US: Why Big Tobacco Loves Globalization

In late 2001, Canada's government proposed a regulation that would ban the use of the words "light" and "mild" on tobacco advertising. Since there was no medical proof that low-tar cigarettes were better for you than high-tar, the feeling was that such descriptors constituted false advertising.

In response, Philip Morris complained that such a regulation would violate the North American Free Trade Agreement. "Prohibiting the use of these descriptive terms would effectively ban the display of trademarks containing them. If enacted, the proposed ban would therefore expropriate and destroy the affected trademarks and brands in Canada as well as the substantial goodwill that accompanies them in violation of both NAFTA and TRIPS [Trade-Related Aspects of Intellectual Property]."

Philip Morris never actually filed suit. But it didn't need to. Canada never passed the regulation. Did the threat from Big Tobacco scare Canada off? That's certainly one possibility, and for anti-tobacco crusaders, it's a blueprint for the future, as the U.S. continues to sign bilateral free trade agreements with other countries that give corporations similar (or expanded) rights to sue governments for so-called expropriations or otherwise contest domestic public policy. Just today, I learned from a posting to the invaluable mailing list run by the Consumer Project on Technology on intellectual property and public health issues that the same issue is a potential problem with a proposed U.S.-Malaysia Free Trade Agreement.

Tobacco consumption in the developed world is flat or declining, but it is booming worldwide, boosted by the removal of tariffs and other restrictions on trade that have been an integral part of globalization. But, tobacco, as its critics like to point out, is not like most other products -- it's "the only legal consumer product that kills half of its regular users." So, naturally, governments are wont to regulate it.

The fact that tobacco companies might use provisions of trade agreements to fight against the imposition of such regulations, or to claim financial compensation from governments, is one of the most glaring flaws in free trade as it is currently practiced. Eleven years ago, NAFTA pioneered the possibility of this kind of extraterritorial challenge to domestic sovereignty, with its inclusion of the infamous "Chapter 11" provision giving foreign investors the right to sue governments and be judged under special tribunals if they believed that domestic court rulings or government action was unduly interfering with their business.

As of 2005, 42 such suits have been filed in Mexico, the U.S. and Canada. Six have been dismissed, five were victories for the plaintiff, and the rest are pending or in arbitration. The total amount of compensation forked over by governments has added up to a relatively piddling $35 million, but the legal precedents being set are alarming. In one notable case, Canada rescinded a ban on the gasoline additive MMT, and ended up paying the plaintiff $13 million.

Under Chapter 11, foreign investors enjoy the rights to contest government regulations and court decisions that domestic citizens do not. This has led to criticism in Congress by both Republicans and Democrats, and in 2002, the White House was instructed to ensure that it didn't make the same mistake in future trade agreements. But a detailed analysis conducted by Public Citizen that is must reading for anyone interested in this subject pretty conclusively demonstrates that the opposite has occurred. If anything, the provisions built into succeeding trade agreements extend the abilities of corporations to contest domestic government action.

One can be a supporter of the principle that greater trade between nations will lead to greater prosperity and still argue that the way the United States has gone about ensuring how "free trade" works has been a gross dereliction of governmental responsibility. Big Pharma shouldn't be able to use free trade agreements to contest domestic decisions on public health. Big Tobacco should be given even less room to breathe.

• 104 Globalization