Philip Morris defends international practices

[Robert Weissman <rob@essential.org>]

At Philip Morris' upcoming April annual meeting, shareholders will be
asked to consider two resolutions related to international issues. One
requests that Philip Morris implement is "Action Against Access" program
-- allegedly designed to keep youth in the United States from obtaining
cigarettes -- overseas. A second asks for the formation of a company
committee to investigate smuggling.

The company's response to both resolutions is quite interesting. Not
surprising, the company's Board of Directors recommends against both
proposals. Here is what they say in their proxy statement:

On the first proposal:

The Company shares the proponents desire to prevent youth smoking and is
committeed to taking action to prevent the sale of cigarettes to minors.
However, we believe that effective programs to combat youth smoking must
be adapted to local conditions, many of which are vastly different than
those in the United States.

The proposal asks us to take a program specifically designed for the
United States and apply it without regard to its effectiveness under local
conditions. For example, many elements of the Company's domestic program
seeks to assure compliance with minimum age laws that are already on the
books in every state. Transplanting a prgram based on these legal
restrictions is not the most effective way to curtail you;th smoking in
countries that lack minimum age laws.

Nor is the unilateral imposition of our U.S.-oriented program likely to
have the desired effect in countries in which Philip Morris International
is a relatively small competitor. ...

[W]e have initiated 60 programs against youth smoking in 36 countries and
are increasing the momemtum. We launched 18 new programs last year and
will launch 35 more programs this year. In developing countries, these
programs have included the creation of retailer-endorsed campaigns where
there are no minimum-age laws; support for retail education programs and
the posting of minimum-age notices at retail; and educational programs
designed to dissuade minors from smoking. As we move forward, the Company
is committeed to further initiatives, working proactively with government,
public health authorities and, importantly, other participants in the
industry, to acheive more effective results that those which the Company
could achieve unilaterally. We will, for example, work with others to
support minimum-age laws in countries where they are not yet in effect,
and we intend to work with educational institutions to develop and put in
place more effective youth anti-smoking programs.

On the second resolution, they say:

Your Board does not believe that it is necessary or appropriate to take
the actions requested by the proponent. The Company already has in place a
worldwide business conduct policy that requires employees of the Company
and its subsidiaries to comply with the laws and regulations of the
countries in which they do business. The policy is monitored on a
continuing basis, and significant violations are brought to the attention
of the Audit Committee, a Committee composed entirely of independent
directors. ...

Cigarette smuggling is primarily a serious problem in a few foreign
countries with heavily taxed products or products that are subjected to
trade barriers. The principal factors associated with these problems are
national tax and trade policies, the effectiveness of government
enforcement efforts and overall cultural attitudes toward tax discipline.
Contraband cigarettes compete unfairly with legitimately distributed
products of the Company in problem countries, and the Company's tobacco
subsidiaries cooperate with the governments of these countries to help
them in their efforts to reduce or eliminate the problem.