Smoke_Abuse_in_Public_Area

A: PROCESS Article 22 & 23(1) of the GATT states that if a contracting party considers that any benefit accruing to it has been nullified or impaired as a result of the application of any measure by another contracting party, then it has a right to request consultation with the contracting part. It further states that each contracting party will accord sympathetic consideration to a member requesting consultation. Therefore the Indonesian government should exercise their right to consultation by submitting a written representation stating their concerns (over restrictions imposed on certain flavored cigarettes) to the US government. Once the request has been received the US government will be obligated to accord sympathetic consideration by entering into consultation in good faith, in order to resolve the dispute. The process of consultation is regulated by the DSU . Article 4 of the DSU states that it is the responsibility of the US government to respond to the request within 10 days and to enter into consultations within 30 days of receiving the representation. If the consultations fail to settle the dispute the Indonesian government may submit a request to the DSB for the establishment of a dispute resolution panel, no later than 60 days from the US receiving the request for consultation. After receiving a request for the establishment of a panel, the DSB will discuss the issue in their meeting and if there is no valid reason for a panel not to be formed the DSB will approve the request thus establishing a panel. The panel will comprise of members who are well qualified as per (Art. 8(1)) and independent individuals as per (Art. 8(2)). The panel will investigate the dispute in light of the facts of the case and the relevant agreements of the WTO. The rebuttals and arguments (Art. 15(1)) of both parties will be taken into consideration. A report of the findings will be submitted to the DSB for approval. The DSB has 60 days in which to adopt this report unless either the Indonesian or US governments submit a request for appeal or the DSB member in meeting decide through consensus not to adopt the report (Art. 16(4)). The next part of this article discusses the legal issues that will be raised during the panel deliberations on the dispute. B: LEGAL ISSUES AND ARGUMENTS BEFORE THE PANEL The Family Smoking Protection Tobacco Control Act (herein referred to as TCA) gives authority to the “Food and Drug Administration” to regulate the tobacco industry. Proponents of the legislation argue that it will help discourage smoking amongst minors and young adults. The legislation imposes new warnings and labels, disclosure of ingredients on packaging and bans the sale of flavored cigarettes with the exception of menthol. This exception benefits US tobacco giant Phillip Morris which is the largest manufacturer of menthol cigarettes . (a) Arguments in support of an alleged breach of Article 3 (1) of the GATT Article 3(1) explicitly states that laws and regulations which affect the sale or use of a product should not be applied to imported products so as to afford protection to domestic production. The TCA bans the sale of flavored cigarettes but allows the production and sale of Menthol cigarettes. Phillip Morris a US firm is the largest supplier of menthol cigarettes and this ban puts Phillip Morris in a monopolistic position. Therefore it can be concluded that this is a protectionist measure designed to protect the US tobacco industry from foreign competition. This is in breach of Article 3(1). (b) Arguments in support of an alleged breach of Article 3 (4) of the GATT Article 3(4) states that the products of a country should be accorded no less favorable treatment than that accorded to “like” products of national origin in respect of all laws and regulations affecting their sale. By banning the sale of some flavored cigarettes and exempting others the TCA favors US tobacco producers over foreign producers. This practice is discriminatory and in violation of Article 3(4). (c) Arguments in support of the “Likeness” of different flavors of cigarettes In order for a claim against the US government to succeed it must be proved that cigarettes which are different in flavor from other cigarettes are essentially the same product. It must be proved that clove cigarettes and menthol cigarettes are “like” products and therefore must be accorded the same treatment by the US government. In order to establish violation of Article 3(4) , three tests must be satisfied; (i) the measures at issue must be laws or regulations and (ii) it must be established that the imported products are accorded less favorable treatment than that accorded to like domestic products. (iii) it must be established that the imported and domestic products at issue are “like” products. All three tests must be passed : Test (i): It is clear from the facts of the case that the US government is using legislation (i.e. TCA) as apposed to tariffs or other charges. The use of laws and regulations is in violation of Article 3(4) and therefore the first test is passed. Test (ii): The TCA clearly states that all flavored cigarettes with the exception of menthol flavored ones will be banned from sale or production in the US. This cannot be treated as providing fair or equal competitive opportunities. Flavored cigarette manufactures (excluding those manufacturing menthol) have been accorded less favorable treatment in violation of Article 3(4) and therefore the second test is passed. Test (iii): Firstly it must be remembered that there is no precise and absolute definition of “like”. The concept is a relative one requiring the application of judgment. The facts of each case are different and must be taken into consideration before any decision can be made . It is also important to note that “like” does not mean “identical” . Given the circumstance of this case, following four criteria will be used to assess “likeness”. • What physical differences, if any, exist between clove flavored and menthol cigarettes' A comparison of the chemical composition of clove with menthol cigarettes should be made. The analysis should focus on nicotine and tar contents in clove and menthol cigarettes. If the test results reveal that both flavors contain the same levels and types of chemicals (excluding clove and menthol) then this would mean they are “like” products. Therefore the only difference is in the flavor. • What is the health risks associated with clove and menthol cigarettes' If the above study reveals that the chemical composition of both cigarettes is the same, then this would mean that the health risks of both cigarettes is also the same. This suggests that both flavors are “like” products. • Are both products close substitute' A comparison of consumer tastes and preferences is required' This is not an easy assessment however, analysis of the total market size and its composition of cigarettes before and after the ban will reveal if clove smokers have given up smoking or simply shifted to smoking menthols instead. If the market has NOT shrunk and if the market size of menthols has increased then this would mean that both products are close substitutes and therefore “like” products. • Economic factors such as price and international tariffs should be compared. If the price for menthol and clove cigarettes is the approximately the same and if international tariffs treat both products in the same manner then this evidence suggests that both cigarettes are “like” products and should be treated as such. (d) Arguments in support of an alleged breach of Article 11 (1) of the GATT Article 11(1) of the GATT states that “No prohibition or restriction other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party……….”. The US government is clearly using legislation (i.e. the TCA) as opposed to duties or tax’s, to ban foreign companies from selling flavored cigarettes and is therefore in breach of Article 11(1). (e) Defenses in support of the US under Article 10 of the GATT Article 10 of the GATT states that “subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: (b) Necessary to protect human, animal or plant life or health; … The Tuna Dolphin Panel Report provides guidance on how to apply Article 10(b). The report states that for a measure to be justifiable it must be “necessary”. All other options available (consistent with GATT) must first be exhausted. It can be argued that banning sale of cigarettes to minors, public smoking, and advertisements aimed at youngsters and education and awareness programs must first be used and shown not to be working before a complete ban on flavored cigarettes can be justified. The fact that Phillip Morris, the largest producer of menthol cigarettes is a US firm, suggests that the provisions of the TCA are also discriminatory. It is important to refer to the SPS Agreement for an elaboration on Article 10: Article 2 of the SPS states that measures applied should not be maintained without sufficient scientific evidence. The US has to prove using scientific research that youngster are attracted to cigarettes because of the flavors available and that menthol flavored cigarettes do not attract youngsters. The US must also prove that cigarette consumption amongst the youth has fallen since the introduction of this act. According to the decision in the Australian Salmon Case it was held that in the absence of sufficient scientific data a higher standard (such as a ban) will not be justified. Article 3 of the SPS states that members will take measures based on international standards where they exist. Members however are allowed to take higher standards if they can prove using scientific research that these higher standards are justifiable. The panel will refer to other developed countries and how they tackled the problems of smoking amongst the youth. Were similar steps taken or was a completely different path adopted. Most countries have focused on education and awareness programs together with prohibition of sale cigarettes to minors (at the shop level). Additionally public smoking has been banned and so has advertisements promoting smoking. If it can be shown that cigarette sales generally and in minors specifically, have fallen (in these countries) then the US argument is weakened further. Article 5 of the SPS states that members will ensure that measures are based on an assessment of risks to human health taking into account risk assessment techniques developed by international organizations. According to the Australian Salmon Case, although the high risk assessment was justified the deferential treatment adopted by the Australian Government towards different types of fish weakened their case for higher standards. Similarly even if the US Government can justify a high risk assessment it will be unable to justify the deferential treatment adopted by it against foreign tobacco manufacturers. CONCLUSION The US ban on flavored cigarettes is both unnecessary and discriminatory. It has denied the Indonesian government certain benefits under the GATT by reason of the ban being in violation of US obligations under Article 3 and 11. This violation cannot be excused under Article 10. Therefore the Indonesian government should initiate consultations with the US government.If the US government fails to lift the ban then the Indonesian government should request the DSB to establish a panel to resolve the dispute. The panel will issue a report in favor of the Indonesian government and the US will be forced to lift the ban (Article 19 and 22 of the DSU).