearly important.

While the data can be – and will be – argued over, it is what is going on behind these numbers that will concern many governments.

Shove and Shove Back

What the Australian Government has done is to attempt to forcefully change – by a Shove – the public’s habit of smoking. This raises questions of individual choice and it also puts the administration in direct conflict with a very powerful and entrenched private industry.

Looked at in the wider context, however this plays out, it also raises questions about whether this is a one-off or will it be the first of several such interventions by governments.

If enormous corporations can be forced to change their marketing programmes and affect their sales by governments, will it just be cigarettes targeted? Or would the alcohol industry, another cause of premature death and disease when abused, be next in line? With sugar firmly in the sights of governments in the West, might fizzy drink manufacturers follow after that? Several other industries, with major multinational interests, will be watching closely.

The Battle of the WTO

For now the biggest challenge to the Australian Government is upon it. On 5 May 2014 the Director General of the World Trade Organisation (WTO) appointed panellists to judge a dispute between Australia and five other countries.

The Dominican Republic, Cuba, Ukraine, Honduras and Indonesia are all challenging the plain packaging law. Specifically they are arguing the laws breach the WTO’s General Agreement on Tariffs (GATT), the Agreement on Technical Barriers to Trade (TBT Agreement), and the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS Agreement).

Conflict of Interests

This escalates the situation into a major and international dispute, something the Australian administration may not have foreseen when it passed the law. And it almost certainly did not expect to be in this position while  mulling over figures which could suggest the plain packaging has had little effect on smokers.

It has been reported that the tobacco multinationals British American Tobacco (BAT), Imperial Tobacco and Philip Morris are providing support to the countries challenging the ruling. The tobacco industry can not directly challenge through the WTO.

The case could take over a year to be resolved and in the meantime it may give pause for thought to those countries poised to bring in similar legislation, like Ireland, New Zealand and Great Britain. Cases involving the tobacco industry have been marked by delays and sliding timetables.

There also needs to be more time to look at the data. It could be interpreted that the plain packaging, which also feature horrific images of the effects on smokers, is putting off younger people from starting to smoke. That would be a major long-term benefit, even if it does not alter the habits of those already smoking.

Inconsistent Outcomes

Unfortunately the positions of other governments is not always consistent. Generally the European Union, for example, is strongly anti-smoking yet member states take different positions. There are bans on smoking in public places in many countries, like the UK and France, yet they are enforced with very different levels of severity.

Germany has strong anti-smoking laws yet its 16 states have widely differing outcomes with some pubs in some states being smoke-free while others are ‘Raucher Local’ where smoking is permitted under conditions.

And the EU overall is in the position of being officially anti-smoking yet at the same time produces about 4% of the world’s tobacco crop. Farmers from Italy to Bulgaria and Greece produce smoking tobacco. Farming subsidies were only stopped in 2010 for this industry but large subsidies are once again under discussion for reinstating.

Subsidies and Tax

Changes to the Common Agricultural Policy (CAP) would allow member states to decide which of their crops received subsidies. Greece and Bulgaria in particular are promoting the change, which has still to be ratified. They both have large numbers of tobacco farmers who have been in decline since the loss of subsidies.

This is happening at the same time as the European Commission is running a €33 million campaign to encourage smokers to stop smoking.

The picture is further clouded by the position of national treasuries, which make substantial incomes from taxes on tobacco. The United States alone makes around $17 billion a year from tobacco tax revenue.

Battle Lines Drawn

The battle lines are being drawn up. On the one side are governments taking strong action to protect their citizens from what they see as harmful activity – either smoking or passive smoking. Another clear advantage for administrations is of course that they expect to see a reduction in the strain on their hospital and health budgets.

On the other side are major multinationals with immense budgets who claim moves against them are illegal. Alongside them are tens of thousands of farmers who rely on growing tobacco for their livelihood and all the people in the supply chain.

And in the middle are all the criminal gangs who are already pouring counterfeit cigarettes onto the world market. They are openly saying business will dramatically improve if more countries move to plain packaging.

Who will win? It’s certainly too early to say but the battle between governments and some corporations is now in the courts.

About Graham Scott

Graham is an experienced editor and publisher and an award-winning writer. He has travelled extensively and is interested in world cultures.

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