Ukraine Pulls Out of Australia Tobacco Packaging Dispute

11 June 2015

Ukraine announced last week that it would be suspending its WTO dispute over Australia’s plain packaging measures for tobacco products, with Kiev saying it would instead seek to find a mutually agreed solution with Canberra on the subject.

Kiev submitted the request in late May, which was then circulated in early June. Australia has said that it supports Ukraine’s request, so long as it does indeed aim for reaching such a solution.

“First, now we have restricted resources and we would like to send them to the direct trade interest of Ukraine. Second, economic logic is absent in this dispute, and third, the dispute has negative consequences for our country,” said Aivaras Abromavicius, Ukraine’s Economic Development and Trade Minister, in a press conference last week.

Ukraine was the first of five WTO members which had challenged Australia’s Plain Packaging Act, as the measure is known. The policy requires all tobacco products sold in Australia to be packaged with only one colour and shape, with a significant portion of the packaging covered in health warnings. The bill was approved in December 2011, though it allowed tobacco companies until December 2012 to make the required changes in their production. (See Bridges Weekly, 21 March 2012)

The other four complainants are Cuba, Dominican Republic, Honduras, and Indonesia, who have claimed that the measure is unnecessarily trade-restrictive. By undermining protections provided to trademarks and geographical indications, they say, it is difficult for their premium products to stand out in the marketplace, making fair competition impossible.

Australia, for its part, has defended the policy as being in line with global trade rules and being key toward reducing the incidence of smoking and its related health effects.

Estimates from the World Health Organization place the number of tobacco-related deaths globally at 6 million per year, with nearly 80 percent of the world’s smokers living in low- to middle-income countries, which the global health agency says suffer the worst toll of the related illnesses and deaths.

A WTO dispute panel had been established over a year ago to hear all of the complaints against the Australian policy. (See Bridges Weekly, 1 May 2014) Under the organisation’s rules, a panel can suspend its work upon a complainant’s request for up to a year. If the time period exceeds a year, then the authority for establishing that panel will lapse.

According to previous documents released by the WTO, a panel report on the other four complaints is expected not before the first half of 2016, in line with the timetable adopted by the panel last year.

More plain packaging on the horizon

The WTO case has drawn significant international attention, both given the interest expressed by other countries in pursuing similar policies, as well as the possibility that the plain packaging trend could spread to other industries, such as unhealthy foods or alcohol.

In the years since Australia established the Plain Packaging Act, various other countries have already followed suit. Earlier this year, both the UK and Ireland approved plain packaging regulations. Uruguay also has such measures in place, being the first country to do so. (See Bridges Weekly, 19 March 2015)

Norway is now in the process of conducting consultations on the subject, and has publicly supported the moves by other countries to do the same. Similar policies are also under consideration in France, Turkey, and Finland.

The growing interest by some countries in adopting such measures has been met with swift opposition by other countries that are major producers of such goods, as seen in the above-mentioned WTO dispute, as well as by tobacco companies themselves.

While companies cannot launch disputes at the global trade body, they can pursue legal action in other ways, such as under bilateral investment treaties (BIT).

Australia has already faced some of these cases, including a domestic constitutional challenge, which it won, and under its BIT with Hong Kong, which is still ongoing. The latter marked Canberra’s first investor-state dispute, according to the Australian government.

The UK government is now facing its own challenge from Philip Morris International and British America Tobacco, with the complaint filed in the High Court of Justice, one of the country’s highest courts, last month.

ICTSD reporting; “Ukraine ends dispute with Australia over cigarettes,” INTERFAX UKRAINE, 5 June 2015; “Tobacco Giants Sue Britain Over Rules on Plain Packaging,” NEW YORK TIMES, 22 May 2015.

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