IPR and Innovation 36, Plain packaging from tobacco and soon to soft drinks, alcohol, ice cream products

I am reposting this good interview of my friend, PRA Exec. Director, Lorenzo Montanari, published in The Financial last May 29, 2017. State nannyism is wrong, there will be too much state intervention to "protect people from 'harming' themselves", the state semi-own people's body and mind.


“We are really worried about the new regulations,” Montanari commented. “Plain packaging - removing all signs of the brand from the packaging of cigarettes - is a direct attack on the trademark system. The first plain packaging was implemented in Australia in 2012. We were against it and criticized it of course. As a reaction to that we have already published an International Coalition letter against plain packaging. We collected more than 40 think tank signatures from around the world; New Economic School is also amongst them. We claim that if one wants to reduce smokers’ numbers then that’s fine, but it can be done in another way, for example educational campaigns can help. The countries that have approved the law on plain packaging, for example France and Ireland, are also considering moving on to another sector, like wine, soft drinks, junk food, etc. I want to say that it is not about the tobacco itself, we care about the trademark. This is our mission because it’s intellectual property.”

Q. At present, in terms of Georgia, does it only affect the tobacco sector?

A. It has started with tobacco. It is very easy to attack this sector. In Thailand and Indonesia for example they have already started to talk about plain packaging in the wine sector too. The point is to think about the Georgian wine producer. At the moment Georgian wine is famous throughout the world. Local producers have invested so much money in building brand identity. Imagine what would happen if they weren’t able to show their label. I have heard that the Ministry of Economy, the Ministry of Finance, and even the Prime Minister of Georgia are against it. If parliament decides to implement the new law, what will happen hereafter to Georgia wine? This is the point we are strongly criticizing.

Since we analyzed the 128 country index, Georgia held 90th place. In terms of the legal political environment Georgia is not performing too badly. By registration of property Georgia is the best country in the world. The problem in Georgia is the protection of intellectual property rights. In this case we discovered the score is 2.4 - the lowest in our ranking. A policy like plain packaging will not help to improve the protection of intellectual property. I had the pleasure to speak to the Chairman of Sakpatenti. He is against this new regulation about plain packaging. We want to collaborate with them also.

Q. Can you tell us more about the experience of foreign countries which have already implemented the law?

A. The Australia National Drug strategy household survival has shown that in 2014 the daily smoking use rate was 2.5 and 1 year after the implementation was 3.4. Plus, according to the dates, afterwards a 20% increase of contraband cigarettes can be seen. Since there is no trademark it’s very easy to fake, they don’t need to reproduce the logo of the brand or label.

Even if plain packaging will reduce the number of smokers, we are still against it, because of the policy being against the principle of the trademark. I have seen interesting research by IPM. According to it, 81% of Georgians don’t have information about plain packaging. 54% of Georgians think that it will simplify the reproduction of fake cigarettes.

The Georgian Government is doing everything to make Georgia the best performing in terms of economic freedom. We are worried that parliament is moving in the opposite direction. Even in the EU, the European directive of tobacco has been approved, for example Germany is completely against plain packaging.

Q. You mentioned the EU. Georgia has signed an EU Associate Agreement which requires some changes to tobacco regulations. They also have some recommendations for approaching European standards. Do you think that this might be the reason for these regulations?

A. Germany, the leading country in the European Union, is not implementing it. This demonstrates perfectly, that even if the EU gives a recommendation, the country can still disagree. Italy and Greece are against the implementation also. If you want to cut down on the number then it’s better to hold educational campaigns. We believe that an attack on the trademark system is bad for the economy.

Q. Due to the law the tobacco industry will not have the right to conduct any philanthropy hereafter. They won’t even have the right to conduct any ads or marketing action. What do you say to that?

A. My mission isn’t to judge a law, it’s up to the Government to decide. In general, since I believe in a free market economy, if you have legal activity you can advertise. If you are legally working why should someone forbid advertising? This type of banning is against freedom of speech and expression. Removing one’s brand is the same. You can’t describe your product anymore.

Q. How can the new regulation affect the tobacco business in general and the economy as well?

A. I think that in the future if any company thinks that plain packaging will touch them they won’t invest in Georgia anymore. I honestly don’t know what tobacco companies are going to do in the future. I understand that they aren’t happy. I don’t know what will happen afterwards. What I do know is the law is violating trademarks. If we take into consideration foreign countries’ examples, in France ex-president Nicola Sarkozy criticized the plain packaging law for wine. It’s impossible to survive without brand identity.

Q. What do you think, if the Parliament of Georgia passes this new regulation, will it force some tobacco companies to leave the Georgian market?

A. I honestly don’t know. It could cause this too. For sure it is not going to be a positive signal to other companies who want to invest. Afterwards these companies might ask for help from the World Trade organization. They might find themselves in a very bad situation, because they have put millions into advertising and creating brand awareness which they now might lose.

Written By Tamta Kldiashvili

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See also:

IPR and Innovation 33, More on the panel on property rights, ALF 2016, March 09, 2016 

IPR and Innovation 34, When 95% of WHO's EML are off-patent, May 08, 2016 
IPR and Innovation 35, Letter to WIPO on World IP Day, May 06, 2017

Fat-Free Econ 27: Sin Tax and Nannyism

* My article yesterday in TV5's news portal,
http://www.interaksyon.com/business/46120/fat-free-economics-sin-tax-and-nannyism
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The bill raising the excise tax for tobacco and alcohol products – a.k.a. “sin tax” bill - is a tax bill mainly, and a health bill only second. It is a tax bill because its main goal is to raise revenue for the government, from a minimum target of P20 billion on year one alone, to a maximum target of P60 billion.


It is also a health bill because its second purpose is to discourage more people from smoking and drinking more by raising the price of cigarettes and alcoholic products. Various studies cited by physicians and health groups who supported the tax hike bill show that many debilitating diseases that affect millions of Filipinos each year are directly or indirectly related to smoking. Hence, less smoking, less diseases. And that makes the bill plausible and worthy of public support. This writer is among the many supporters of the tax hike for these products.

Certain sectors though go far beyond and suggest that the tax hike should be as high as possible while some suggest that cigarettes should simply be banned and prohibited, and government should not expect revenues from this “sin” and unhealthy product.

And that is how governments become more interventionist because many people themselves are interventionists. They have a particular worldview or opinion on how the rest of humanity should behave and run their own lives, so they concoct or devise various forms of regulations, restrictions and prohibitions. There is intolerance, explicit or implicit, in the diversity and spontaneity of the lifestyle of other people, so the “solution” is to invite and impose new regulations and restrictions by government so that the specific worldview as advanced will hopefully be realized.

And so while this writer is in favor of raising the excise tax on tobacco and alcohol products, preferably with just one rate and not two or three, the public should also recognize that people own their bodies, not the government or physicians or media or anybody else. Thus, even if government will raise the price of cigarettes to P500 per pack, people who want to smoke will always find a way to smoke, like usingnga-nga, buy smuggled cigarettes, make their own cigarettes or sell low-keykarinderia type, and so on.

And this brings us to three issues.

First, banning and prohibiting the consumption of cigarettes is wrong and unenforceable. There are many services that are currently banned by the government now, like prostitution, dangerous drugs, jueteng and other forms of gambling. And the result is more corruption in government as all these services and goods are available in many places in the country. Government officials simply allowed these in exchange for huge bribe money.

Second, using taxpayers’ money to subsidize the healthcare of people who deliberately abuse their body is wrong and economically distortionary.  If many people will over-smoke, -drink, -eat, or -sit,  and they become sickly later on, the rest of society should not be penalized by taxing them more, or denying the tax cut proposal. If those guys can buy lots of cigarettes and/or beer/alcoholic products, fatty food and drinks, and can afford to be couch potatoes, then it is assumed that they also have some resources to buy private health insurance to augment their Philhealth membership benefits.

Third, potential revenues from the excise tax hike should be delinked from funding universal health care. The new tax revenues should instead be used to reduce the public debt, or reduce the programmed annual borrowings. Any savings in interest payment can be used to expand the funding for UHC. For 2013, for instance, interest payment is projected at P334 billion, up from P317 billion this year. If such spending can be reduced to, say P300 billion, the P34 billion savings in one year can be used for UHC and other social programs. 

Reducing the public debt and the high interest payment is possibly the single biggest anti-poverty program that the government can do. To achieve this, raising the sin tax is one measure, privatizing some government corporations like Pagcor is another, and cutting the budget of certain agencies is another measure.

Of the three issues mentioned above, only the last two are problematic due to the nanny-state thinking in many sectors in the country. The first issue is not getting wide public support and this is a piece of good news.
The second issue in particular is tricky. A friend asked (a) if sin taxes are issue of civil liberties, (b) if every adult citizen should have an unabridged right to smoke cigarettes and drink alcoholic products, and (c) whether we should valorize individual freedom above all other values.

For this writer, the quick answer to the three questions is, yes. If people will say no - that government has the right to curtail an individual’s itch to smoke and drink as much as he wants, say inside his own house and not disturbing the neighbors - then they are implying that the state has jurisdiction and even ownership of a person’s body.

If that is true, then the government will have the “right” to prevent or restrict other people from eating fatty and oily food, carcinogenic food, as their healthcare later on will be assumed by the government. Or the government can also restrict or prohibit people from climbing steep mountains, trees and rooftops because if they fall, their treatment will fall again under public healthcare spending.

People should recognize that they do not own other people’s bodies. Let other people do what they want with their body. Since there are potentially adverse health outcomes, then let the people get private health insurance from various service providers -- NGOs, corporations, local governments, others. This is on top of the state-run Philhealth system.

This way, the “negative externality” of people’s unhealthy or risky lifestyle will be internalized solely by them, and the rest of us will be spared more taxes and fees to finance more public healthcare spending.

There is a limit to nannyism. As the world modernizes further, people’s lifestyles will continue to evolve. People should learn to be more tolerant of other people’s lifestyle evolution and modernization. And they should learn to protect their turf by opposing government moves to further socialize and collectivize their incomes and savings, purportedly to expand healthcare for others, including those who deliberately abuse their own body.


See also:
Fat-Free Econ 23: Penang Workshop on Markets in Healthcare, September 10, 2012
Fat-Free Econ 24: Government Fat and Public Expectations, September 21, 2012
Fat Free Econ 25: Property Rights and the Cybercrime Prevention Law, October 01, 2012
Fat-Free Econ 26: US Public Debt and the November Elections, October 10, 2012

Tobacco Tax 3: When Supply is Killed But Demand Persists, November 15, 2010
Tobacco Tax 4: Finding the Optimum, Not Maximum Cigarette Tax, May 26, 2011
Tobacco Tax 5: Consumer Demand After Tax Hike and Smuggling, February 23, 2012
Tobacco Tax 6: On Cigarette Smuggling, February 27, 2012.
Tobacco Tax 7: DOH on NCDs and Tax Hike, March 04, 2012
Tobacco Tax 8: Ban Smoking, or Raise its Tax? March 15, 2012