According
to the Malaysian
Star, last week the ASEAN Health Ministers meeting in Phuket (held every
two years) had agreed to “withdraw tobacco from AFTA”:
Malaysia
and Asean member nations have agreed to withdraw tobacco from the Asean Free
Trade Area (AFTA) list for implementation by 2015. Health
Minister Datuk Seri Liow Tiong Lai said a consensus was reached at the
11th Asean Health Ministers Meeting at Phuket, Thailand last Thursday. He said
Asean Health Ministers discussed how to reduce consumption of tobacco as well
as the ways to control the item from becoming widespread in the region. “We
agreed that tobacco needs to be withdrawn from the list of AFTA products as it
could reduce the number of smokers and create a tobacco-free environment,” he
said.
(note that the official ASEAN Health Ministers' joint statement makes no reference to removing tobacco) Regardless
of one’s views on tobacco regulation, the author feels compelled to address
several aspects of this report.
First,
the governing agreement for trade in goods in the ASEAN Economic Community
(AEC) is the ASEAN Trade in Goods Agreement (ATIGA). Administration of ATIGA falls under the
purview of the ASEAN Economic Ministers, not the ASEAN Health Ministers. The ASEAN Health Ministers can only recommend
action to the ASEAN Economic Ministers, and cannot “withdraw” products from
ATIGA on their own.
Second,
under ATIGA’s tariff reduction schedules, ASEAN member states have already
agreed to 0-5 percent duty treatment for ASEAN-origin tobacco products. Raising the ATIGA import duty rates for
tobacco products to MFN levels (e.g. the non-preferential rates applied to
goods that do not qualify as ASEAN-origin or for preferential treatment under
ASEAN’s free trade agreements (FTAs)) would require consensus to renegotiate
ATIGA, which would be difficult given the presence of strong tobacco industries
in some ASEAN member states.
Furthermore, increasing the ATIGA rates for tobacco would simply divert
the tobacco trade to China, Korea, India, Japan and Australia-New Zealand,
which have FTAs with ASEAN which also have reduced preferential tariff rates
for tobacco products. These countries
would benefit at the expense of ASEAN domestic producers unless they also
agreed to renegotiate the tobacco duty rate provisions of their FTAs with
ASEAN. That also appears to be difficult.
Third,
ATIGA covers not only tariff measures but also non-tariff measures and other
regulations related to trade in goods.
Hence what the ASEAN Health Ministers may have meant by “withdrawing”
tobacco from ATIGA would be differential treatment of tobacco products under
such measures. This could be justified under ATIGA Article 8(c), which allows
for discriminatory measures if “necessary to protect human, animal or plant life
or health.” Other jurisdictions have
imposed plain packaging and other special rules applicable to tobacco products,
claiming authority, inter alia, under GATT Article XX(c), which ATIGA Article
8(c) is based on. However, such measures
have to be drafted carefully, as they have been subject to much litigation both
at the domestic level and before the WTO.
Which
brings me to my fourth and final point, which is that any measures aimed at
tobacco would be subject to immediate and aggressive dispute resolution
procedures. The tobacco industry has actively defended its interests in
litigation and arbitration elsewhere, and ASEAN would be no different.
Hence
media reports that ASEAN has decided to “withdraw” tobacco from ATIGA are
premature. The ASEAN Health Ministers’ declaration is merely a recommendation
to the ASEAN Economic Ministers. Furthermore, modification of tobacco duty
rates under ATIGA and other ASEAN FTAs is not realistic. Whether ASEAN intends to follow the lead of
other jurisdictions in imposing non-tariff measures will also remain to be
seen, and even then such measures would be subjected to much scrutiny and
possible litigation within ASEAN and perhaps at the WTO. But the ASEAN Health Ministers’ declaration
does mean that the tobacco regulatory debates have reached the AEC and will
test both the ASEAN institutions and their regulation of the ASEAN single
market.
