SEPTEMBER 1987 - VOLUME 8 - NUMBER9
U P D A T E S
The Tobacco and Trade Wars
In a clear demonstration of how U.S. trade policy gives undue preference to the U.S. tobacco industry, the Reagan administration recently threatened Japan, Taiwan and South Korea with trade sanctions if they didn't increase imports of American cigarettes and, in the case of Taiwan, remove a prohibition on cigarette advertising.
And Sen. Jesse Helms, R-N.C., has inserted a provision in the Senate Trade Bill that removes U.S. exported tobacco from the no net cost provision of the tobacco loan program. This means farmers who export tobacco would not be required to repay federal loans. This new provision would cost the U.S. taxpayer $200 million annually. If enacted, the United States would not only be promoting world smoking but subsidizing it.
The governments of Japan, Taiwan and South Korea operate state tobacco monopolies which are protected from foreign competition by tariffs on imports, restrictions on distribution and advertising and, in South Korea, a law prohibiting possession of foreign brands. U.S. cigarettes make up less than 2 percent of the market totals for these countries.
Claiming that $3 to $5 billion in trade revenue could be realized if the three countries removed trade restrictions, the U.S. Cigarette Export Association persuaded President Ronald Reagan to conduct trade investigations under Chapter 301 of the 1974 Trade Act, which allows the president to sanction countries if they are found to unfairly restrict trade.
On October 26, 1986, one year after initiating the investigations and one week before key Southern congressional elections, Reagan announced that Japan and South Korea had conceded to U.S. demands. Taiwan followed within a month. The administration's threat of retaliatory tariffs on textiles, semi-conductors and other products was the principle reason for this compliance. Of the nine trade cases under "301"that were announced that day, cigarettes were the key issue in three, making tobacco one of the most commonly lobbied-for trade items of the Reagan administration.
The tobacco industry's political influence played an important role in the special treatment given to cigarettes. In 1984, a group of 10 tobacco congressmen wrote to then Secretary of Commerce Malcolm Baldridge and asked him to urge South Korean President Chun Doo Hwan to repeal the law banning imports, encourage joint cigarette manufacture and impress on Hwan the potential for retaliatory trade action. Philip Morris did its own lobbying by sending Baldridge a copy of the 1980 Presidential election results in key tobacco growing areas, noting the narrow margin of victory. According to the Los Angeles Times, Philip Morris hired Reagan's former Deputy Chief of Staff Michael Deaver to lobby Korea, and R.J. Reynolds hired Reagan's former Secretary of State Alexander Haig.
In the summer of 1986, 13 U.S. senators from tobacco states wrote to President Reagan and stated that "retaliation [against the Japanese] is the only available option, and the only action that will establish the fairness and equity to which the United States tobacco industry is entitled." Senator Helms traded tobacco for other American products in a July 1986 letter to Japanese Prime Minister Yasuhiro Nakasone: "Your friends in Congress will have a better chance to stem the tide of anti-Japanese trade sentiment [in Congress] if and when they can cite tangible examples of your doors being opened to American products. I urge that you make a commitment to establish a timetable for allowing U.S. cigarettes a specific share of your market. May I suggest a goal of twenty percent within the next 18 months."
The Japanese newspaper Asahi Shinbun said that the Reagan administration was going "to make a blood offering of tobacco to answer Congress' still stronger protectionist pressure." The United States had prepared a list of retaliatory taxes on Japanese super-computers, automobile parts and textiles. In the face of this threat, Japan conceded to the cigarette pressure, thus forestalling retaliation on what they saw as more important products.
The State Department also watched events in Japan. In February 1986 the Japanese Ministry of Health and Welfare (MHW) decided to convene two expert panels on smoking and health. The second would recommend public health measures to curb smoking. The U.S. Embassy in Japan took note and informed the U.S. Trade Office that: "The second panel on `Countermeasures' poses the danger that intentionally or not actions, which might discriminate against foreign cigarettes, might be recommended and subsequently adopted."
The State Department's interest may have been heightened by the $1.2 million contribution from seven cigarette companies to the $2.2 million refurbishment of its historic treaty room. An estimated 350 treaties and other agreements are signed each year in this room where the moldings, doorways, carpeting, dishes and vases have been redecorated with motifs of tobacco leaves, seedpods, and blossoms.
Other members of Congress were at work elsewhere. Senators Dole, Kasten, Weicker and Dodd pressured Hong Kong not to pass a pending public health law which would prohibit the introduction of smokeless tobacco by the U.S. Tobacco Company. Hong Kong had no history of smokeless tobacco use and deemed as introduction dangerous to the public health. The senators wrote, "We believe such action would constitute an unfair and discriminatory restriction on foreign trade" - terms that signaled future trade sanctions. The U.S. Tobacco Company contributed $26,000 to the election campaigns of the four senators in 1986.
In response to Reagan's threat of sanctions, the Consumer's Foundation of Taiwan conducted a survey in November of 1986, which found that 70 percent of the respondents opposed advertising of U.S. cigarettes and 40 percent felt that import of U.S. brands would lead to an increase in smoking particularly among children. The Tung's Foundation of Taiwan held public protests and initiated a letter-writing campaign toPresident Reagan urging him not to retaliate. The protests called the trade actions "an abuse of dignity." The Tung's Foundation called upon the Taiwanese government to raise the excise tax on native brands, maintain the ban on advertising and restrict public smoking. The Taiwanese National Health Administration has responded and is proposing a ban on smoking in public places including hospitals, libraries, elevators and public transportation systems.
In Korea, protests were also held and the Consumers Union initiated a boycott of American cigarettes. The expected sales of 750,000 packs of U.S. cigarettes per month reached only 284,000 in September of 1986 and fell to 145,000 the next month. By April of 1987, the companies achieved only one-tenth of their projected sales.
In Japan, sales of imported cigarettes more than tripled between 1985 and 1987.
The cigarette wars have spilled over into the Philippines. In May of 1987, a group of young physicians and lawyers sued Philip Morris for failing to provide the same protection to Filipino children that they provide for U.S. children; that is, warning labels on packages and a ban on television advertising. Philip Morris' representative defended the company's position by stating that children from the United States need protection because the U.S. family structure is looser than that of Filipino families.
Congress has not taken note of the growing resentment against tobacco's double standard and is still pushing forward with additional trade provisions to encourage tobacco exports. The House Trade Bill contains four such provisions, including one that would mandate the U.S. Trade Representative to investigate unfair trade barriers against tobacco in even more countries.
Japan knows how to compete and is already gearing up to produce cheap, quality cigarettes, the same way it learned how to produce cars, computers and steel. Add that to joint ventures between U.S. cigarette manufacturers with Korean and Taiwanese monopolies, and the demand for cigarettes throughout all of Asia will soar, broadening the worldwide smoking epidemic.
The strange union between tobacco and U.S. trade should come as no surprise. What is surprising is the aggressiveness of the U.S. government in its foreign markethunting for the U.S. tobacco industry and its blind acceptance of such a risky, regressive policy.
Chernobyl: Poisoning the Third World
Almost a year and a half after the Soviet nuclear reactor at Chernobyl spewed a radioactive cloud over Europe, it continues to contaminate the food supply of the Third World.
Contaminated vegetables, fruits and milk from Europe and the Soviet Union, have been parceled, packed and exported to the Third World. Although the European Economic Community (EEC) said it would monitor radiation levels of all foods and milk exported from its member countries until at least October 1987, spot checks in Asia continue to turn up disturbingly high levels of radiation.
A month after the Chernobyl disaster, the EEC set limits on the amount of radiation it would permit in food exports. Two months later, 39 containers of Birch Tree powdered milk and4,000 cartons of Dutch Lady milk arrived in the Philippines armed with safety certificates from Holland. But tests revealed that both contained dangerous levels of cesium, a radioactive element.
The Philippine government banned the sale of both brands of milk from the market. In September, 1986, the government found high levels of radioactive substances in six other brands of milk powder, four of them from Holland and one each from Britain and Ireland.
These two incidents in the Philippines confirmed the fears of Third World consumer groups that EEC safety checks on food exports were not working. For every contaminated shipment that is detected, they say, there may be many others which reach market shelves.
"There is a possibility of deliberate dumping by some corporations of contaminated food products in countries whose governments do not have the information, infrastructure or expertise to check the entry of such items," warns the International Organization of Consumers Unions (IOCU).
Testing facilities in many Asian countries are insufficient, as are import controls. In India, the importer himself picks out samples and sends them in for testing. Indian consumer groups argue that this may be the reason that imported food stuffs do not reveal high levels of contamination that are present in neighboring countries' imports.
Singapore which probably has the most efficient system of testing and control, had rejected approximately 240 consignments of food contaminated with radioactivity by Nov. 1, 1986 - 4 percent of the total 6,000 consignments that were checked.
In Malaysia, after the government rejected three consignments of contaminated food it imposed import controls on 13 food items from Europe, ranging from milk products to cereals.
Sri Lanka banned the sale of jam imported from Poland and plums from Bulgaria which had a high radiation content.
Bangladesh too has banned the import of some milk products, but still allows the import of canned milk from some European countries according to the Commercial Counselor, Nasir Ahmed, at the Embassy in Washington.
- Teh Chin Chai, Third World Network/