Tobacco Companies Fight, Asia Cigarettes Policy

buy dunhill cigaretteThe world’s tobacco merchants are down on Australia after the country’s highest court backed the toughest cigarette-labelling rules anywhere. So far, the focus has been on intellectual-property rights, possible lawsuits by British American Tobacco, Japan Tobacco and their ilk, and the plight of investors. More attention should be on how many lives will be saved and how much economic output won’t be squandered as other nations follow Australia’s lead.

There’s a reason Big Tobacco waged such a ferocious fight against Australia’s ban on logos and requirements for graphic health warnings that cover 90 per cent of the back of cigarette packs and 70 per cent of the front. Should this precedent spread, and there’s every reason to think it will, it would hasten the end of the industry’s run of growth and profitability.

One figure explains why Asian governments should emulate Australia: $193 billion. That’s how much smoking-related illness and lost productivity costs the US economy alone each year, according to the Centres for Disease Control and Prevention. That loss is greater than the annual output of nations such as Kazakhstan, Peru and Romania. Or consider all the lives that will be snuffed out because of smoking in China: 3.5 million a year by 2030. That figure comes from a 2011 report by prominent Chinese health experts who can only imagine the drag on productivity and growth that will be lost in the second-biggest economy as more of its 1.3 billion people smoke. That more Chinese do so is certainly the hope of cigarette makers.

As developed nations impose higher taxes, limits on advertising, and smoking bans in public places, Asia beckons. It is the same strategy being pursued by other product makers. Consumers in the West are aging and consuming less. Executives at multinational companies see opportunities to sell more cars, handbags, air conditioners, movies and wine in the East. With shareholders looking over their shoulders, they have no choice but to respond to market demand. The economic fallout of this shift should be tallied by Asian governments. They must raise cigarette taxes to finance the resulting increase in health-care costs and initiate anti- smoking educational campaigns.

They also must reconsider the fiscal trap inherent in current policies. Japan is a perfect example. Japan Tobacco is 50 per cent government-owned. This unseemly arrangement creates a toxic conflict of interest: Politicians are hardly inclined to do anything to hurt profits or the nice flow of revenue from excise taxes.


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