After Australia and New Zealand, UK proposes to introduce tobacco plain packaging

After Australia and New Zealand, reports that tobacco plain packaging would be implemented in U.K is doing the rounds bringing stocks of major tobacco companies down. The Guardian reported the move recently here. The plain packaging may come into effect later this year in the U.K.

"Ministers are to introduce plain packaging for cigarettes along the Australian model with legislation this year, after becoming convinced that the branding is a key factor in why young people start to smoke. 

The legislation, to be announced in the Queen's speech in May, is also expected to ban smoking in cars carrying anyone aged under 16 years. Ministers acknowledge that the ban is likely to be difficult for the police to enforce, but they believe peer group pressure will have an impact similar to the ban on drivers using mobile phones."

Will the plain packaging moves spread to other countries? How will major tobacco companies react? How will countries that rely on tobacco manufacturing for employment generation and national growth react? How will the panels established at the WTO decide on concerns of public health objectives in the context of intellectual property rights and trade?

 

Plain packaging of tobacco - Employment, developing country and a dispute

Apart from Honduras and Ukraine which have challenged the legislation on plain packaging of tobacco products of Australia, the Dominican Republic is also a complainant in the WTO dispute (DS441). The request for consultation is here. I have blogged about the issue here, here and here.The WTO website shows that this is Dominican republic's first case as a complainant as a WTO member. Challenging a developed country like Australia in the WTO is an indication of the level playing, rule based system that the dispute settlement system of the WTO offers to both the developed and developing worlds. 

Reuters recently reported that the Dominican Republic had now requested for the establishment of a WTO Panel, presumably because the consultations did not lead to any results.

"HE Luis Manuel Piantini, Ambassador of the Dominican Republic to the WTO, explains: "Tobacco has been an intrinsic part of the Dominican culture and heritage for centuries, and the tobacco sector is vital for our development.  Our producers have made enormous investments - including in intellectual property - to turn the Dominican Republic from a simple tobacco leaf exporter into one of the world's leading producers of premium cigars and the world's largest exporter of cigars.  This a significant achievement for a small developing economy.  Plain packaging will wipe away these achievements - our premium cigars will be dressed as discount products, which people will continue to smoke; prices will ultimately fall, affecting the livelihood of more than a hundred thousand Dominican workers and their families.  The TRIPS and TBT agreements protect our commercial and development achievements."

Interesting points from the Dominican Republic standpoint:

1. The critical role of the tobacco industry in the national economic growth perspective of the country

2. Livelihood of many locals will be affected by the measure

3. Investments and intellectual property rights impacted

4. Export of tobacco products integral part of the developing economies growth story

5. Multilateral trade rules protect the country's interests

6. Domestic pressures would definitely favor local employability against public health concerns of another country

What considerations will the Panel depend upon? Are the interests of developing countries and employment relevant at al in the dispute settlement process? Will they have a role to play in deciding the compatibility of the Australian measure? Australia's health concerns versus the Dominican Republic's economy - what will prevail? Include in this the business interests of Tobacco companies - it does make a heady cocktail that the WTO dispute settlement has to confront.

Tobacco Plain packaging panel established at the WTO

(bbc.co.uk)

The dispute panel with respect to the Australian Tobacco Plain packaging legislation is finally constituted at the WTO. I have blogged about it earlier here, here and here.. Ukraine, Honduras and the Dominican Republic are pitted against Australia. The dispute raises intricate questions about issues of public health, domestic regulatory space, intellectual property, international trade and protectionism.

Ukraine raised these primary issues in the complaint:

"In its request for the establishment of a panel, Ukraine said that Australia’s measures “erode the protection of intellectual property rights” and “impose severe restrictions on the use of validly registered trademarks”. Ukraine’s statement also said that “Ukraine considers that governments should pursue legitimate health policies through effective measures without unnecessarily restricting international trade and without nullifying intellectual property rights as guaranteed by international trade and investment rules”. Ukraine also considers that the measures “are clearly more restrictive than necessary to achieve the stated health objectives” and thus violate the Agreement on Technical Barriers to Trade as an “unnecessary obstacle to trade”."

Australia defended the move thus:

"Australia showed surprise and disappointment that Ukraine decided to challenge Australia’s tobacco plain packaging measures since this step “is at odds with the policies being pursued within Ukraine to comply with the WHO Framework Convention on Tobacco Control”. Australia mentioned that Ukraine has also taken many measures in accordance with this Convention and said that the tobacco plain packaging “is a sound, well-considered measure designed to achieve a legitimate objective — the protection of public health”, which the WTO recognizes as a fundamental right of its members. Australia added that the measure is “clearly non-discriminatory”, “nor is [it] more restrictive than necessary to fulfil its legitimate objective”."

Interesting support for Ukraine from Zimbabwe, Honduras, Dominican Republic, Nicaragua and Indonesia.

" Zimbabwe said that 200,000 farmers and their families in the country depend on tobacco for their livelihood. Honduras said that the WHO Framework Convention is indicative and non-binding. Nicaragua said that tobacco is one of the most important items in the country’s exports."

Diverse interests and issues coalescing here:

1. Intellectual property rights of tobacco product manufacturers

2. Public health concerns

3. Domestic policy space to regulate in relation to public health

4. Restrictions on international trade

5. Right to trade in tobacco products

6. Relationship between international conventions relating to health and the multilateral trading system

7. Livelihood and employment issues

8. National business interest vis a vis public health 

With New Zealand announcing its intention of introducing plain packaging legislation, and a number of third party members, including India, Indonesia, United States,Turkey, Oman, Japan, European Union and Argentina in this dispute, it sure promises to be keenly contested dispute. Not surprisingly, Ukraine seems to have abandoned the violation of "national treatment" principle argument, unless it remains in the detailed submission. Atleast prima facie, there seems to be no less favorable treatment to imported tobacco products as compared to locally made tobacco products. Both will have to follow the plain packaging requirement.

"Falsified Drugs", India, EU and the WTO - The next battle?

Mint carried a piece recently on the issue of EU's Directive on falsified drugs and its probable impact on the Indian Pharmaceutical Industry. The EU Directive which was enacted in June 2011 essentially amended an earlier Directive on the Community code relating to medicinal products for human use, as regards the prevention of the entry into the legal supply chain of falsified medicinal products.

The new Directive is found here which amended an earlier Directive. The EU Directive is an elaborate piece of legal rules which mandates the following a particular standard of manufacturing of medicinal drugs which would apply to drugs imported into the EU.

Explaining the rationale of the Directive, the preamble, inter alia, states:

"... 

(2)There is an alarming increase of medicinal products detected in the Union which are falsified in relation to their identity, history or source. Those products usually contain sub-standard or falsified ingredients, or no ingredients or ingredients, including active substances, in the wrong dosage thus posing an important threat to public health.

(3) Past experience shows that such falsified medicinal products do not reach patients only through illegal means, but via the legal supply chain as well. This poses a particular threat to human health and may lead to a lack of trust of the patient also in the legal supply chain. Directive 2001/83/EC should be amended in order to respond to this increasing threat."

What is a "falsified medicinal product" as per the EU Directive? The Directive defines a falsified medicinal product as follows:

"Any medicinal product with a false representation of:

(a) its identity, including its packaging and labelling, its name or its composition as regards any of the ingredients including excipients and the strength of those ingredients;

(b) its source, including its manufacturer, its country of manufacturing, its country of origin or its marketing authorisation holder; or

(c) its history, including the records and documents relating to the distribution channels used.

This definition does not include unintentional quality defects and is without prejudice to infringements of intellectual property rights.’"

The Directive lays down that drugs can be imported only if certain good manufacturing practices are followed and the products are accompanied by a written confirmation of a competent authority of the same. These "good manufacturing practices" are mandated in Article 47 of the Directive. Alternatively a country must obtain a declaration as per Article 111b of the Directive from the EU whether that country’s regulatory framework applicable to active substances exported to the Union and the respective control and enforcement activities ensure a level of protection of public health equivalent to that of the Union. In other words, a country intending to export its medicinal products to the EU, must establish that its regulatory framework with respect to good manufacturing practices are in conformity with that of the EU.

A number of points on this issue:

1. Is there a case for challenging the EU Directive as violating the TBT Agreement? Is it an unnecessary obstacle to international trade? Is article 2.2 of the TBT Agreement violated?


Article 2.2 of the TBT Agreement states:

"2.2        Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade.  For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create.  Such legitimate objectives are, inter alia:  national security requirements;  the prevention of deceptive practices;  protection of human health or safety, animal or plant life or health, or the environment.  In assessing such risks, relevant elements of consideration are, inter alia:  available scientific and technical information, related processing technology or intended end-uses of products."

Are the restrictions more trade restrictive than necessary to fulfill the objective of protection of human health. Is the certification procedure and standard unduly burdensome? Is the possibility of potential misuse for protectionist purposes be a ground for a claim that it is more trade-restrictive than necessary?

2. What should India's strategy be? Is not India's national interest in consonance with the interests of the Indian drug manufacturers? Should not there be a strategic agenda to pursue one's interests to protect one's industry? Should there not be a coalition of stakeholders set up to identify "national interest" and chalk out a strategy for pursuing it legitimately at the WTO?

3.Claiming that a particular measure is "protectionist" is quite different from establishing a contravention of WTO obligations of the EU. While the former can have a rhetorical and political pitch, the latter must have sound grounding in the interpretation of the Agreements as well as impact on local industry.


4. Would "protection of human health" be an acceptable exception for the EU to justify this measure? Can India take a stand that the standards prescribed are unduly burdensome and treat developing countries unfavorably since complying with this would make their products, in effect, uncompetitive? Is there de facto violation of national treatment even though on the face of the measure there is no discrimination between imported and local products.


I am not an expert in this field, but I guess this issue would throw open complex questions of the interpretation of TRIPs, TBT as well as the General Exceptions under Article XX GATT.Are we going to see an India EU WTO dispute?