Why the Clash Over the Tobacco Carveout Could Scuttle US Ratification of TPP

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By Chris Bickers

The Trans-Pacific Partnership (TPP), the wide-ranging trade agreement negotiated among 12 Pacific Rim countries and agreed on October 5, 2015, may yet lose its biggest participant over a controversial provision that would exempt tobacco from protections allowed for other agricultural sectors if and when the pact goes into effect.

Not surprisingly, tobacco-state legislators have vowed to oppose TPP because if it “carves out” tobacco products from the dispute resolution procedure created by the treaty, it would deprive cigarette manufacturers of any realistic protection against hostile regulation.

“It is essential as you work to finalize TPP, you allow Kentucky tobacco to realize the same economic benefits and export potential other US agricultural commodities will enjoy with a successful agreement,” wrote senate majority leader Mitch McConnell of Kentucky to the US trade representative in July.

Senator Richard Burr of North Carolina expressed dismay when he read the final version of the treaty draft that was released in November. He thought he had the trade representative’s assurance that tobacco would not be treated differently than other farm commodities.

“Now that we have more details about TPP, it is abundantly clear that President Obama and his allies have stacked the deck against North Carolina agriculture,” said Burr. “I won’t accept any deal that puts our farmers at a disadvantage. This is not a free trade deal for North Carolina.”

The other North Carolina senator, Thom Tillis, had told the trade representative in August that a tobacco carveout would set a dangerous precedent for future trade deals and could scare away would-be supporters of the deal.

“A number of my colleagues share my view that TPP can be a net positive in the long run,” Tillis wrote. “I am confident, however, that the path toward ratification will be significantly endangered if the administration or one of our trading partners impose their biases by targeting specific industries for exclusion.”

“The current proposal in TPP creates an entirely new precedent,” said Tillis. “[It is] a precedent that will no doubt become the norm for future trade agreements where the negotiators get to pick the winners and losers and American businesses will suffer as a result. Once we allow an entire sector to be treated unfairly in trade agreements, the question is, who’s next?”

Similar comments have been heard from the US House of Representatives, where 17 Republican members of have already said they won’t vote to ratify TPP if the tobacco carveout remains a part of it.

Leaf Versus Products

American tobacco farmers - or at least those who have taken a public position on the treaty - have opposed the carveout clause. A widely quoted opinion piece written by a leading burley grower said it could be very damaging to tobacco growers.

“The Trans Pacific Partnership will damage the ability of the purchasers of our burley to protect their market share in affected countries,” wrote Roger Quarles of Georgetown, Ky., in the Lexington (Ky.) Herald Leader in September.

“The tobacco product manufacturers have invested heavily in creating trademark brands that use our burley. They deserve every legal right to protect the identity of those brands. Our tobacco growers’ sales depend on the good fortune of our purchasers.”

Quarles, whose son was elected commissioner of agriculture for the state of Kentucky in November, noted that public-health policies in some countries are targeted at American blend cigarettes even though there is little sound science to support these policies.

“Poorly disguised attempts in the name of social health reforms will create a precedent to eliminate trade in several other of our agricultural commodities, all in the name of improving public health,” wrote Quarles. “Any consumer who has decided to enjoy tobacco products is doing so knowing all the risks. We should not accept having the playing field tilted against us.”

Washington Infuriated

Representatives of general agriculture (i.e., not just tobacco) have found this attitude infuriating: They can’t understand why any grower would oppose TPP. One of them is the US Secretary of Agriculture, Tom Vilsack, who said in frustration in October that an educational process was needed.

“The challenge is to make sure they (tobacco farmers) fully understand that tariffs are being eliminated on tobacco, which will expand opportunity for our producers to sell to Japan, to the Malaysian market, to the Vietnamese market. Market access is going to be greater.”

As to the carveout, he called it simply an acknowledgement of what already exists and pointed out that public health laws in other countries have to be respected.

“That is not much different than what we have in the United States,” said Vilsack. “What is lost in this conversation is that tariffs are being eliminated on tobacco products, so for producers in the US there is greater market access.”

Weapon for Smoking Opponents

Anti-tobacco activists tried to use a contradictory aspect of the treaty to divide growers from manufacturers: The carveout applies to tobacco products but not to leaf.

“The tobacco industry and its political allies claim this provision would harm tobacco farmers,” said Matthew L. Myers, president of an organization called Campaign for Tobacco-Free Kids. “Make no mistake: This provision would not impact and explicitly exempts trade of tobacco leaf.”

Indeed, like Vilsack, he claimed the net effect of the agreement would be beneficial to tobacco farmers.

“The tobacco provision is focused on preventing tobacco manufacturers’ abuse of the international trade system and addresses the actions of these manufacturers, not growers,” said Myers. “It is shameful that tobacco companies are hiding behind tobacco growers to disguise their own wrongful and abusive behavior.”

Growers Unconvinced

But this interpretation gained no traction with growers. “The only loser in this carveout will be the American farmer,” said growers Tim Yarbrough of Prospect Hill, NC, and Graham Boyd of Raleigh, NC.

“Big tobacco companies already manufacture and sell products in the many regions of the world TPP would encompass,” said the two, who are president and executive vice president of the Tobacco Growers Association of NC.

The reality is that such products are and will remain devoid of US grown leaf. What would benefit the growers would be more sales of American-made cigarettes. “Consumers will still maintain the choice to buy and use tobacco products constituted from leaf grown in other inferior regions of the world when compared to the quality and accountability of American grown tobacco under our government’s agronomic and production standards,” Yarbrough and Boyd said.

They claimed that the Obama administration had promised North Carolina’s congressional delegation that it would not unfairly target tobacco growers in the TPP talks.

“We are profoundly disappointed to learn that this promise has been broken,” they said. “If the White House truly believes they are standing up for the best interests of the thousands of farm families and the industries that service their segment of the economy and community, then we invite them to have a real conversation with us. (They will) learn that we do not share their views.”

Dangerous Precedent?

The tobacco activist Myers, by the way, described why he and his colleagues were so excited about the carveout.

“This provision is a critical step toward ending the tobacco industry’s growing abuse of trade agreements to challenge life-saving tobacco control measures all over the world,” he said. “It sets a precedent for other trade agreements and boosts efforts to combat a global tobacco epidemic that kills millions each year.”

The tobacco provision protects the sovereign right of the United States and the 11 other TPP countries to adopt public health measures to reduce tobacco use and its devastating toll, Myers said.

“Until Congress approves this agreement, the tobacco industry and its allies are certain to make every effort to defeat or weaken the provision protecting tobacco control measures,” he said. “We urge President Obama and members of Congress to stand firm and reject these efforts.”

Malays Make a Point: Why Not Leaf Too?

The Malaysians, meanwhile, who made the original request for the carveout, said in November that changes made in the final version of the treaty had weakened their provision.

The president of the Malaysian Council for Tobacco Control, Molly Cheah, said that the agreement as currently written may not offer full protection for tobacco control measures, since the parties are given the option to “choose” to implement the exercise or to “deny” its benefits.

 “It is unfortunate that the (Malaysian) Ministry of International Trade and Industry did not defend its carve-out proposal, only to see the government caving in,” she said at a press conference.

She was particularly incensed that tobacco leaf would not be carved out as well as tobacco products and asked that a Malaysia-specific clause be added so that leaf would be treated the same way as products in her country.

NOTES:  Participating countries are the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile, and Peru. Other countries could petition to be included later…Negotiations have taken seven years so far…In the US, the agreement cannot be voted on before 90 days have passed since President Barack Obama notified Congress on November 5 of his intent to sign the agreement. Since that would put the ratification debate right in the middle of the presidential campaign, it has been suggested that legislators might try to delay the process… Because of the “fast track” authority recently given to the President by Congress, legislators can only approve or reject the treaty. They can’t amend it.