Saturday, August 04, 2018

BWorld 238, Trademark ban and health alarmism

* This is my article in BusinessWorld last Wednesday, August 01, 2018.

Health alarmism is the practice of frequently looking at health conditions pessimistically and then calling for more government regulations, taxation, and prohibitions supposedly to ameliorate the perceived pessimism.

Smoking is something that many people indulge in despite awareness of its dangers. The reason is that people own their body, not the government or doctors or NGOs. That is why many people also engage in dangerous activities like rock climbing, sky jumping, downhill bicycle racing, deep sea diving, full contact sports like boxing and UFC, and so on.

So aside from high and ever-rising tobacco taxes, advertising ban, smoking ban in public places, graphic warning in packs, the most extreme perhaps is mandatory plain packaging — no more branding and logos, only graphic warnings, pictures of damaged lungs, throat, tongue, etc. Their purpose is to further discourage people from smoking on top of existing measures mentioned.

One thing noticeable in the health alarmism of “more deaths due to non-communicable diseases (NCDs) due to smoking” is its inconsistency with data on rising life expectancy. From developing to developed coun- tries, people are living longer and healthier.

In addition, smoking prevalence among adults has been declining in many countries all these years even without plain packaging and related extremist measures.

When people have rising incomes, they also increase their appetite for travel, to live longer and naturally reduce substance abuse. Rising tobacco taxes and similar restrictions of course have also contributed to such reductions.

Based on the numbers, there seems to be little correlation between smoking prevalence and life expectancy. Japan has high smoking prevalence of 34% or twice of Australia’s 17% and yet Japan has higher life expectancy of 84 years compared to Australia’s 82.5 years. South Korea has smoking prevalence of 50% or three times that of Australia and yet they have similar life expectancy.

Australia is the first country in the world to legislate plain packaging in December 2012. Several tobacco-exporting countries like Indonesia and Honduras went to the World Trade Organization (WTO) to complain the measure as non-tariff barrier to trade. In late June 2018, WTO made a ruling that Australia’s law is valid.

If we bring in the above numbers to this case, it is clear that the plain packaging law is not really a health measure but a political measure to shut out some legitimate businesses while unintentionally aiding illegitimate businesses including criminal and terrorist groups whose main fund-raising activity is smuggling and illicit trade.

The decline in smoking prevalence/incidence in many countries all these years can be explained by (a) people’s awareness of the dangers of smoking, (b) effects of high cigarette taxes, smoking bans in public places, etc.

Another possible explanation is (c) people are smoking fewer products from legitimate manufacturers but actually smoking more products from smugglers and illegal sources as the latter’s prices are much cheaper.

In the case of Australia, a KPMG study last year showed that after the plain packaging law in 2012, the estimated share of illicit and smuggled tobacco rose from 11.5% of total tobacco consumption in 2012 to 13.5% in 2013 and since then stayed at around 14.2% average from 2014-2016 (source: KPMG, “Illicit Tobacco in Australia, 2016 Full Year Report,” March 2017.)

The Philippines has no plain packaging law or legislative proposal yet but only rising tobacco taxes: P30/pack under the Sin Tax law of 2012 (RA 10351), became P35/pack this year and P40/pack in 2020 under the TRAIN law of 2017 (RA 10963), then another push towards P90/pack as proposed by Sen. JV Ejercito and many health NGOs.

The impact on cigarette smuggling seems to be big. See for instance a BusinessWorld report on May 01, 2018, “DoF warns cigarette smuggling may be helping finance terrorism.” The report quoted DoF Secretary Sonny Dominguez as saying that “Illegal money can end up funding terrorist activities” while Customs Commissioner Caesar Dulay said that “smuggled cigarettes are currently flooding the market.”

The twin measures of more tobacco taxes and plain packaging policy are perfect formula to encourage more tobacco smuggling, more fake products that are cheap and can encourage more smoking and more smokers. And more money to criminal and terrorist groups that are engaged in illicit trade.

Newton’s third law of motion (“for every action there is an equal opposite reaction”) can also apply in economics and trade policy: For every taxation and prohibition, there is an equal and opposite distortion.

Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.

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