BWorld 218, Tobacco taxation, smuggling and plain packaging

* This is my column in BusinessWorld on June 04, 2018.

“To cease smoking is the easiest thing I ever did, I ought to know because I’ve done it a thousand times.” — Mark Twain

On May 29, 2018, I attended the “Health for Juan and Juana” conference on universal health care (UHC) at the PICC, jointly sponsored by the DoH, ADB, PHAP, MeTA, Havas, AC Health, others.

It was a big event with many participants and high-powered speakers and facilitators from national and local governments, multilaterals, NGOs, academe and private players.

Listening to the health officials of Davao, Makati, Bataan, and South Cotabato, I got the impression that with the way they provide health care to their constituents, it is possible to abolish the DoH and realign its budget to LGUs.

The keynote speaker was Sen. JV Ejercito, Chairman of the Senate Committee on Health and Demography and he talked about his UHC bill, the public consultations, the financing including his proposal to further hike tobacco tax to P90/pack. It is a far-out number compared with P30/pack in 2017 under Sin Tax law of 2012 (RA 10351), to become P35/pack in 2018, P37.50 in 2019, then P40/pack in 2022 under TRAIN law (RA 10963).

Since corruption in government remains high, higher tax rates mean higher tax avoidance. Lots of cigarette smuggling occurred in 2015-2016 involving billions of pesos of avoided taxes. In February 2017 for instance, the Bureau of Customs estimated that some P50B of foregone taxes in 2016 were due to smuggling, about P16B of it was from cigarette smuggling.

If the numbers are correct and if we divide P16B over P29/pack excise tax in 2016, that was equivalent to 552 million packs of cheap cigarettes. Cheap cigarettes encourage more smoking and, as a result, higher tobacco taxes achieve an opposite result.

With higher tobacco tax this year because of TRAIN law, cigarette smuggling has continued.

For instance, a BusinessWorld report on May 01, 2018 said “DoF warns cigarette smuggling may be helping finance terrorism.”

DoF Secretary Sonny Dominguez was quoted, “Illegal money can end up funding terrorist activities” while Customs Commissioner Caesar Dulay said that “smuggled cigarettes are currently flooding the market.”

High taxation and explicit prohibitions are often two sides of the same coin. One policy done by governments abroad is the prohibition of displaying the tobacco companies’ names, logos, and brands via plain packaging policy. So all cigarette packs by all players, old and new, established or fly-by-night, will display similar designs and graphic warnings.

After implementing plain packaging policies since December 2012, illegal tobacco consumption in Australia has increased from an estimated 11.5% to 13.5% in 2012 to up to 15.0% in 2017 (source: KPMG, “Illicit Tobacco in Australia, Full Year 2017 Report,” April 20, 2018).

This because many new players, including those engaged in criminality and terrorism, have come in, produced cheap cigarettes since plain packaging is much easier to copy, and attracted more buyers and smokers.

The United Kingdom also enacted the plain packaging policy in May 2017 and after one year, (1) no significant decline in smoking incidence happened, partly or largely because (2) cheap counterfeit plain packs surfaced.

The counterfeits were found to have high tar, nicotine, and carbon monoxide than those allowed in UK, and in some cases, are found to contain heavy metals such as arsenic, cadmium, and lead, along with other toxic contaminants: asbestos, mold, dust, dead flies, rat droppings — and even human excrement. (Sources: The Times, “Illegal tobacco tainted by asbestos and rats,” May 16, 2017; Evening Standard, “Sniffer dogs with GoPro bodycams help uncover 30,000 fake cigarettes in Soho crackdown,” May 24, 2017).

Meanwhile, the World Justice Project (WJP) produces an annual study, the “Rule of Law Index” (RoLI) and score countries based on their performance on 8 factors and 44 sub-factors. The RoLI 2017-2018 Report involves more than 110,000 households as respondents and 3,000 expert surveyors in 113 countries and jurisdictions.

A summary is shown below, focused on Factor 6: Regulatory Enforcement (Government regulations are effectively enforced, applied and enforced without improper influence; Administrative proceedings are conducted without unreasonable delay, etc.)

So if Australia and the UK with better rule of law implementation have experienced high and rising incidence of illicit trade and smuggling of cheap cigarettes, how much more for developing countries like the Philippines?

If the Philippines will consider imposing higher tobacco taxes like the P90/pack proposal by Sen. Ejercito, and/or if it is to consider plain packaging policy, given its low rule of law culture and poor regulatory enforcement, a doubling of current extent of illicit trade and smuggling can be expected.

Which means more fake and cheap cigarettes will come in, and there will be more smoking and smokers, not less.

More government taxation and prohibitions create adverse selection problems; the law of unintended consequences always kicks in as nature abhors a vacuum.

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

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See also:

BWorld 211, Intellectual property, innovation, and prosperity, May 20, 2018

BWorld 215, Urban mobility index and transport disruption, May 29, 2018 

BWorld 216, Positive and negative disruptions in the electricity market, May 31, 2018 

BWorld 217, Dutertenomics, TRAIN and high inflation, June 02, 2018

BWorld 206, Intellectual property rights in East Asia

* This is my column in BusinessWorld last April 19, 2018.

The degree of wealth and economic size of East Asian economies generally correlate with their degree of private property rights protection, both physical and non-physical or intellectual property. While protection of physical properties like houses, cars, and land are easier to see and measure, the protection of intellectual property rights (IPR) like patents, copyrights, trademarks, and trade secrets are not so tangible.

IPRs are important because they represent the “heart and soul” of private enterprises and the goods and services that they produce.

For instance, people differentiate and choose shoes made by companies as represented by their logos such as a big check, three striped leaves, or letter F. These same people also choose products from food companies with logos of a double arch, a happy insect, or a smiling young female.

Here are some numbers showing the degree of IPR protection of selected East Asian economies. (Data and report sources are (1) Property Rights Alliance (PRA)- International Property Rights Index (IPRI) 2017 Report, (2) US Chamber of Commerce (USCC)- Global Innovation Policy Center (GIPC), International IP Index (IIPI) 2018, and (3) World Economic Forum (WEF), Global Competitiveness Report (GCR) 2017-2018. The numbers in parenthesis beside each report represent the number of countries or economies covered. The WEF’s GCR is composed of 12 pillars and pillar #1 is about Institutions; among the sub-pillars there is IPR protection).

These numbers show that East Asian tiger economies also rank high in IPR protection. Conversely, emerging economies aspiring to join the club of tiger and developed countries tend to have medium to low ranking in IPR protection. The exception is Brunei, a developed economy in terms of per capita income (thanks to its high gas exports and small population) but it is low in IPR protection.

The issue of IPR protection in the region was tackled by a symposium early this week entitled “Intellectual Property Rights in the ASEAN Economic Community: Challenges and Potentials” at Intercontinental Kuala Lumpur, Malaysia. The event was organized by the Institute for Democracy and Economic Affairs (IDEAS), Malaysia’s first and most dynamic free market think tank.

There are moves to abolish the trademark, corporate logos and branding of products deemed “unhealthy” in many countries.

For instance, plain packaging of tobacco products has been legislated in Australia and France, and is currently considered to be legislated in Singapore too. Such trademark busting policies are also considered as extended to other “unhealthy” products like alcohol, sugary food like chocolates, confectionery and candies.

IDEAS commissioned a study that was presented in the symposium entitled “Challenges in Improving Intellectual Property Rights in ASEAN: Case study of Singapore, Malaysia, Indonesia, Thailand and Philippines” by Adidarmawan, S.H. and Marolita Setiati.

In the paper, the two authors noted that:

“Trademark promotes freedom of choice and enable consumers to make quick, confident and safe purchasing decisions. Standardizing… packaging for tobacco products that would restrict the use of brands, trademarks and trade… concern is if brand marks are eroded, then consumers are not able to differentiate between inferior products and those with a reputation for reliability that may create an environment in which companies may end up competing on price instead of quality. In addition, plain packaging is easier for counterfeiters to copy and could result in an increase in inferior — and more dangerous — imitations. The counterfeiters will have an easier time duping the consumer into buying products that are sub-standard. Brand restriction sets an unfortunate precedent, opening the door for IP rights to be weakened in other industries.”

A BusinessWorld report early this week entitled “Excise tax increase triggers widespread cigarette smuggling” also underscores these concerns.

High taxes, rising regulations and plain packaging have similar effects — they make the consumption of legal and branded products like tobacco and alcohol more restricted and more costly, which open up more space and markets for illicit, illegal, smuggled, and cheaper products. This results in more smoking, more drinking, more consumption of the restricted products.

Governments should focus on protecting private property rights, both physical and intellectual. Weakening such property rights will also lead to a weakened state and strengthen the powers of smugglers and criminal syndicates who do not pay taxes and do not respect brands and intellectual property.

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

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See also:
BWorld 203, TRAIN, inflation and PPP, April 10, 2018
BWorld 204, Mining attractiveness index and the Philippines, April 30, 2018 

BWorld 205, Energy mix and wishful thinking, April 30, 2018

BWorld 200, IPR in the ASEAN and plain packaging in the West

* This is my column in BusinessWorld on March 27, 2018.

Last week, March 22, a global coalition of 62 market-oriented independent or nongovernment think tanks and institutes sent a letter to the World Health Organization (WHO) on the subject, “Five years of failure: Global coalition letter against plain packaging.” Three institutes from ASEAN countries were among the signatories: the Center for Indonesian Policy Studies (CIPS) in Jakarta, the Institute for Democracy and Economic Affairs (IDEAS) in Kuala Lumpur, and Minimal Government Thinkers (MGT) in Manila, my think tank.

The statement was circulated well in social media particularly by signatory-institutes. The paper noted,

“After Australia implemented the policy, other industries have been targeted around the world: alcohol, sugary beverages, fatty foods, even toys. These industries employ millions and any regulation that would deny key IP assets would have a devastating global economic impact. The trademark value alone of only twelve companies associated with these sectors is estimated to be more than $1.8 trillion.

The costs of plain packaging are enormous: the loss of the innovation incentive, the mutilation of established international IP law, the market carve-out to illicit actors, including terrorists. We urge the WHO and governments around the world to stop infringing on intellectual property rights with plain packaging policies.”

This coming April 18, IDEAS will hold a public forum on “Intellectual Property Rights in the ASEAN Economic Community: Challenges and Potentials” to be held at Intercontinental Kuala Lumpur. The forum will partly cover an emerging big issue in international trade — the proliferation of illicit products.

The proliferation of illicit trade and smuggling is ironic in a period of overall tariff reduction and trade liberalization in the ASEAN and many other regions in the world.

What explains this irony?

It is non-tariff barriers (NTBs) or non-tariff measures (NTMs). After all, these require additional permits, sanitary and phytosanitary measures (SPS), and technical barriers to trade (TBTs).

And, as mentioned in the letter, the emerging attack on IPR — plain packaging, abolition of trademark and logo, abolition of corporate branding, initially for tobacco products. Then advocates will move to other “unhealthy” goods like alcohol, sugary drinks, confectionery and candies, and so on.

Australia is the first country in the world to legislate and implement plain packaging or standardized packaging in December 2012. The estimated consumption of illicit and smuggled tobacco products was 12.2% of overall tobacco consumption in 2011 and 11.5% in 2012.

When plain packaging was implemented, the estimated illicit consumption went up: 13.5% in 2013, 14.5% in 2014, 14.1% in 2015, 13.9% in 2016 (source: KPMG, March 2017. “Illicit Tobacco in Australia, 2016 Full Year Report”).

Removing the trademark, logo and brand via plain packaging is less of an assault on tobacco companies with long years of corporate existence but more of an assault on a country’s tradition of protecting private property rights.

Below are some numbers showing average wealth and IPR protection in 15 economies, ASEAN + five in Northeast Asia. Data sources are (a) IMF’s World Economic Outlook (WEO) for GDP per capita, (b) Property Rights Alliance (PRA) International Property Rights Index (IPRI) 2017 Report, and (c) World Economic Forum (WEF) Global Competitiveness Report (GCR) 2017-2018.

The GCR is composed of 12 pillars and pillar #1 is about Institutions; among the sub-pillars there is IPR protection (see table).

These numbers show that countries with high per capita GDP whether in current or nominal prices or in purchasing power parity (PPP) values are also those with high scores and global ranking in intellectual property rights (IPR) protection. And countries with low per capita income also have low scores and ranking in IPR protection. The exception to this trend is Brunei in the IPRI Report, and South Korea in the GCR.

High and rising taxes and now plain packaging as measures to discourage smoking is successful only in reducing smoking of legal and branded tobacco products. Not mentioned by advocates is that these measures are highly favorable to producers and distributors of illicit, fake, non-branded, and cheap tobacco products.

Since brand and product differentiation is effectively abolished, producers and manufacturers, old and new players, will only compete in pricing. So more cheap tobacco will be introduced and this will encourage more smoking.

To further reduce smoking incidence, governments and NGOs should continue public education about the dangers of smoking. But almost all smokers already know the dangers of smoking, the same way that cliff and plane jumpers, high wall/rock climbers, motorcycle stunt drivers, extreme bicycle downhill riders, deep sea scuba divers, MMA/UFC fighters, etc. know the dangers of their sports and passion but they keep doing it anyway, repeatedly.

People own their body, not governments or health NGOs. There is a limit to state nannyism and very often, such nannyism results in adverse, unintended consequences.

Governments should instead focus on protecting private property as a way to encourage more economic prosperity. 

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

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See also:
BWorld 197, Estimating electricity price hikes because of TRAIN, Part 2, March 22, 2018 
BWorld 198, Three levels of global disruption, March 24, 2018 
BWorld 199, Charity and giving should not be legislated, March 27, 2018

IPR and Innovation 42, Coalition letter to WHO re plain packaging

Today, a global coalition of 62 market-oriented independent or non-government think tanks and institutes sent a letter to the WHO. Three institutes from ASEAN countries were among the signatories -- CIPS in Indonesia, IDEAS in Malaysia, and MGT in the Philippines.

Dr. Tedros Adhanom Ghebreyesus

Director-General

World Health Organization

December 01, 2017, marked the five-year anniversary of the full implementation of plain packaging in Australia. The removal of brands and trademarks from packaging remains a gross violation of intellectual property rights and has failed to achieve its intended goal. As a global coalition of sixty-two think tanks, advocacy groups and civil-society organizations that have been critical of plain packaging for any product, we write in response to proposed plain packaging tobacco control measures and to the announcements by several countries of their interest in pursuing these policies.

Intellectual property rights are human rights enshrined in the Universal Declaration of Human Rights: Article 17, the right to ownership; Article 19, the right to freedom of expression; and Article 27, the right to protection of material interests. In this regard, even if plain packaging is effective, it should still be repealed, as rights are inalienable and should not be discarded for political purposes.

International trade law, the UNDHR, and historic international treaties are designed to protect intellectual property for this very purpose. The innovation incentive created by trademarks fuels competition and produces amazing products demanded by consumers like affordable medical advances that save lives. Obviously, any loophole should be closed, not exploited....

After Australia implemented the policy, other industries have been targeted around the world: alcohol, sugary beverages, fatty foods, even toys. These industries employ millions and any regulation that would deny key IP assets would have a devastating global economic impact. The trademark value alone of only twelve companies associated with these sectors is estimated to be more than $1.8 trillion.

The costs of plain packaging are enormous: the loss of the innovation incentive to the economy and society are inestimable, the mutilation of established international IP law is unprecedented, and the market carve-out to illicit actors, including terrorists, is reprehensible. It is beyond reason that such a policy continues to be pursued, even after it has failed to achieve its intended goal.

We urge the WHO and governments around the world to stop infringing on intellectual property rights with plain packaging policies.

(Full letter and names of institute heads, co-signatories, see  http://www.propertyrightsalliance.org/wp-content/uploads/2018/03/2018-Global-Plain-Packaging-Coalition-to-WHO.pdf, or 

https://www.slideshare.net/Noysky/global-coalition-letter-to-who-vs-plain-packaging)

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See also: 

IPR and Innovation 39, Recent IP developments in CN, TW, KR, ID, November 05, 2017 

My first article in BWorld, Oct 2007, on IPR, December 29, 2017 

IPR and innovation 40, WHO health alarmism and IPR tinkering, January 16, 2018 

IPR and Innovation 41, Governments and the UN on patent prizes, February 23, 2018

BWorld 169, On tobacco tax and plain packaging

* This is my column in BusinessWorld last November 30, 2017.

Protection of private property rights — including physical and intellectual — is an important cornerstone of a free society. People can exclusively use, keep, sell, donate or give away their property if they want to.

There is a measurement of property rights protection worldwide being done annually by the Property Rights Alliance (PRA), a Washington DC-based think tank. It produces the annual International Property Rights Index report and partners with independent, nongovernment, and market-oriented think tanks and institutes from many countries. IPRI covers three major areas: (1) Legal and Political Environment, (2) Physical Property Rights (PPR), and (3) Intellectual Property Rights (IPR) that include protection of patents, trademarks and brands, copyrights and trade secrets.

In the IPR of several ASEAN countries, the gap is not very wide between say, Singapore and the Philippines or Indonesia (see table).

Currently, there are IPR issues that are intertwined with taxation issues of some “sin products” like tobacco and alcohol.

In the Philippines, the sin tax law of 2012 or RA 10351 is turning five years old next month. The law has dual purposes of (a) reducing smoking and drinking incidence in the country by raising tobacco and alcohol taxes, and (b) raising more government revenues.

So far, both have been achieved but there are moves and legislative bills to further raise tobacco tax to twice or thrice their current rates.

In December 2012, Australia introduced a variant of this law aimed to further discourage smoking. Its plain packaging law required tobacco companies to remove the brand, trademark, and logos of its tobacco products and replace them with plain packs with graphic warnings.

Since some smokers may be unable to distinguish good brands from new and/or inferior brands, they are supposedly discouraged from stop smoking.

While the goal is good — to protect public health — the means and the policy leaves much to be desired.

Since it is assumed that consumers can no longer distinguish good brands from inferior ones, brand competition is precluded.

As a result, companies will now be forced to compete on the basis of prices alone, allowing players with poor but cheap products to gain advantage and attract more customers.

Which may then defeat the purpose of anti-tobacco initiatives because this may yet increase the incident of smoking.

Five years after introducing its plain packaging scheme, has Australia been able to meet its goal?

The Australian government collects data on national smoking incidence every three years as part of its National Drug Strategy Household Survey (NDSHS).

Based on 2016 data — its most recent — there has been no statistically significant decline in the overall daily smoking rate between 2013 (12.8%) and 2016 (12.2%).

So the plain packaging scheme is a failure in Australia.

Moreover, the plain packaging law has unwittingly succeeded in raising the consumption of illegal tobacco, estimated at 13.9% of total consumption in 2016. This results in an estimated excise tax loss of A$1.6 billion for the government last year.

Furthermore, Australia is also facing a dispute resolution panel at the WTO for implementing the law that disrespects IPR laws on trademark and branding.

France and the UK have also introduced the plain packaging scheme in recent years. One unintended result in France is the rise in illicit tobacco coming from some terrorist groups and criminal syndicates while the French government suffered an excise tax loss of approximately €2 billion in 2016. This illicit trade was linked to jihadists traveling to Syria and Iraq and terrorist attacks in France. Counterfeit cigarettes are also among the most investigated IP-crime in the UK and are linked directly to criminal organizations.

In Asia, there are plans to introduce plain packaging legislation in Singapore, Malaysia, Taiwan, Sri Lanka, and Nepal.

This may a dangerous precedent.

Soon, other “sin products” will be targeted — alcohol, sugary drinks and beverages, fatty foods, even toys.

I am a non-smoker and have never been a fan of smoking. I am just a fan of individual liberty and people having the freedom what to do with their own body and life, also a fan of the rule of law and people’s right to private property.

The plain packaging scheme is dangerous because (a) it disrespects private property rights and IPR laws, (b) encourages the production of illicit items from illicit and possibly criminal players who can easily play with price competition, (c) it encourages more consumption because very cheap products with no brands are more easily available, and (d) it reduces government potential excise tax revenues, which might result in creating new taxes elsewhere.

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See also: 
BWorld 153, Property rights, trademarks and consumer protection, September 30, 2017

BWorld 166, US energy trading and implications for Asia and Philippines, November 26, 2017 

BWorld 167, Multilateral, bilateral, or unilateral liberalization, November 27, 2017
BWorld 168, Uncertainty in mining policy and the Manicani debate, December 12, 2017

BWorld 153, Property rights, trademarks and consumer protection

* This is my article in BusinessWorld last September 18, 2017.

Private property rights that people and businesses enjoy are among the cornerstones of a free and dynamic society. People have exclusive rights on what to do with their private properties — use them, sell, rent out, or donate.

However, when rights to private property — both physical and intangible assets — are unprotected, society can quickly degenerate into disorder. As a result, consumers will be unable to recognize which among manufacturers and service providers are trustworthy and which are suspicious.

Measuring the extent of property rights protection across many countries is done annually by the Property Rights Alliance (PRA), a Washington DC-based think tank. It produces the International Property Rights Index (IPRI) annually and partners with independent, nongovernment, and market-oriented think tanks and institutes from many countries.

IPRI is derived by getting the score (1 to 10, 10 being the highest) of each country covered in three major areas:

1. Legal and Political Environment (LP), covers judicial independence, rule of law, control of corruption, and political stability of a country or economy.

2. Physical Property Rights (PPR), includes registration and protection of physical properties, access to loans.

3. Intellectual Property Rights (IPR), includes protection of patents, trademarks and brand, and copyrights.

Countries with high scores in two or all three of these areas will have a high IPRI overall score and global rank (see table).

Among the important insights in the above numbers are: One, the more developed the economies are like Singapore and Japan, the higher the IPRI score and global rank. Which implies that as private property is better recognized and protected, there are more economic activities and innovations that occur.

Two, the Philippines experienced some improvement in its global rank, from 77th out of 131 countries in the 2013 report. It rose to 64 out of 127 countries in 2017. Its low score in legal and political environment was compensated by its high score in physical property rights.

One emerging issue in IPR non-protection is plain packaging (PP) of tobacco products purportedly for health reasons. Besides being slapped with high taxes, tobacco products also feature graphic warnings on packaging. Advertising tobacco products have also been restricted and smoking in may areas have been disallowed, which are part of several moves to deter people from lighting up.

These have been tried in many countries but smoking incidence does not seem to significantly decline as people shift to cheaper and often, illegal, illicit products. So the next step is to prohibit the use of a tobacco brand, logo, or trademark. This has been done in Australia and there are plans to introduce legislation in Singapore, Malaysia and Taiwan.

This plan does not appear to be right because a brand or logo of a company represents how effective it is in developing consumer loyalty and service. Imagine also if all ice cream, all soft drinks, all beer, all wine, etc. will simply be labeled as “ice cream,” “soda,” “beer,” etc. with no brand recognition of who produced or manufactured the products.

Or all government departments and agencies (DoH, DoF, DPWH, NEDA, etc.) will lose their logo and will simply have a generic brand “Philippine government,” it would not seem right.

I have never been a smoker nor have I been a fan of smoking but was once a fan of tobacco ads in cycling or in the F1 race. But I will not recommend the scrapping of a brand or trademark of companies in a particular industry. People who hate the companies should attack them as such and they may even use the company brand for their attacks.

Intellectual property rights like medicine patents, song copyrights, company brand or trademarks, play an important role of recognizing efficiency and innovation. Consumers look up to these brands and decide which ones to support and patronize and which ones to reject based on their specific needs and interests.

Governments therefore, should respect and protect these IPRs the same way it should respect and protect physical private properties. Moreover, people own their bodies and not the state nor NGOs.

After rising taxes, health warnings, and business regulations are in place, governments should leave individuals and allow them to seek their own happiness without harming other people.

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers, which is a member of EFN Asia and the Property Rights Alliance (PRA).

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See also:

BWorld 150, Rising state-inspired murders and budget 2018, September 18, 2017 

BWorld 151, Mining taxes per hectare of land, September 22, 2017 
BWorld 152, Cronyism in Renewable energy, gas sectors? September 23, 2017

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

IPR and Innovation 32, On tobacco plain packaging proposal in Singapore

This is my letter to the HPB yesterday. The auto reply said they have received it and will look into it.
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Subject: Singapore's plan on "Standardized packaging" of tobacco products
To: HPB_Mailbox@hpb.gov.sg

Health Promotion Board

3 Second Hospital Avenue,

Singapore 168937

Dear Sir/Madam,

I have read your campaign to control tobacco use and promote good health among Singapore citizens, it is a good objective. But I notice that you also plan to introduce or legislate “standardized packaging” or “plain packaging” in tobacco products, and I think it can adversely affect Singapore’s good image on protecting intellectual property rights (IPR).

It is true that smoking is dangerous to one's health. I myself am not a smoker, never smoked a single stick in my whole life, never worked for the tobacco industry or its allied industries. But I think people have a choice for their body. They recognize the danger of smoking -- and drinking, drugs, over-eating, sedentary lifestyle, etc. -- and still they do it. They compare the health risks with the pleasure of those actions then they decide whether to continue doing it or not; if they continue, whether to smoke 1 or 20 sticks a day, drink 1 or 10 bottles of beer a day, etc.

Plain packaging (PP) is wrong for the following reasons.

1. Singapore is known for its clear and strong property rights protection, both physical and intellectual property. Abolition or significant reduction of the trademarks and corporate logo of tobacco companies via PP will dent this image and put Singapore’s adherence to IPR protection in a question mark.

2. If Singapore is to be consistent in its policy, then it will be pressured in the near future to also introduce PP for alcohol products like beer and whiskey, soda, chocolate bars, other high sugar, high fat content meals and snacks.

3. People who derive pleasure in smoking will continue to smoke despite PP and they will likely shift to cheaper and illicit products. Overall smoking incidence can either flatline or even increase because tobacco companies will produce cheaper but cool-tasting products, which will attract new  smokers or entice the few-sticks-a-day smokers to become one pack a day smokers. PP will only adversely affect the sale of known and premium products of the big multinational tobacco  companies but not the cheap products of lesser known companies.

4. If drawn in a graph, the supply curve of cheap cigarettes will move to the right as manufacturers of premium brands will soon produce lots of plain pack but cheap cigarettes. Equilibrium price goes down while equilibrium quantity goes up, even if the demand curve does not move.

Discouraging the people from smoking can be done via more public education. The graphic health warnings, campaigns by the  Ministry of Health and health NGOs or groups are part of such public education.

But some people will continue to  smoke – and over-drink, over-eat, over-sit in  sedentary lifestyle – despite learning more and new things  about the dangers of smoking, over-drinking, and so on. Government cannot micro-manage the lives of people all the  time. What Singapore should continue protecting is its image  as the bastion of IPR  protection, whether companies are in  IT, pharma, healthcare, hotels, food,  alcohol or tobacco.

Thank you very much.

Sincerely,

Bienvenido Oplas, Jr.

President, Minimal Government Thinkers

Manila, Philippines

https://ipinasia.wordpress.com/

http://funwithgovernment.blogspot.com/

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See also:

IPR and Innovation 29, Civil society enforcement of patents, copyrights, January 18, 2016

IPR and Innovation 30, Patents and pharma issues in Asia in 2007, February 07, 2016 

IPR and Innovation 31, On TPP, medicines patent and tobacco trademark, February 29, 2016

IPR and Innovation 32, On TPP, medicines patent and tobacco trademark

After the 4th Asia Liberty Forum (ALF) ended in Kuala Lumpur on February 20, SEANET organized a small group discussion on "business friendly regulations", same hotel venue. I was one of those invited. Below, Wan Saiful Wan Jan, CEO of IDEAS and Director of SEANET, spoke to explain once again what the meeting-seminar was all about.

Aside from independent think tank leaders from some ASEAN countries, some friends outside the region were also there, like Barun Mitra, Cris Lingle, Julian Morris, Lorenzo Montanari.

I gave a brief presentation. Brief as in 8 minutes or less.

TPP’s liberalization agenda will:

1. Force open members’ economic sectors such as agriculture, affect poor peasants, women

2. Further push them into poverty, compete with giant agricultural corporations from more developed countries

3. Increase corporations’ access to indigenous people’s lands and territories for resource extraction without their free prior informed consent (FPIC)

4. Undermine country’s right to reject genetically modified

organisms (GMOs), subject those GMOs to prior risk assessment; ensure uninterrupted trade for GMOs to the benefit of major GMO producers and exporters like the US and Canada

5. Permit corporations to violate labor rights by making it easier to offshore jobs to countries with lower labor standards

6. Encourage more inflows of migrants who later forced to become undocumented migrants  to add more cheaper and docile labor

7. Endanger people’s right to quality and affordable healthcare due to strict intellectual property rights (IPR) on patents, data monopolies to medicines

8. Make educational materials become expensive with strict IPR

9. Violate internet users’ privacy rights and will stifle creativity and freedom of expression through severe copyright rules

10. Mean death to democracy, allow corporations to use investor-state dispute settlement (ISDS) to attack public interest laws to increase their profits; corporations suing governments over living wages, environmental protection , people’s access to public utilities

11. Have knock-on effects on the whole region, have potential to be the standard that all future trade deals will follow

12. Promote the hegemony of corporations, neoliberal regimes and political and economic dominance of the US and other powerful States over the developing and underdeveloped economies of the world.

Among the prominent arguments why people hate the TPP and other FTAs with the US and EU is that stronger IPR protection would mean more expensive medicines, affecting even off-patent, generic drugs. Is this true?

No. Perhaps all TRIPS flexibilities with regards to newly-invented medicines were respected by the TPPA. Like these texts, the red comments on the right are mine.

Then I added another aspect of IPR infringement, the abolition of trademarks and brand logo for cigarettes.

Concluding Notes:

1. Joining the TPP has more gains than pains for member-countries, especially in exports and overall GDP expansion.

2. IPR health provisions in TPP not scary, apply only to newly-invented medicines and not to cheaper generic drugs. Existing TRIPS flexibilities for new meds are maintained.

3. Possible that generic pharma lobby + anti-capitalism, anti-globalization NGOs created more fear than what the TPPA actually provides.

4. More to fear in government taxation of medicines, mandatory drug price discounts and price controls, than IPR protection.

Brief presentation, I think I spoke for only 7-8 minutes, then the others gave their own inputs and insights on other topics. The full 14-slides presentation is available in slideshare.

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Meanwhile, the debate seems raging in Malaysia now regarding their government's plan to introduce plain packaging in tobacco products too. All these news reported since last week.

It's now a Singapore-Indonesia-Malaysia triumvirate of tobacco plain packaging legislation. Soon it will infect the governments and stakeholders in the Philippines, Thailand, Vietnam, etc. And if they succeed, next would be beer, whiskey, other alcohol products? Then chocolate bars, soda and cola. The WHO should be involved in this new government initiatives. I will follow this development.
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See also:

IPR and Innovation 28, Recent IP development in Singapore, October 10, 2015 

IPR and Innovation 29, Civil society enforcement of patents, copyrights, January 18, 2016

IPR and Innovation 30, Patents and pharma issues in Asia in 2007, February 07, 2016 
IPR and Innovation 31, Plain packaging and trademark-busting, February 29, 2016

BWorld 45, Asia Liberty Forum and property rights, February 20, 2016

ALF 6, Panel discussion on property rights, February 23, 2016

ALF 6, Panel discussion on property rights

The 4th Asia Liberty Forum 2016, #AsiaLF16, has successfully ended in Kuala Lumpur last Saturday night. Among the important panel discussions was the one on “Protecting Yourself Against Daylight Robbery -- Current Challenges to Property Rights”.

Photo below, holding the microphone is Wan Saiful Wan Jan, CEO of IDEAS Malaysia, who chaired the discussion. The speakers from left:  (1) Lorenzo Montanari of Property Rights Alliance (PRA), Washington DC, USA; (2) Barun Mitra of Liberty Institute, India; (3) Kriengsak Chareonwongsak of the Institute of Future Studies for Development, Thailand; and (4) Julian Morris of Reason Foundation, USA.

Lorenzo spoke about the International Property Rights Index (IPRI) annual reports, especially the latest, 2015 Report.

Barun talked about fighting for property rights of poor rural workers and households in their tilled land in India.

Julian talked about IPR, especially of trademarks and company branding. His paper title was witty, "Marks vs. Marx", the former refer to trademarks, the latter refer to IPR confiscation and stealing/socialization.

Among the slides shown by Julian. An example of a medicine whose products and corporate brand/logo was copied and stolen to sell substandard or fake medicines, which can have serious or even fatal consequences to patients.

Plain packaging of cigarettes, the logo and brands of Winfield and Marlboro were removed, only their product name is displayed. Further below, when plain packaging is applied on softdrinks/soda and beer.

I don't smoke, never smoked my entire life, I derive zero pleasure in smoking, but I respect other people's decision to smoke. It's their life, their body, they can do whatever they want with their life so long as they do not harm other people, like puffing heavy smoke in an enclosed room with many non-smokers inside.

I think people should not smoke, but if they decide to smoke because they derive some pleasure in smoking -- the same way that I derive pleasure in drinking with friends, frequently when I was still a bachelor, and seldom now with a family and 2 young girls -- then their freedom to choose which cigarette products or brands to take should not be curtailed by the government.

After all, the government is a huge hypocrite institution that says "promote public health, discourage smoking and drinking" on the left hand, then happily and gleefully collects billions of pesos or dollars of "sin tax" revenues every year from more smokers on the right hand.

Meanwhile, I am thankful again to EFN Asia and FNF regional office for giving me a travel grant to attend the 4th ALF. Thanks Siggi, Pett, Jules.
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See also:

ALF 3: Photos with Friends, Kathmandu Conference, January 20, 2015 

ALF 4, Conference 2016 in Kuala Lumpur,January 09, 2016 

ALF 5, Meeting of Property Rights Alliance in KL, February 19, 2016 

BWorld 45, Asia Liberty Forum and property rights, February 20, 2016

IPR and Innovation 31, Plain packaging and trademark-busting

Trademarks and brand logo are important to distinguish companies and producers from each other. A customer can say, "I don't want to ride airline X because they are frequently late/delayed, nor airline Y too because they are expensive, I prefer airline Z because their fares are cheap they mostly fly on time." That is branding from the perspective of customers.

When government or many groups dislike or hate something, this is how regulations and later prohibitions look like:

1. Raise the tax, make it more expensive.

2. Restrict or prohibit advertising to certain events.

3. Mandate graphic warnings, like "Smoking kills" and show ugly pictures of dilapited lungs and mouth.

4. Actual product restrictions to certain consumers, like "for people above 21 years old" and so on.

5. Ultimately, plain packaging. Like all tobacco products, all beer and wine products, all  chocolate bars, etc. to be labelled as plain "cigarettes" or "beer" or "red wine" or "chocolate". 

Boring and lousy, right?

Of course smoking -- and drinking lots of alcohol, and taking lots of soda, ice cream, eating lots of fatty, salty, preserved food, sedentary lifestyle, etc. etc -- is bad for people's health. 

But people -- not the state or media or the health NGOs, etc. -- own their body. People recognize the risks of smoking, drinking, drugs, etc. and they compare such health risks with the pleasure of smoking and drinking. Then they decide whether to continue doing it or stop; if they continue, whether to smoke 1 or 20 sticks a day, drink 1 or 6 bottles of beer a day, etc.

Too much nannyism by the state purportedly to "protect public health" is wrong, and is a clear smoke screen and excuse for more taxation, more regulations, prohibitions, more government.

Plain packaging of tobacco, beer, whiskey, chocolates, etc. in the Philippines, I do not think this kind of legislation will prosper here. Mainly because legislators themselves are among the big fans of branded tobacco, beer, wine, etc. But it is an opportunity for big time extortion by health regulators and/or legislators.

Meanwhile, the graphic photos law against tobacco consumption, the implementing rules and regulations (IRR) to be signed soon, http://www.interaksyon.com/article/123786/doh-implementing-rules-for-cigarette-graphic-health-warnings-out-before-march

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See also:

IPR and Innovation 27, India strengthening its IP protection, September 30, 2015 

IPR and Innovation 28, Recent IP development in Singapore, October 10, 2015 

IPR and Innovation 29, Civil society enforcement of patents, copyrights, January 18, 2016 

IPR and Innovation 30, Patents and pharma issues in Asia in 2007, February 07, 2016

Tobacco Tax 9: Why Earmarking Legislation is Wrong, January 14, 2014 

Tobacco Tax 10: More Questions on Sin Tax Money, March 03, 2015