Ottawa’s fruit-flavoured tobacco bomb

Crime

At a news conference in mid-election campaign last year, Prime Minister Harper held up flavoured tobacco products and promised that, if relected, the Conservatives would crack down on tobacco that tasted like mints, bubble gum and banana splits. “As a parent I was appalled to see tobacco products being marketed in a way that is clearly enticing children, ” said Mr. Harper. He promised to ban ingredients that imparted extreme flavour to cigarettes and other tobacco products.

The result was Bill C-32, officially titled The Cracking Down on Tobacco Marketing Aimed at Youth Act — a misnomer if ever there was one. Today, a year later, what Mr. Harper’s Conservatives have delivered instead is an over-the-top law that threatens a global trade war and another bonanza for Canada’s already out-of-control contraband cigarette market.

The trade-war potential gathered momentum earlier this month when, according to Inside US Trade, the United States joined Argentina, Mexico, Switzerland, the European Union and other nations in opposition to Ottawa’s new anti-bubble-gum tobacco law. At a meeting in Geneva, the nations said Canada’s law would restrict trade in regular tobacco products to the benefit of Canadian tobacco producers.

The more immediate impact of the law, however, is a ban on the sale in Canada of virtually all brands of U.S. cigarettes. Guess where that leads? The logical result of a ban on legal imports of Marlboros and winston tobacco is new demand for illegal supplies through the burgeoning Native-dominated contraband market, a tax-evading multi-billion-dollar industry that already accounts for between 33% to 50% of the Canadian cigarette market.

While this may look like another case of unintended consequences run amok, it more likely is part of deliberate scheming by Health Canada officials and others who are consciously using fruit-flavoured smokes to create a global tobacco trade bomb against the U.S. and tobacco industries in Europe, South America and Asia.

There is certainly evidence that Health Canada officials misled Parliament on the trade implications of the flavoured tobacco ban.

On Sept. 30, Diane Labelle, Health Canada’s general counsel, legal services unit, appeared before the Senate social affairs committee to review the bill. Several committee members — including Senators Michel Rivard and Hugh Segal — became concerned about the implications of the flavoured tobacco law on Canada’s World Trade Organization commitments. Committee chair Art Eggleton asked: “Is this [bill] compliant with various trade agreements and international obligations that we have on trade?”

Senator Rivard repeated the question: “The WTO assured you that we were in compliance?”

Ms. Labelle: “Yes.”

But when Canadian officials appeared earlier this month before the WTO’s Technical Barriers to Trade Committee in Geneva, they came prepared with briefing notes on what to say when WTO members raised questions “On Canada not notifying Bill C-32 at WTO.” The briefing notes, obtained by Financial Post, suggest a weaselly Canadian response: “We thank you for raising this concern and are talking note of the systemic issues that have been raised.”

In other words, it is not true, as the Senate committee was told, that the WTO had been advised in advance of Bill C-32 and had determined the new child tobacco measure to be compliant with trade law.

Were the Tories snookered by Health Canada officials? It looks like it. It also looks like the Prime Minister’s original campaign gambit, to protect children from flavoured tobacco, was a ruse. Whether Mr. Harper knew that he was getting into is another matter. The zeal with which his staff pushed the issue suggests they were eager to score political points but less keen on understanding what Health Canada was up to.

The final version of Bill C-32, which became law last month, does much more than ban bubble-gum flavours in tobacco. It bans the use of 5,000 ingredients in making tobacco. Most of the ingredients, however, are not used to turn tobacco into Froot Loops. Many are used, however, to subtly alter the harsher tobaccos used in the making of the kinds of cigarettes smoked all over the world, especially U.S. brands such as Marlboro and European brands such as Gauloise.

With the child marketing act, Canada has effectively banned the import of U.S. and other tobacco brands. What really galls the United States, Argentina and others is that — in typical Canadian trade protectionist fashion — Canada will allow a Rothmans plant in Quebec City to make cigarettes that contain the banned ingredients — for export only. Canada, in short, will ban the import and sale at home of cigarettes containing any of the 5,000 banned ingredients. But it will allow such cigarettes to be made in Canada and exported to the United States and elsewhere.

Internationally, then, the Harper Tories have created a potential trade war. At home, meanwhile, the ban on the import of cigarettes that contain some of the 5,000 ingredients — including Marboros and Camels — will fuel new contraband demand. Warnings to that effect were issued during the Senate committee hearing. “I can guarantee you that we will lose even more money to the illegal cigarette trade,” said Kenneth Kim, general manager of the Ontario Korean Businessmen’s Association.

Still, Bill C-32 became law, even though Senator Segal abstained over the trade issue. As a result, Mr. Harper’s opportunistic election gimmick, aimed at curbing the use of flavoured tobacco to children, will do nothing to protect children. By further enhancing the power and scope of the contraband market, it will only increase the supply of illegal cigarettes, a prime source of tobacco to the young. At the same time, the government has launched a protectionist scheme that threatens a trade conflict.

source: http://www.financialpost.com

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