Australia is now in the vanguard of public health initiatives against smoking. Last year the Government passed ground-breaking legislation for cigarette plain packaging through a hostile parliament and then a high court challenge in August this year. The legislation requires tobacco products to feature standard olive-coloured plain packaging with large health warnings. Within hours of the court decision a challenge came from tobacco-producing country Ukraine in the WTO. According to the Australian Department of Foreign Affairs and Trade, trade with Ukraine is “modest” and favours Australia. In 2009 Australia exported $70m of goods and services to Ukraine while just half of that went the other way mainly for Ukrainian fertilisers and electrical circuits equipment. Ukraine exports cigarettes but little or none to Australia.Nevertheless Ukraine requested a WTO Dispute Settlement Body (DSB) panel to look at the cigarette trademark restriction. After deferral last month, the DSB agreed to form a panel last week. They will determine if the measures “erode the protection of intellectual property rights” and “impose severe restrictions on the use of validly registered trademarks”. Ukraine explained why IP and trademarks trump public health policy: “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 said the measures were “clearly more restrictive than necessary to achieve the stated objectives” and an “unnecessary obstacle to trade”.
With so little trade at stake, it seems an absurd argument but as ABC Lateline discovered, Ukraine’s tobacco industry is powerful. After the collapse of the Soviet Union, production soared through conglomerates like Japan Tobacco International (JTI) and Philip Morris peaking at more than 130 billion cigarettes four years ago. JTI supports the challenge to Australia. “Put simply, if this measure is passed, Australia will be saying to the rest of the world, ‘we’re not open for business’,” JTI said. Ukraine challenges two key Australian measures, the Tobacco Plain Packaging Act 2011 and the Tobacco Plain Packaging Regulations 2011. It says these acts are inconsistent with articles of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, some of the Technical Barriers to Trade (TBT) agreement and one of the 1994 GATT agreements.
Australia said Ukraine had high death rates from tobacco and its actions were at odds with its own policies to comply with the WHO Framework Convention on Tobacco Control. Australia defended the tobacco plain packaging as a “sound, well-considered measure designed to achieve a legitimate objective — the protection of public health”. Australia said the WTO recognised public heath as a fundamental right of its members and the measure was non-discriminatory and not unnecessarily restrictive.
Uruguay agrees with Australian aims. Its WTO reps said Uruguay “could not remain silent in this fight against the most serious pandemic confronting humanity”. Uruguay said the Multilateral Trading System should not force members to allow a product that kills its citizens in large numbers “to be sold wrapped as candy to attract new victims.” New Zealand said it is also considering plain packaging measures and Norway said countries are under obligation to adopt measures to protect public health.
Zimbabwe, Honduras, Dominican Republic, Nicaragua and Indonesia have backed Ukraine. Zimbabwe relies on tobacco taxes and has not forgiven Australia for its anti-Mugabe stance. It said 200,000 farmers and their families in Zimbabwe depend on tobacco. Honduras said the WHO Framework Convention is “indicative and non-binding” while Nicaragua said tobacco was one of their most important exports.
Fairfax economic correspondent Peter Martin said a Philip Morris International briefing note for the US trade representative in the Trans-Pacific Partnership wants an investor-state dispute settlement mechanism, “including the right for investors to submit disputes to independent international tribunals.” Martin said the Howard Government FTA with the US resisted this notion but an Abbott Government might be more pliable.