[Intl-tobacco] WPost: U.S. Helps Tobacco in Trade Case (Korea)

[Robert Weissman]

U.S. Helps Tobacco in Trade Case
South Korea Alters Rules; White House Denies Policy Shift
By Marc Kaufman
Tuesday, June 26, 2001; Page A01

American trade officials have intervened on behalf of U.S. tobacco
companies to stop South Korea from imposing new requirements on foreign
firms seeking to sell and manufacture cigarettes in that country.

The U.S. interventions appear to mark a shift in the federal government's
position on whether to help the tobacco industry expand in foreign
markets. The Clinton administration typically declined to intercede for
tobacco companies in similar matters because of concerns about the public
health consequences of smoking, former officials said.

Bush administration officials maintain that the actions by the U.S. trade
representative's office earlier this month do not represent a change in
U.S. policy, and are necessary because South Korea's plans were unfair to
American tobacco companies.

"This is a basic issue of fairness," said spokesman Richard Mills. "The
Korean government proposed regulations that were discriminatory and were
aimed at protecting their own industry, not at protecting health or
safety. That would have presented a different situation."

The Bush administration has been coming under fire from anti-smoking
activists for being much friendlier to the tobacco industry than the
Clinton administration -- especially after the Justice Department last
week announced it would try to settle a federal lawsuit against tobacco
companies. Anti-tobacco activists also criticized the administration for
taking what they considered positions too favorable to the industry at a
recent World Health Organization conference on international tobacco
issues.

One official with Philip Morris Cos. applauded the moves in South Korea.
He said the tobacco industry had been frustrated with Clinton
administration policies abroad and had hoped the Bush administration would
be more aggressive in opposing foreign trade barriers.

"All assistance to support nondiscrimination efforts stopped" under
Clinton, said Mark Berlin, an associate general counsel for Philip Morris.
"Clearly, we hope to see a different policy now. We don't want to help in
marketing cigarettes and don't want to suppress health messages. But when
it comes to high duties and barriers to our entering markets, we think the
U.S. government has a role to play and is supposed to fight discriminatory
practices."

The recent trade objections were delivered in Seoul after South Korea
announced last month that it would place a 40 percent duty on all imported
cigarettes. The Koreans recently passed a law allowing foreign cigarette
companies to build cigarette manufacturing plants in the country for the
first time, and argued the duties were now allowable under World Trade
Organization guidelines -- a position that U.S. officials do not dispute.

"The U.S. government raised some concerns about the immediate 40 percent
tariff rate," said Shim Dalsup, counselor for finance and economy at the
South Korean embassy. "They said it would create a big impediment to
cigarette exports to the South Korean market, and we decided to take
account of the U.S. concern." The tariffs will now be phased in over four
years instead of in one year.

Dalsup said a U.S. trade official also objected to new Korean rules
governing how large an investment foreign cigarette companies had to make
to begin manufacturing cigarettes in the country. He said that the Korean
side again agreed to accommodate U.S. objections.

Former U.S. trade representative Charlene Barshefsky said the trade office
under Clinton had consistently declined to help U.S. tobacco companies
expand foreign markets -- refusing, for instance, to push for an end to
the Chinese state tobacco monopoly -- and that it would not have objected
to the recent South Korean tariffs and investment policies.

"We definitely would have recommended against taking any action," she
said. "As long as they treat American cigarettes like imports from any
other country, and as long as it is within WTO guidelines, we would not
have objected."

Another former U.S. trade official said tobacco interests had lobbied the
Clinton administration last year to oppose some of the South Korean
foreign investment rules, but officials had decided against it.

Bush administration officials argue that the trade office under Clinton
had also helped U.S. cigarette makers abroad, pointing to a 1997 patent
infringement case in Thailand. A cigarette company there was marketing a
brand called "Marble" in red and white boxes like Marlboros. Barshefsky
acknowledged that her office had helped in that case, but said it was
handled as a simple infringement issue.

Rep. Lloyd Doggett (D-Tex.), who since 1997 has successfully sponsored
yearly riders on appropriations bills that place limits on what help
federal officials can give to cigarette makers working abroad, said he was
troubled by the South Korean case.

"I am concerned that the law may have been disregarded," Doggett said. "It
sure seems the general philosophy is moving back to the Reagan-Bush days
of 'Let's help the industry addict as many people overseas as we can.' "

During the 1980s, U.S. trade officials under presidents Ronald Reagan and
George Bush moved aggressively to open foreign markets to U.S. cigarette
makers and were especially successful in Asia.

Public health advocates complained that the American cigarettes were
contributing to increased in smoking rates in those new markets,
compensating for declining U.S. smoking. Under Clinton, American embassies
abroad were generally told not to help tobacco companies expand markets
overseas.

On his last day in office, Clinton also signed an executive order making
it official policy to "take strong action to address the potential global
epidemic of diseases caused by tobacco use." That order said that
executive agencies shall not promote the export of tobacco products or
"seek the reduction or removal of foreign government restrictions on the
marketing and advertising" of tobacco products.

The order, like the Doggett legislation, does leave room for U.S.
officials to contest "discriminatory" treatment of U.S. tobacco products.
But former Clinton trade officials say they made a clear decision against
using that authority aggressively.




=A9 2001 The Washington Post Company