The TPP and the Tobacco Trade Policy: Will Other Products Be Affected?

Posted by Dr. Lukasz Gruszczynski
On November 6, 2015
exceptions, FTAs, international trade, tobacco, TPP

The representatives of 12 countries have recently concluded negotiations on the Trans-Pacific Partnership (TPP), the biggest free trade agreement ever negotiated. While the final text has been just released and still requires detailed analysis, some parts have already proven controversial. One issue that caught particular attention is a carve out clause for tobacco products (Art. 29:5). The TPP contains a provision which gives state-parties to the agreement the right to deny access to the Investor-State Dispute Settlement (ISDS) system to an investor from another TPP country that seeks to challenge a national tobacco control measure. The provision also stipulates that such a denial could be made at any time, even after the initiation of a proceeding.

When the information about this proposed solution was disclosed, many praised the TPP negotiators. In particular various health advocacy groups, pro-health policy makers as well as tobacco control specialists have quickly pronounced it a major victory for public health over the interests of transnational tobacco companies (TTCs) (see, for example, the statement made by the Action on Smoking & Health, which is available here). According the them, a carve out will not only remove an important weapon from the legal arsenal available to TTCs, but it will also reduce the regulatory chilling effect which can result from a threat of potential international litigation over a domestic tobacco control measure. As a consequence, countries will be more willing to experiment in this regulatory field and test new and innovative initiatives.

However, there are also others who remain skeptical. Besides TTCs, which are obviously unhappy about the outcome of the negotiations, some analysts and representatives of other industries are also concerned. It is argued, for example (see a note by Simon Lester), that such a carve out indirectly indicates that various safeguards which are conventionally included in every international trade agreement (and the TPP is no exception) are not necessarily sufficient to secure the sovereign prerogatives of states in the field of health and environmental protection. Otherwise, why would one single out one specific commodity/policy? What is needed therefore is some general change in the current approach to trade rather than an ad hoc solution that only addresses one specific risky product. Of course this might be politically impossible, but this is another story.

Some also point out that a carve out for a specific commodity (here tobacco products) may have some unintended negative systemic consequences. In this context, critics particularly refer to slippery slope concerns. The idea behind these type of argument is that once you establish one exemption for a specific commodity, you may actually create a precedent for similar exclusions of other products which possess some negative externalities (for example, alcoholic beverages, soft drinks or certain types of processed food). Indeed, there are some empirical evidence showing that the establishment of certain restrictions on one product may lead to a regulatory cascade with respect to other goods as well. Since the TPP is expected to operate as point of reference for other future international trade deals and a vehicle for the diffusion of norms (see, for example, the statement made by President Obama during his State of Union Address), one may rationally assume that its precedential effect will be quite high. Of course, one may argue that tobacco products are unique because of, e.g., their proven negative health effects and/or the past abuses of the international trading system by TTCs. But on the other hand it is not difficult to imagine that other goods could also be labeled as unique in some sense (e.g. alcohol as a important factor in domestic violence and/or a cause of traffic accidents).

So are increasing numbers of carve-outs for other products a possible scenario? The answer is not an easy one. In the short term, arguably not. Considering the opposition that was raised against the exclusion of tobacco products from the TPP (which eventually led to only a carve out from the ISDS mechanism), one should not expect that countries will be eager to exclude other additional categories of goods. There are greater chances that some form of tobacco carve out may appear in other trade agreements, including the Transatlantic Trade and Investment Partnership – another important trade deal negotiated between the United States and the European Union.

But this picture may look very different in the long-term perspective. While it still might be difficult to introduce additional carve outs for other risky products through mega trade deals, it may be easier to do this in the context of bilateral FTAs between like-minded countries. This scenario becomes even more probably if one considers a growing attention which is paid by international community, including the World Health Organization, to the prevention of non-communicable diseases, where alcohol and some foods are also concerned.