According to an article at Law360, the U.S. appeals brief argued that the WTO erred in deeming that menthol and clove cigarettes are "like products." The brief also argued that the WTO erred in concluding that the Tobacco Act treats imported cigarettes less favorably than domestic cigarettes.
The crux of the argument in the brief, according to the article, was this:
"The problem, according to the U.S., is that it should be allowed to regulate menthol cigarettes, a product to which millions of adults are addicted, differently than it deals with clove cigarettes, which are 'used almost exclusively by novice smokers.'"
The Rest of the Story
What the U.S. is implicitly admitting is that it chose to ban clove cigarettes because almost no one in the U.S. smokes them, but it exempted menthol cigarettes because millions of adults actually use these products.
In other words, the Tobacco Act was largely a hoax played on the American people, in which Congressmen and anti-smoking groups could make it look like they were fighting tobacco use, but without actually taking the difficult actions which would make a dent in cigarette use.
By banning clove, strawberry, chocolate, banana, and raspberry cigarettes, politicians and anti-smoking groups could boast to their constituents that they have protected America's children from the scourge of flavored cigarettes. But by exempting menthol, the politicians and anti-smoking groups didn't actually have to put any dent in cigarette sales and profits.
The cigarettes that were banned made up less than 0.1% of the domestic cigarette market, while the cigarettes that were exempted make up about 50% of the American youth cigarette market and more than one quarter of the adult market.
As a result of the Tobacco Act, not a single cigarette brand manufactured by a major U.S. cigarette manufacturer had to be removed from the market. However, the Act did have a significant effect on foreign importers, especially manufacturers of clove cigarettes.
In fact, in many ways the flavoring provision in the Tobacco Act is essentially a ban on clove cigarettes. That is the only tangible result of the provision. The same effect would have occurred had the Congress simply banned clove cigarettes. Since those cigarettes are largely imported, the provision is tantamount to Congress banning the importation of clove cigarettes.
So yes, clearly this is a violation of international trade agreements.
As I argued previously, the Tobacco Act's flavored cigarette ban violates international trade policy by arbitrarily (without a health basis) treating like products differently -- favoring domestic cigarettes over imported ones. As I wrote at that time: "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."
I summarized the basis for my opinion as follows: "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."
The WTO decision follows the reasoning that I outlined. Clove cigarettes and menthol cigarettes are "like products." They are both flavored cigarettes. However, there is no public health justification for banning clove cigarettes while exempting menthol cigarettes. Since clove cigarettes are almost exclusively imported and menthol cigarettes are almost exclusively produced domestically, the policy represents discrimination which maximizes trade effects.
This ruling exposed the hypocrisy of the national anti-smoking groups and politicians who crafted the Tobacco Act. It also exposes the fact that the Tobacco Act is largely a political show-piece, designed to make it look like anti-smoking groups and politicians are taking on Big Tobacco, when in fact they are protecting the domestic cigarette market.
Both major arguments in the appeals brief are flawed.
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 Technical Barriers to Trade Agreement (TBT) does not list political or economic considerations as legitimate objectives that would allow a discriminatory trade restriction, it is clear that the flavoring ban violates Article 2.2.
The law also violates the General Agreement on Tariffs and Trade (GATT). Article 3.4 of GATT 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."
Furthermore, the law violates Articles 5.4 and 5.5 of the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS), which 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."
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 violate international trade agreements. Specifically, it violates 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.
Moreover, not only is the U.S. appeal of the WTO's decision flawed in its defense of the discriminatory treatment of menthol cigarettes vs. clove cigarettes, but the appeals brief essentially admits that the reason for the differential treatment of these products was political, not based on public health concerns.
The reason for the differential treatment? Menthol cigarettes are actually smoked by millions of Americans, while clove cigarettes are used by very few. Thus, banning menthol cigarettes would actually put a dent in cigarette sales while banning clove cigarettes would not.
The hypocrisy of the national anti-smoking groups and politicians who crafted the Tobacco Act has now been thoroughly exposed. The Tobacco Act was largely a political show-piece, designed to make it look like anti-smoking groups and politicians are taking on Big Tobacco, when in fact they are protecting the domestic cigarette market.