Source: Adam Behsudi, POLITICO PRO, 8/11/15


The Obama administration is working with other Trans-Pacific Partnership countries to prevent Big Tobacco from challenging their anti-smoking laws through the rules of the trade deal, much to the ire of tobacco-state lawmakers and business groups.

The push-back from those lawmakers, including Senate Majority Leader Mitch McConnell, adds a significant wrinkle to the White House’s push to gain congressional approval of the sprawling trade deal, which it sees as essential to securing President Barack Obama’s economic legacy.

Up to now, McConnell has been among the president’s staunchest allies on trade. While he stopped short of pulling his support from the deal, the Kentucky Republican warned in a letter that U.S. Trade Representative Michael Froman should “not set a new precedent for future U.S. trade negotiations by negatively carving out a specific American agricultural commodity — in this case tobacco.” Tobacco, he noted, is the second-highest agricultural export in Kentucky, which sold $300 million of the commodity in 2013 alone.

During last month’s trade talks in Hawaii, Froman discussed the idea of a tobacco exclusion with several countries, including Australia, New Zealand and Malaysia, sources close to the talks say. The proposal would bar tobacco companies from challenging public health laws that they claim hurt their business investments under the deal’s so-called investor-state dispute settlement clause.

“USTR was clear tobacco had to be treated differently, and there was general agreement on that,” an industry source said of the discussions in Maui.

U.S. business groups have largely echoed the views of tobacco-state lawmakers, saying they oppose any attempt to single out a specific product for special treatment under the deal.

“The high standards that the TPP should put in place to protect property and innovation and promote the rule of law should be ones that are applied without discrimination,” the American Farm Bureau Federation, National Association of Manufacturers and other groups wrote in a letter to Froman on July 30.

Added Phillip Morris International spokesman Corey Henry, “When governments embrace unequal treatment for one sector, they open a door to discrimination against all sectors.”

The tobacco giant has used international trade and investment rules to challenge Australia’s and Uruguay’s plain-packaging laws and filed a lawsuit along with British American Tobacco against the British government in May over a similar regulation. The United Kingdom is the first country in the European Union to enact the standardized tobacco packaging rule, which the EU approved last year.

Tobacco opponents say such litigation has a chilling effect on regulations, especially in smaller, poorer countries that may lack the financial means to argue a case or pay damages.

During the trade talks in Maui last month, Froman broached the tobacco exclusion discreetly in separate meetings with trade ministers from the 11 other countries. Although the issue wasn’t settled, observers say it helps that the other countries are taking the lead, allowing Washington to focus on other difficult-to-resolve areas, such as dairy market access and drug patent protections, in the push to wrap up the talks.

“USTR’s strategy seems to be taking a back seat, given that some countries are going to demand something on tobacco,” a source close to the talks said.

USTR spokesman Trevor Kincaid said neither Congress nor business groups should be blindsided by the inclusion of a tobacco provision in a final deal.

“Over the past several years, the administration has consistently briefed Congress on the salience of tobacco issues for our TPP negotiating partners and previewed more than one potential solution,” Kincaid said in a statement. “Our goal is to ensure that the outcome negotiated in TPP promotes the interests of American farmers while ensuring that governments can implement tobacco regulations to protect public health.”

But the tobacco discussions in Maui prompted lawmakers and business groups to send a flurry of letters and statements to Froman. Thirty-four House members told Froman that barring the tobacco industry from participating in investor disputes would have a negative impact on farmers.

“We firmly believe that all agricultural exports and industries covered in the TPP should be afforded the same opportunities and protections,” the lawmakers said in the letter, which was spearheaded by North Carolina Rep. George Holding and signed by several Ways and Means Republicans.

Meanwhile, Sen. Thom Tillis, another North Carolina Republican, vowed to vote against the trade agreement despite supporting legislation that would allow Obama to fast track passage of the deal in Congress.

“Once we allow an entire sector to be treated unfairly in trade agreements, the question is, who’s next?” Tillis said in a floor speech July 30.

But tobacco opponents say they want a final deal to protect public health regulations.

“The discussions have been around preventing the tobacco manufacturers from filing abusive suits,” said Matthew Myers, president of the Campaign for Tobacco-Free kids. “We and others have not focused on curtailing trade or anything that would impact tobacco growers.”

The anti-tobacco proposal makes reference solely to “manufactured tobacco products,” said a source closely following the talks, adding that any language will be carefully worded to exclude leaf tobacco.

Other sources who were in Maui for the trade talks say it’s unclear what is actually being discussed.

“I think it’s still an open question as to how it will be treated,” said National Foreign Trade Council Chairman Alan Wolff, whose group opposes any tobacco language. “Is it treated by name? Is it treated by health exclusion of some sort?” He added: “Our feeling here … is that it’s a pretty slippery slope if you name a product.”

U.S. trade negotiators have considered at least two earlier proposals to single out tobacco in the trade deal, heeding calls by Obama and an influential cadre of administration officials to safeguard public health.

The most recent proposal would have provided broad assurances that governments have the right to pass public health laws to protect citizens from the harms of tobacco use. That marked a step back from the administration’s initial proposal a year and a half earlier, which would have labeled tobacco “unique” for its negative health effects, warranting that countries be granted “safe harbor” to pass anti-tobacco measures without being challenged.

But in a nod to farmers, the U.S. has long maintained in all of its proposals that tariff cuts for exports of leaf tobacco should not be jeopardized by curbs on investor disputes.

Any tobacco measure in the TPP will have to be carefully worded, warned Stan Glantz, director of the Center for Tobacco Control Research and Education at the University of California, San Francisco.

Glantz said he discussed the issue with administration officials a couple of months ago, warning them that any language would have to withstand the tobacco industry’s aggressive litigation tactics.

“If the carve-out has even the tiniest bit of equivocation or room for interpretation, the companies will litigate that into the ground,” Glantz said.