The growing tobacco epidemic which is the subject of this conference is spread by identifiable agents: the multinational tobacco companies.
Two of the three leading global tobacco companies -- Philip Morris and R.J. Reynolds -- are based in the United States. Two thirds of their sales, and about half of their profits, come from overseas sales.
But the U.S. deal with the tobacco companies to settle existing and future lawsuits says nothing about the global operations of Philip Morris and RJR. It does nothing to restrict their overseas activities.
The deal is completely compatible with the companies' global strategy and ambitions: to maintain constant or slowly declining sales at home, while expanding massively abroad. The deal would sacrifice many of the most powerful tools to discipline the tobacco multinationals -- most importantly, litigation in U.S. courts -- without doing anything to curtail the tobacco epidemic in the companies' target regions: the Third World and Eastern Europe and the former Soviet Union.
Compounding the problem, in a series of ways the deal may actually intensify the global epidemic.
1. The deal will enable and perhaps encourage the tobacco companies to intensify their predatory behavior abroad.
The deal requires the tobacco companies to pay $368 billion over 25 years. In exchange, it grants the industry a comprehensive U.S. peace -- an end to the lawsuits and myriad hassles it now faces in the United States.
In order to pay off the $368 billion -- a sum small in comparison to the harm inflicted by the injury and what would be needed to genuinely punish the industry, but a substantial sum nonetheless -- the companies are likely to intensify their aggressive marketing, advertising, corporate acquisition and related strategies abroad. As Greg Connolly of the Massachusetts Tobacco Control Program suggests, Filipino kids may end up paying the U.S. state of Mississippi's Medicaid bills.
Whether or not international sales end up subsidizing the company's payment obligations under the deal, there is little doubt that peace at home will enable the companies to intensify their overseas market invasion. The lawsuits and growing public controversies about tobacco company behavior are a drain on company executives' time and energy, and on the resources of the companies; with that diversion eliminated if the deal is approved, expect to see them adopt a laser-like focus on overseas expansion, new corporate resources plowed into international divisions and unbounded tobacco company aggression in Third World and Eastern Europe and the former Soviet Union.
There is no question that U.S. tobacco corporate expansion means not only enlarged market share for the U.S. companies but higher smoking rates. After the Reagan/Bush threat of trade sanctions forced South Korea to open up its cigarette market to U.S. companies in 1988, smoking rates among male Korean teenagers jumped from 18.4 percent to 29.8 percent in a single year, according to the U.S. Government Accounting Office. The rate among female teens more than quintupled, from 1.6 percent to 8.7 percent. CNN reports that since foreign cigarettes entered Russia in large numbers a decade ago, smoking rates have risen from 50 to 65 percent among men, and tripled among women, skyrocketing from 10 to 30 percent.
2. The deal will effectively close off foreign tobacco victims' access to U.S. courts.
A. The deal will absolutely or effectively preclude lawsuits by non-U.S. victims in U.S. courts
The deal states that it settles all medical cost reimbursement and aggregated suits by governmental entities against the tobacco companies. ("Present Attorney General actions (or similar actions brought by or on behalf of any governmental entity) parens patriae and class actions are legislatively settled. No future prosecution of such actions." (Title VIII, A., 1.) On its face, this provision would block other governments from bringing suit, in U.S. courts, on the same theories as the U.S. state cases have proceeded.
Similarly, the deal's limitations on private suits appear on their face to apply to lawsuits filed in U.S. courts by non-U.S. citizens. Those provisions -- which apply equally to past and future conduct -- preclude victims from joining together through class actions or other means to sue the industry collectively. Given the economics of suing the tobacco industry, which fights each case tooth and nail, the preclusion of aggregated suits grants the industry effective immunity.
But note: while U.S. victims and the U.S. public are presumably receiving benefits in exchange for this grant of effective immunity, overseas victims and non-U.S. populations are receiving nothing.
It is true that, even absent passage of the deal, any private suit in U.S. courts by non-U.S. victims would have to overcome difficult procedural obstacles. But it is not impossible that these suits could succeed in U.S. courts, especially in the future, as the courts revise their views on the propriety of suits filed in the United States against U.S. corporations for harms those corporations perpetrate abroad.
B. The deal will interfere with foreign governments and foreign victims' efforts to collect judgments in U.S. courts.
Even if foreign governments or victims choose to sue in their home courts, the deal will still restrict their rights. In many countries, the U.S. company subsidiary may not have sufficient resources to pay the total costs of the award to the government or victims. This will especially be a problem where the subsidiary is an importer and promoter, but not a manufacturer.
If the foreign government or victims then seek to collect their money from the parent company in the United States, they are likely to run up against the liability caps in the U.S. deal. Those caps limit the overall amount the companies can be forced to pay to $5 billion annually. And they specify that individual judgments are limited to $1 million annually, unless every other judgment can first be satisfied under the overall cap.
There is nothing in the deal which suggests foreign attempts to collect judgment from the U.S. tobacco companies should be considered outside the framework of the deal.
3. The deal appears to preclude the U.S. Food and Drug Administration (FDA) from equally regulating products made for domestic consumption and for export.
The warning labels and marketing restrictions under the new deal apply only to "all tobacco products sold in the U.S. (including all its territories and possessions, as well as duty-free shops within U.S. borders)." (Title I).
Even more disturbingly, the deal defines the scope of FDA as "all product sold in U.S. commerce," specifying that it covers imports but not mentioning exports. (Title V. A.) Leading U.S. regulatory law authorities believe this provision would preclude the FDA from regulating cigarettes manufactured in the United States for export.
That would enshrine into law a double standard. Cigarettes manufactured in U.S. factories for domestic consumption would be subject to warning requirements included in the deal or tougher warning, labeling, ingredient disclosure or ingredient regulations potentially later required by the FDA. Cigarettes made in the same factories, but for export, would not be subject to these rules.
4. A bankruptcy loophole in the deal could give the tobacco companies an out to ravage the Third World and Eastern Europe and the former Soviet Union.
The deal specifies that, in the event of bankruptcy, the U.S. companies must continue to meet their payment obligations under the deal. However, it states that the "obligation for annual payments responsibility only of entities selling into domestic market" (sic). (Title VI, B.6.) In other words, in the event of bankruptcy, the U.S. company payment obligations continue, but not for the subsidiaries selling overseas.
This means that the companies' overseas earnings would go directly into shareholder pockets, without being siphoned off to the settlement payment pot.
It is easy to imagine disturbing scenarios in which the companies might exploit this provision, especially if U.S. consumption rates decline significantly in coming years.
5. The deal would effectively end the disclosure in the United States of damning internal company documents.
The proposed terms of the deal would enable the tobacco industry to continue to conceal its most important documents for years, and perhaps permanently.
The deal permits the tobacco companies to withhold from a new central depository of industry documents all of those for which they claim attorney-client, trade-secret or other privileges and protections. The industry would conduct a new review -- with no deadlines -- of all the documents for which it claims privilege or trade secrecy. After the review is concluded, public or private parties could challenge particular continuing claims of privilege or trade secrecy, but the terms of the deal mitigate against successful challenges. Those who do contest industry claims of secrecy may not be qualified or highly motivated to do so -- and could even be industry allies -- and the challenges are likely to be greeted with hostility by the panel of judges who would decide the cases.
Those tobacco control advocates outside of the United States who find industry disclosures in the United States -- such as the revelation that BAT considered making root-beer-flavored cigarettes -- helpful would be out of luck if the deal is enacted. The deal would mean those types of disclosures will come to a screeching halt.
6. The deal will end the U.S. political momentum against the industry and the U.S. media focus on tobacco.
For tobacco control movements that find their governments become interested in tobacco control when it is a hot topic in the United States, or find their national media tends to focus on tobacco when the U.S. media does, this "decompression" effect should be of concern.
Conclusion: A Plea to Non-U.S. Tobacco Control Advocates
Please do not feel inhibited to speak out against the proposed deal because it is a "U.S." issue.
The so-called "global settlement" is really a U.S. settlement -- but it has global implications.
The proponents of the deal, in my view, have not given sufficient attention to international tobacco control issues. They have not appropriately consulted with their international allies. They need to hear from you -- at this roundtable discussion and at this conference, and in the weeks ahead; in personal conversations and communications; and through a resolution adopted by this Conference clearly stating that the proposed deal is unacceptable.