Big Tobacco’s New Frontier: Developing World

The International Consortium of Investigative Journalists (ICIJ) has issued many excellent reports about the tobacco industry big tobacco industryincluding one released this week. This new report talks at length about the manner in which Big Tobacco is now increasingly lobbying the developing world, where rules are still lax and apparently easier to bend or break (compared to the developed world) and potential for new business is enormous.

Here is an excerpt from the ICIJ report: “Multinational tobacco companies for years have been battered by politicians and lawyers in the United States and other developed nations like Australia and France. The global reputation of tobacco executives ranks near the bottom in public standing surveys. Market growth in the developed world has flattened out or declined. In the United States, the number of men who smoke dropped from 52 percent in 1965 to half that today.

And, since 2003, at least 171 countries, with some 90 percent of the world’s population, have signed onto the WHO’s Framework Convention on Tobacco Control – a legally binding international standard that governments can use to limit tobacco marketing and tamp down consumption with stern health warnings and higher cigarette taxes.

With all this pressure, it’s easy to believe that Big Tobacco is down and out. But in five decades of fighting public health advocates over the dangers of smoking, the industry has proven time and again to be an effective brawler when its revenues are threatened. In fact, Big Tobacco may well have an answer to its woes: emerging markets and developing countries.

Over the past decade, multinational tobacco firms have increasingly aimed their formidable lobbying prowess at weak governments in fast-growing nations. Their goals seem clear enough to public health experts: derail no-smoking laws and advertising prohibitions in countries rich with potential new smokers, especially among women and youths. For the industry, this is a chance to sustain and even add to its revenues, which, despite growing tobacco controls, reached an extraordinary $300 billion for the top five companies in 2008 – larger than the gross domestic product of all but 40 countries.

Of the 176 million tobacco deaths predicted to occur between 2005 and 2030, 77 percent will be in developing countries. The annual cost to the global economy – in direct and indirect health care and related costs – were estimated at $500 billion last year by the World Lung Foundation, a cost that will be borne increasingly in emerging markets. Much of the industry growth is in China, by far the world’s largest tobacco market, as well as places like Russia, Indonesia, and India – nations where cigarettes are at least $3 cheaper per pack than in the United States or Western Europe.

The growth in emerging markets is helping keep global rates of smoking on an upward curve. Despite Big Tobacco’s reputation and challenges by governments and public health advocates, an estimated 70 million people around the world started smoking between 1998 and 2008. This year the industry expects to sell more than six trillion cigarettes and cigars worldwide, up from 5.7 trillion in 2007.

This inquiry, sponsored by the Washington, D.C.-based International Consortium of Investigative Journalists, has uncovered a long list of aggressive industry lobbying tactics from Moscow to Mexico City. Among the items in the industry’s tool kit: political campaign contributions; gifts and donations; helping regulators write new tobacco rules; threatening legal action against reforms; and in at least two cases, paying bribes to secure favorable trade deals and legislation.

ICIJ has traced millions of dollars to lobbyist firms, foundations, social clubs, and even government health ministries. Companies have donated computers to schools on behalf of politicians and made grants to favorite causes of politicians’ wives. The payoff for all this is delaying anti-smoking efforts in some countries, and derailing them entirely elsewhere.

Consider the case of Russia, one of the most important emerging markets for the tobacco industry. Last year some 400 billion cigarettes were consumed in a country where about 60 percent of adult men and 22 percent of women smoke. Russia is also an important exporter of cigarettes to Eastern Europe. By 2012 – four years after signing the WHO’s tobacco control pact – Moscow promises it will have new limits on the industry. Getting there, however, has meant Russian leaders sloughing off decades of industry interference with government tobacco policy.

Earlier this year, for example, Russia led talks on new tobacco rules for former Soviet countries. But the Russian version of tobacco controls were actually written by tobacco lobbyists, according to the industry’s own boasting on the website of Tabakprom, one of two Russian industry lobbying groups. And the country’s delegation to talks by the influential Eurasian Economic Community included four executives of tobacco industry lobbying groups and two employees of Philip Morris in Russia. Most of those delegates were listed as experts from Russia’s Agriculture Ministry, one of the agencies that oversees tobacco.

Also critical to the tobacco industry is Mexico, where, despite a declining population of adult smokers, some 57 percent of teenagers between ages 13 to 15 have smoked at least once. Mexico also is home to Carlos Slim, the world’s richest man. Slim, who built his early wealth on sales of popular Mexican cigarette brands, first partnered with Philip Morris in 1997 and a decade later sold most of his tobacco holdings to the multinational company.

He still owns 20 percent of the firm’s Mexico operation. He also has a seat on the parent company’s board of directors. In 2004, Slim also participated in a private meeting with then President Vicente Fox, according to a former government official who attended the meeting. After the meeting, the government announced a compromise in which the industry would help pay some costs of treating tobacco-related illness in Mexico – as long as the country put off new excise taxes on cigarettes.

As the industry spends less in the United States to lobby legislators – the amount plunged from $65 million in 1998 to $24.6 million in 2009, according to the Center for Responsive Politics – WHO officials say they are seeing more government-relations work in emerging markets. But it is difficult to quantify exactly how much is spent in developing nations. Philip Morris International and British American Tobacco do not report lobbying expenditures abroad as they do in the United States. Japan Tobacco International said it does not discuss international lobbying expenses.

Yet ICIJ found that Japan Tobacco has spent considerable sums to fight for markets in emerging markets. In India, for example, the company paid Deepak Talwar, one of the country’s top lobbyists, at least $1 million for an unsuccessful four-year campaign to ease restrictions against foreign investment in Indian tobacco manufacturing, according to industry sources.

With its fast-growing economy and population, India is one of the world’s biggest tobacco markets; more than half the men, from 15 to 49 years old, smoke. Ironically, Japan Tobacco rolled into homegrown opposition from India’s powerful makers of bidis, small cigarettes, hand-rolled in tendu tree leaves, which are the choice of 100 million smokers. About 300 bidi barons control a business that produces at least 550 billion smokes per year and operate with little government oversight. Bidi tycoons are closely tied to federal politicians. More recently, Talwar has become an ally of Praful Patel, the country’s aviation minister and a leading bidi merchant.”

The ICIJ report then gives similar examples in other developing nations like Indonesia, Nigeria, Thailand etc. The ICIJ concludes, “To combat industry influence, the WHO tobacco convention included rules barring company participation in writing standards in individual countries, and urged governments to more closely monitor industry lobbying. But in the rough-and-tumble world of politics in developing nation capitals, such controls can be tough to enact, and even tougher to enforce.”

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