Litigation  
 


Mark O'Neill
BEHIND THE NEWS
Slaying a smoking dragon

 

Thursday, March 31, 2005

When Yan Zhuoxun, 21, decided to file China's first lawsuit against the State Tobacco Monopoly (STM) and the mainland's 24 major cigarette manufacturers, he waited until his government had signed the first global health treaty against smoking.

Mr Yan, from Wuhan, started smoking five cigarettes a day from the age of 13 and has taken the legal action because he found that the cigarette manufacturers' websites did not contain explicit warnings of the health risks and described smoking as a sign of taste and culture.

On February 27, the Framework Convention on Tobacco Control, drawn up by the World Health Organisation (WHO), became effective. Of the 168 countries that signed it, 51 have ratified the convention. China was the 77th signatory and is now in the process of ratifying it.

The WHO declaration rings out like the oration of a Buddhist priest at a funeral for any of the two million Chinese who die each year of tobacco-related illnesses. The figure represents 41 per cent of the world's 4.9 million victims.

"No other consumer product is as dangerous or kills as many people as tobacco," the declaration says. "With the adoption of a new ground-breaking international treaty, the scene is now set to protect billions of people from the devastating impact of tobacco consumption and exposure to tobacco smoke.

"Globalisation has facilitated the spread of a tobacco epidemic through a complex mix of factors that transcend national borders. This means that countries cannot regulate tobacco solely through domestic legislation."

Will these words reach the ears of the Wuhan judge considering Mr Yan's lawsuit, or the overworked officers of the Ministry of Finance charged with balancing the country's budget? And will they reach the directors of the STM, who have created the most profitable business in China with a rate of return that exceeds even that of Philip Morris and British American Tobacco?

No country is more the target of the treaty than China, which has more than 300 million smokers, a third of the global total. The mainland also has one million hectares under tobacco leaf - 26 per cent of the world's total - which is grown by 22 million farmers, two-thirds of the global total.

The number of smokers is increasing, especially among the young and women. A study of 10,000 middle school students found that 22.5 per cent had smoked, with the average first puff at 10 years of age and the youngest aged seven. Of the smokers, 42 per cent said that, for a male, smoking was a sign of success, style and manhood. Smoking among women has risen to about 5 per cent from 1 per cent a decade ago.

The nation gains huge revenue from the tobacco industry, which is a state monopoly under the STM.

For the past 16 years it has been the largest contributor of any industry to the state budget, last year paying a record 210 billion yuan, a rise of 45 billion yuan over 2003 and accounting for 10 per cent of national tax income. Of China's 100 top tax-paying companies, 35 are cigarette producers. About 60 million people rely on the industry for employment, including farmers.

These numbers are a result of a decision in the 1980s to improve and increase cigarette production and raise the procurement price of tobacco by 20 per cent, making it more attractive to grow than grain.

The budget of Yunnan province, which grows the best leaf and produces some of the best brands, depends on the industry for 70 per cent of its revenue, up from 32 per cent in 1980.

An important part of the consumption, perhaps up to 10 per cent, is gifts - to a police officer, customs official or product inspector, someone from whom a licence or a favour is needed. For such presents, people naturally favour the top brands, which can cost up to 57 yuan a packet, compared with one yuan for the cheapest varieties. The gift is usually two cartons.

In a streamlining of the central bureaucracy in 2000, eight of 10 economic bureaus were abolished, one was restructured and only one left unchanged - the State Tobacco Monopoly.

Given this dependence, why did China sign the treaty at all? During the negotiations, it had one of the largest delegations, with 20 members representing different and conflicting constituencies within China, including the Health Ministry, the Tax Bureau, the Ministry of Finance, the Ministry of Agriculture and the STM - the only cigarette producer in the world who was a delegation member, not an observer.

The fiercest debate within the Chinese delegation was between the representative of the Health Ministry and the STM, with mediation left up to Xiong Bilin, a senior official of the State Development and Reform Commission, who was the delegation chief.

"Each country must take account of the economic importance of tobacco," Mr Xiong said. "It is unrealistic to disregard this. If we have to choose between a moderate treaty that will be successful and a radical and unacceptable one, we must choose the former."

Beijing signed the treaty because its medical community is alarmed about the damage smoking does to the health of millions of its citizens and because it wanted to send a positive message to the international community.

The question is whether the treaty will have a ground-level effect. "Countries that have signed the treaty have no obligation to implement it," said the WHO in a commentary. "Signing shows the government's interest or intention to become a party at a later stage."

In other words, implementation is at the discretion of the central government, which is not subjecting itself to any outside authority.

The main articles in the treaty call for a rise in taxes on tobacco products of at least 5 per cent over inflation each year; a ban on all tobacco advertising, promotion and sponsorship within five years; health warnings to cover at least 30 per cent of a packet and preferably more than 50 per cent; and for the first time in such a treaty a provision on liability, which Mr Yan is likely to invoke in his lawsuit.

China is years from meeting these requirements. Yang Gonghuan, a public health specialist and member of the national delegation, said that the issue was whether, with higher prices, Chinese would choose not to smoke or instead use cheaper brands. "With cheaper brands, the nicotine content is higher and the health risk even greater," Mr Yang said.

National law already bans tobacco advertising, but the companies get around it by advertising their brands, without mentioning cigarettes. For example, Shanghai Tobacco Company, the most profitable producer, runs an ad with the theme "I Love China (Zhonghua)", against a background of the gate overlooking Tiananmen Square. There is not a word about cigarettes, but Zhonghua is the name of its top brand and the image on the ad is exactly what you see on the packet.

The number two producer, the Hill of the Red Pagoda, has used its millions of yuan in profits to build a conglomerate with investments in many sectors. In its ads, it uses "the Red Pagoda" group. Again, no mention of cigarettes, but that is the product which everyone associates with the name.

The warning on the packet is a small box covering half of one side, not visible from the front, saying "smoking can damage health".

Tobacco firms are aggressive sponsors of sports events, again using the argument that they are advertising not cigarettes but brands.

Consciousness among the government and the public is a world away from the impassioned debate of the WHO negotiations in Geneva.

A commentary in the Global Times, a newspaper published by the Communist Party mouthpiece, the People's Daily, captured the issue. In a story on the lawsuit launched in 2004 by the US Justice Department against seven tobacco companies, asking for US$280 billion in compensation, it asked why the US government would sue one of the country's biggest industries.

"What the US has done is to remove the tobacco industry from its economy. After signing the anti-tobacco treaty, the Chinese government should consider a similar transformation," it said.

 

 
 

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