Tobacco Trade a Challenge for Governments

TobaccoAround the world, governments of different countries have tried a variety of measure to discourage their people from using tobacco. While higher taxes and health warnings appear to help, authorities continue to face challenges, both legal and illegal. In spite of the well-known health risks, cigarettes remain a profitable trade for its producers and distributors.

The United States has different smoking related taxes across the country. Wisconsin increased its cigarette tax 227 percent to a rate of $2.52 per pack between 2006 and 2012. According to Businessweek, New York has a cigarette tax of $4.35 per pack.

Australia implemented a law that requires cigarettes to be sold in The law requires cigarettes to be sold in olive-green packets, with graphic images warning of the consequences of smoking, such as oral and lung medical problems. The country also forbade flashy logos on its packaging, and instead replaced them with bland standardized brand names.

Two years ago Costa Rica enacted strict anti-smoking legislation. smoking in public places was banned, as was selling single cigarettes. The country also implemented a 40 percent tax on cigarette packs. Like Australia, the Central American country required tobacco companies to place graphic images on their packages.

However, countries’ methods of control have not gone unchallenged. As the online medium The Motley Fool reports, the higher U.S. prices do not necessarily hinder the domestic tobacco industry. As companies are forced to raise their prices via taxes, they have more leeway to incorporate an extra sum of money without too much consumer notice. The United States has also seen an increase in smuggled cigarettes, particularly in states like New York and Wisconsin, which have high tobacco tax. Wisconsin saw an increase of more than 20 percent in illegal cigarette sales after the tax hike was implemented. New York has similar problems. A criminal who smuggles 200 cases of cigarettes from North Carolina to New York can clear as much as $500,000 if sold illegally.

Australia’s foreign tobacco suppliers, including Caribbean countries, Indonesia, and Ukraine have filed formal complaints with the World Trade Organization (WTO). Cigarette manufacturers claim that Australia’s rules infringe on their trademarks, and create illegal obstacles to trade. Australia’s government responded that the legislation was well publicized beforehand, and that tobacco producing countries had plenty of time to prepare. The Geneva-based WTO ensures that member nations respect the rules of global trade. Challenges can last for years, amid appeals, counter-appeals and assessments of compliance. If a country is found guilty of hindering trade, the global organization can impose penalties.

Costa Rica has been forced to contend with some of its own international issues. Since the 2012 tax increase, Costa Rican authorities have reported a spike of almost 90 percent in illegal cigarette confiscation. According to the country’s Fiscal Control Police (PCF), criminal syndicates have become very adept at counterfeiting customs and import documents which makes catching smugglers difficult. PCF official Luis Bonilla stated that the tax hinders rural communities where low paid smokers are pushed to cheap, perhaps contraband tobacco. Bonilla lamented the greater health concerns of illegal cigarettes which often ignore standards followed by legal cigarettes. Packs of contraband cigarettes are reported to contain mold and rat waste.

Local and national governments have utilized a myriad of initiatives to reduce, tobacco use among its citizens. However, challenges from trade lobbyists, along with individual smokers who feel their personal choice is being stripped away remain an obstacle. As health ministries around the world continue to pressure governments for greater restrictions on public smoking and cigarette availability, and as long as smokers and tobacco companies dig their own heels in, a permanent compromise is a long way off.

By Ian Erickson
@ierickson1

Sources:
Badger Herald
Businessweek
Motley Fool
Reuters
Tico Times

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