According to a Reuters article: "Indonesia says the United States is abusing health regulations to shut out clove cigarettes, known as kretek and very popular in the southeast Asian country, while allowing U.S. manufacturers to continue to market menthol cigarettes."
The basis of Indonesia's argument is that flavored cigarettes represent a "like" product manufactured in Indonesia and the U.S. The Family Smoking Prevention and Tobacco Control Act bans clove flavored cigarettes - made in Indonesia - but not the menthol flavored cigarettes manufactured in the U.S.
According to the World Trade Organization: "Indonesia stated that on several occasions it had asked the US to share any studies that demonstrated why clove cigarettes should be banned and not menthol. To date, there had been no response from the U.S."
The primary complaints filed by Indonesia were as follows:
"The Government of Indonesia maintains that banning clove cigarettes in the United States while exempting menthol cigarettes from the ban is inconsistent with the following provisions of GATT 1994:
- Article III: 4 of the GATT 1994 because the measure provides treatment to an imported product, clove cigarettes, that is "less favorable" than that accorded to a like domestic product, menthol cigarettes.
- Article XX of GATT 1994 because there is no scientific or technical information indicating that clove cigarettes pose a greater health risk than menthol cigarettes and, as a result, the measure results in arbitrary and unjustifiable discrimination, a disguised restriction on trade, and is more trade restrictive than necessary to achieve a legitimate objective, if one were to exist.
- TBT Article 2.1 because the measure results in treatment that is "less favorable" to imported clove cigarettes than that accorded to a like domestic product, menthol cigarettes.
- TBT Article 2.2 because there is no scientific or technical information indicating that clove cigarettes pose a greater health risk than menthol cigarettes or that youth smoke clove cigarettes in greater numbers than menthol. As a result, the measure is more trade restrictive than necessary and constitutes an unnecessary obstacle to international trade."
Article 2.1 of the Technical Barriers to Trade (TBT) Agreement states: "Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country."
Article 2.2 of the TBT Agreement states: "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 fulfill a legitimate objective, taking account of the risks non-fulfillment 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."
The central question here is whether menthol and clove cigarettes represent "like products" in that they are both flavored cigarettes. Based on the intent of the Family Smoking Prevention and Tobacco Control Act, there is no question to me that they are like products because they are both flavored cigarettes and there is no qualitative difference relevant to the regulation of the characterizing flavor of a menthol versus a clove cigarette.
If they are like products, then there is no question that the Act treats clove cigarettes less favorably than menthol cigarettes, creates an unnecessary obstacle to trade, and does both of these without any scientific justification. The sole justification for exempting menthol is a political and economic one, not a scientific one. As Article 2.2 of the TBT does not list political or economic considerations as legitimate objectives that would allow a discriminatory trade restriction, it appears that the U.S. is in a difficult position in trying to defend itself from Indonesia's allegation.
Article 3.4 of the General Agreement on Tariffs and Trade (GATT) agreement states that "The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use."
Once again, as long as clove cigarettes and menthol cigarettes are considered to be "like products" by virtue of both being flavored cigarettes under the Act's flavored cigarette provisions, then the Act clearly violates Article 3.4.
Article 20 of GATT does provide exceptions to the above article. Those exceptions include measures "necessary to protect human, animal or plant life or health." They do not include any relevant political or economic exceptions. I therefore cannot see how the U.S. can credibly argue that the Act is not in violation of GATT unless it can point to some scientific or public health justification for the menthol exemption.
As I have argued extensively, there is no public health or scientific justification for the menthol exemption. It was clearly a political compromise that served purely political purposes. In fact, a number of health groups and policy makers have readily acknowledged that the menthol exemption was inserted for political reasons. I have yet to hear any credible scientific or public health justification for such an exemption (which is perhaps the reason why the U.S. has failed to provide any justification to Indonesia).
Even if the U.S. were to argue that the Act falls under the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS), I believe the Act still violates that agreement.
Articles 5.4 and 5.5 of the SPS state:
- "Members should, when determining the appropriate level of sanitary or phytosanitary protection, take into account the objective of minimizing negative trade effects.
- With the objective of achieving consistency in the application of the concept of appropriate level of sanitary or phytosanitary protection against risks to human life or health, or to animal and plant life or health, each Member shall avoid arbitrary or unjustifiable distinctions in the levels it considers to be appropriate in different situations, if such distinctions result in discrimination or a disguised restriction on international trade."
As I've argued strongly that there is no scientific or public health justification for the menthol exemption, the only possible escape hatch I see for the U.S. is to argue that menthol and clove cigarettes are not "like products." However, I personally disagree with such an assertion because it is clear that under the regulatory framework governing the relevant provision of the Act, clove and menthol cigarettes are qualitatively equivalent as being flavored cigarettes under the law.
The rest of the story, then, is that the Family Smoking Prevention and Tobacco Control Act's ban on flavored cigarettes - including clove cigarettes - but with an exemption for menthol cigarettes does appear to violate international trade agreements. Specifically, it appears to violate Articles 2.1 and 2.2 of the Technical Barriers to Trade Agreement, Article 3.4 of the General Agreement on Tariffs and Trade, and Articles 5.4 and 5.5 of the Agreement on the Application of Sanitary and Phytosanitary Measures.