All smoke no mirrors in WTO dispute

The Australian government has taken a landmark stance that national health trumps the future of cigarette marketing as a branded product. Australia’s intention is to make all cigarette packaging drab and uniform in colour with standardized labelling requirements. Cigarette exporters are nervous and two countries, Honduras and Ukraine have filed disputes in the WTO over the new Australian legislation.

Australia plans to regulate the appearance of marks and other design features on the retail packaging of tobacco products, as well as on the tobacco products themselves. It will regulate the appearance of the brand, business, company or variant name in a standard form, font size and location. It will prescribe the colour and the finish of retail packaging for all tobacco products and will prescribe the requirements for wrappers, inserts and add-ons. Tobacco companies have been given until December 2012 to comply with the Australian ‘Plain Packaging Act’. Honduras has complained that this threatens over 100’000 jobs in its developing economy, which would be a severe blow to this economy.

So what would the grounds be to challenge the ‘good health’ of Australians in the WTO? Essentially the logic is that the Australian packaging requirements would defeat the basic function of a trademark, which is to allow consumers to distinguish between products of different companies. The complaint is thus based on intellectual property grounds under the TRIPS Agreement and labelling grounds under the TBT Agreement. Some of the primary courses of action under these agreements could be the following:

In relation to intellectual property considerations several parts of the TRIPS Agreement are at issue, some being;

• Article 16.1 of the TRIPs Agreement, because the measures seemingly prevent owners of registered trademarks from enjoying the rights conferred by a trademark.
• Article 20 of the TRIPs Agreement, because the use of a trademark could be unjustifiably encumbered by special requirements. These are the use in a special form, the specific font size and colour of the brand, business or company name, and, the use in a manner detrimental to the trademark’s capability to distinguish tobacco products of one company from tobacco products of other companies.
• Articles 22 and 24 of the TRIPs Agreement, because Australia is possibly diminishing its level of protection for geographical indications below the level that existed prior to January 1995; and does not provide effective protection against acts of unfair competition with respect to geographical indications while also creating confusion among consumers related to the origin of the good.

For the technical regulations and labelling matters Article 2 of the TBT Agreement will be relevant. The technical regulations seemingly create unnecessary obstacles to trade that are more trade restrictive than necessary to fulfil a legitimate policy objective. The measures purportedly also result in treatment less favourable of imported cigarettes than of like products of national origin.

It is also possible that a non-WTO agreement, the World Health Organization’s ‘Framework Convention on Tobacco Control’ may be cited as a defence. It is noted that both Honduras and Australia are signatories to this instrument which seeks to curtail smoking prevalence globally.

These complaints have a particular trade and systemic interest for African countries, who are large producers of tobacco and tobacco products. African countries should be seriously considering joining the present consultations with Australia in Geneva with a view to evaluating their own participation in the proceedings. African farmer groups in tobacco and cigarette companies should also be engaging their trade ministries to ensure that their interests are considered in these WTO proceedings. It is reported that South Africa has requested permission to join consultations, which is a pleasing development.

Readers are welcome to contact Hilton Zunckel for further advice on this ‘smoky’ area of international trade regulation.