[Intl-tobacco] EU: Caution on settlement with PM

[Robert Weissman]

Tobacco money
Financial Times

 Editorial

 April 6 2004

 If there is one thing more addictive than nicotine, it is cash. That
 is the danger lurking behind the European Union's plan to drop legal actio=
n
 against Philip Morris International, part of Altria, the US tobacco and fo=
od
 group, in return for payments from the company totalling $1bn over 12 year=
s.


 The EU and 10 member states had accused Philip Morris International
 and other tobacco companies of colluding in the smuggling of cigarettes in=
to
 the EU by intentionally oversupplying neighbouring countries. But under th=
e
 draft agreement unveiled in Brussels yesterday, all disputes between
the EU
 and Philip Morris International will be resolved, conflict will turn into
 co-operation and the parties will unite in the fight against tobacco
 smuggling and counterfeiting.

 When low-cost cigarettes are smuggled into high-tax countries, tobacco
 companies benefit from extra sales but governments suffer because they are
 denied any tax revenues from those sales. Recently, however, the two sides=
'
 interests have been brought more into line by the rapid rise in production
 of counterfeit cigarettes, which threaten legitimate manufacturers'
sales as
 well as government tax revenues.

 So it is clear how the EU and Philip Morris International stand to
 benefit from the proposed deal. Less clear is how far the public
interest is
 served by the sudden outbreak of goodwill and bonhomie between the two.

 On the plus side, if, as it should, the deal produces funds to
 strengthen EU border controls after next month's enlargement, this will
be a
 boon. If it succeeds in impeding smuggling and counterfeiting, it should
 reduce the availability of cheap cigarettes and, to some extent, cut
 smoking. And if counterfeit cigarettes are even more dangerous than
 legitimate ones, there are sound public health reasons as well as legal on=
es
 for combating their sale.

 Yet EU governments are already beholden to tobacco companies for
 uncomfortably large annual sums in tax revenues and it is unsettling to se=
e
 the EU itself now manoeuvring for a place at the same trough. In the US,
 after state governments agreed to drop litigation against the tobacco
 industry in return for payments totalling $246bn (=A3134bn) over 25 years,
 triumph quickly turned into dependency as they went back on their original
 intention to use the money predominantly for health programmes and started
 diverting it into efforts to plug their budget deficits. Extraordinarily,
 many state attorneys-general last year tried to overturn an Illinois Supre=
me
 Court decision that could have bankrupted Philip Morris USA, fearing their
 tobacco income would be cut off.

 In short, there is more comfort to be drawn from hostility between
 governments and the tobacco industry than there is from cordiality. And th=
e
 objective of tobacco policies, in case it is ever forgotten, should be the
 minimisation of death from smoking, not the maximisation of revenues - for
 governments any more than for companies.