From October, it will be all but impossible for most Australians to vape — largely because of Canberra’s little-known ‘homework police’

After a misstep, it’s about to become illegal to import e-cigarettes without a prescription, which means that, for most Australians, it’ll become all but impossible to vape from October 1.

The misstep tells us a lot about how the Australian government works behind the scenes — most of it good.

Mid last year, Health Minister Greg Hunt announced plans to ban the import of nicotine-containing e-cigarettes and refills without a doctor’s prescription. Border force would be checking parcels.

To Hunt, the decision made sense. It was already illegal to buy and sell such products without a prescription in every Australian state and territory, and it was illegal to possess them without a prescription in every state but South Australia.

All Hunt was doing was closing a (very wide) loophole.

Government backbenchers revolted, Hunt pointed to a doubling of nicotine poisonings over the past year and the death of a toddler, the prime minister offered less than complete support, saying he was keeping an “open mind”, and Hunt put the idea on the backburner.

That’s the way it played out in public.

But beneath the surface, something impressive was swinging into gear. It’s called the Office of Best Practice Regulation, OBPR, an apolitical body nestled within the prime minister’s department.

Canberra’s ‘homework police’

So what did this little-known entity do that will effectively stamp out vaping from next month? Its executive director, Jason Lange, revealed the back story at an Economic Society of Australia meeting in Canberra earlier this year.

Set up during the 1980s to ensure government decisions didn’t needlessly tie up business in red tape, the office gradually was given other things to consider, including the effect of government decisions on citizens, on the environment, and on the distribution of burdens throughout society.

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Read more: Vaping is glamourised on social media, putting youth in harm's way

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Then in 2013 Prime Minister Tony Abbott moved it out of the Department of Finance into his own department: Prime Minister and Cabinet.

Prime Minister and Cabinet is the traffic cop: it decides what gets put forward for cabinet to decide, and when. So suddenly the office was working at the centre of government decisions, getting to view every one of the 1,800 or so things put to senior ministers to decide each year.

Seven questions shaping new decisions

For the few hundred proposals it thinks might have significant unintended impacts, the office demands an impact statement.

It doesn’t tell the department or authority putting forward the idea what to put in the statement. But as Lange explained, it “marks the homework”. The proposals behind statements that aren’t good enough find it hard to get to cabinet.

Hunt’s decision on e-cigarettes wasn’t accompanied by an impact statement the first time around. Lange’s office made sure it was on the second.

Each OBPR analysis has to address seven questions.

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Office of Best Practice Regulation

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The first is what problem the agency is trying to solve. Maybe it’s not really a problem. Merely working that out puts what follows into focus.

The second is why government action is needed. Maybe the problem isn’t very big, or maybe it will solve itself.

The third is what options the agency is considering. The agency has to put forward at least three options, including one that isn’t a regulation. In the case of e-cigarettes, that option was a public awareness campaign.

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Read more: Vaping: As an imaging scientist I fear the deadly impact on people’s lungs

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Then it has to estimate the likely benefits and costs of each option, including the costs to people the option wasn’t intended to hit, such as under-the-counter retailers and people using vaping to give up smoking.

The fifth question is the range of people and organisations to be consulted (which is a way of making sure it happens). The sixth is to identify the best option from the list, which includes making no regulation whatsoever.

The seventh is the means by which the measure would be implemented and (importantly) later evaluated.

Grading government ideas, from ‘insufficient’ to ‘exemplary’

Once in, and usually after being sent back for further work, the analysis is graded on a scale from “insufficient” to “adequate” to “good practice” to “exemplary”.

Very few are graded exemplary, and very few that we know about are graded inadequate, because if such a proposal does get adopted by cabinet, the impact statement gets published along with the grade and a statement that describes its failings — a “nuclear option” Lange says can be deeply embarrassing.

All impact statements attached to proposals the government adopts get published along with its OBPR rating. It is often the best opportunity the public has to read about the thinking behind the proposal.

Tellingly, only about 80 of the hundreds of impact statements started each year get to decision makers, which means the process itself knocks out poorly thought out proposals.

But if an idea has merit, as did the ban on importing e-cigarettes without a prescription, the 180-page impact statement can make all the difference.

It sets out the problem clearly, sets out a number of possible solutions and identifies the winners and losers from each, and shows how they were consulted.

It demonstrates someone in the government has thought it through clearly, and provides material for the government to use when selling its decision.

On the Office of Best Practice Regulation website are hundreds of impact analyses on topics as diverse as food standards, protection for car dealers, and the redress scheme for child sexual abuse.

Vaping becomes harder on October 1

That’s why from October 1 it will become illegal to import without a prescription nicotine-containing e-cigarettes, and illegal to supply any liquid nicotine that isn’t in child-resistant packaging.

Behind the scenes, the government got it right.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Read more >>

How we took on big tobacco - and won

Previously sealed documents reveal the tobacco giant Philip Morris lost its case against Australia over plain packaging because the international tribunal considered it an "abuse of rights".

Philip Morris sued Australia under the provisions of an obscure Hong Kong Australia investment treaty in 2012 after British American Tobacco and Japan Tobacco lost a challenge to the plain packaging legislation in the High Court.

As had its competitors in the failed High Court challenge, the manufacturer of Marlboro and Longbeach cigarettes argued Australia had confiscated its trade marks, turning from "a manufacturer of branded products to a manufacturer of commoditised products".

Philip Morris wanted the tribunal to order Australia to withdraw the law or to award damages of at least $US4.2 billion plus compound interest at the Australian bank cash management rate dating back to the to the law's introduction.

Its use of an outside tribunal rather than an Australian court to sue the government was unusual, in that it was making use of a provision available to foreign companies under trade agreements but denied to Australian companies.

The government spent more than $50 million defending the case, assembling a team including two Queens Counsels and two Senior Counsels and ferrying to Singapore witnesses including the former treasurer Wayne Swan and former judge Roger Gyles QC.

The 186-page judgement, unsealed on Tuesday, shows the tribunal rejected the claim at the first hurdle, finding Philip Morris had moved its Australian and Asian headquarters to Hong Kong for the express purpose of making the claim.

"The tribunal cannot but conclude that the initiation of this arbitration constitutes an abuse of rights, as the corporate restructuring by which the claimant acquired the Australian subsidiaries occurred at a time when there was a reasonable prospect that the dispute would materialise and as it was carried out for the principal, if not sole, purpose of gaining treaty protection," the judgement finds.

A spokesman for assistant health minister Fiona Nash said she welcomed the decision which validated the government's decision to take on Philip Morris.

Originally rare, the use of so-called investor-state dispute settlement provisions in international treaties has ballooned in the past decade. Australia's Productivity Commission counted 42 in 2014.

Productivity Commission count of iinvestor-state dispute settlement cases

Investor-state dispute settlement provisions have been included in Australia's recently-signed treaties with Korea and China and the 12-nation Trans-Pacific Partnership which has been signed but not yet ratified by the Australian parliament.

La Trobe University public health academic Deborah Gleeson said the victory would add to momentum for the spread of plain packaging legislation around the world, but she said it didn't mean that investor-state dispute settlement provisions weren't a threat to public health.

"If we ratify the Trans-Pacific Partnership transnational corporations based in the United States will gain an avenue to sue Australia. There's an exclusion for tobacco control measures, but no solid exclusion for other health measures."

Australia continues to face challenges to its plain packaging laws in the World Trade Organisation from tobacco-growing nations including Cuba, the Dominican Republic, Honduras and Indonesia. The Ukraine withdrew its challenge last year.

In The Age and Sydney Morning Herald

Read more >>

'New wave of quitting' likely as we smoke less

Plain packaging and higher cigarette prices appear to have done more than cut the number of people who smoke. They've also cut the amount remaining smokers smoke.

Official surveys conducted by the Institute of Health and Welfare and the Bureau of Statistics find that in the past decade the number of Australians smoking has fallen 25 per cent. But an analysis of the December quarter Australian National Accounts conducted by health policy specialist Martyn Goddard finds the volume of tobacco consumed over those 10 years has fallen 48 per cent.

He says the difference can only be explained by the remaining smokers smoking less – at least 30 per cent less.

"It might well be more, because people who successfully quit are more likely to be low to moderate smokers than those who remain."

"On that basis, they would be responsible for less than an equal share of any overall consumption decline, and current smokers responsible for more."

Mr Goddard said it was impossible to say which tobacco control measure was the most responsible. But it was clear that restrictions on where people could smoke had made it more difficult to be a heavy smoker and almost impossible to be a chain smoker. Many of the restrictions had been introduced in the past 10 years.

It wasn't at all clear that the Australians who had cut back were less likely to die, but it was certain they were better placed to give up completely.

"They have less of a nicotine habit, they may already have tried to give up and not yet succeeded; and lowering smoking gradually to zero, combined with nicotine patches, is just as effective as going cold-turkey," he said.

The cutbacks were setting the scene for a new wave of quitting.

In March an extra 19 cents was added to the price of a packet of 30 cigarettes in the latest half yearly round of excise increases, taking the price to $16.12.

In September an extra $3 a pack will be added in addition to the excise increase in the last of the four increases of 12.5 per cent imposed by the Gillard Labor government and maintained by the Coalition.

Labor has promised an extra four more increases of 12.5 per cent if elected, lifting the excise to around three quarters of the retail price.

Australia survived a challenge to its plain packaging laws from Philip Morris International under a Hong Kong Australia investment treaty, and is at present defending itself against a challenge in the World Trade Organisation from Cuba, the Ukraine, the Dominican Republic and Honduras.

In The Age and Sydney Morning Herald

Read more >>

$50 million up in smoke defending plain packaging

Australia's legal bill for defending its cigarette plain packaging legislation is set to hit $50 million as it battles to contain a case brought by tobacco giant Philip Morris before an extraterritorial tribunal in Singapore.

And that is just for the first stage. If in September the three-person extraterritorial tribunal decides Australia has a case to answer, the hearing will move on to substantive matters and the bills will become far bigger.

The West Australian newspaper revealed on Tuesday that former treasurer Wayne Swan was called to Singapore in February to give evidence for Australia in a secret hearing.

Among the witnesses called by Philip Morris has been former High Court judge Ian Callinan, who was quizzed about administrative law.

Australia has succeeded in getting the case split into two. The first part will decide whether Philip Morris Asia has a right to bring the case.

Philip Morris Asia bought Philip Morris Australia Limited in early 2011 as the plain packaging legislation was being prepared. Australia is arguing this means it can't claim that the law hurt it, because it bought the company "in full knowledge" of Australia's intentions.

If Australia fails in September it will continue to fight the case, calling former health minister Nicola Roxon and her then departmental secretary Jane Halton as witnesses.

Philip Morris has been able to bring the case despite losing an appeal against Australia's laws in the High Court because of a so-called investor-state dispute settlement clause in an obscure Hong Kong Australia investment agreement.

Such clauses have been included in two of Australia's recently concluded free trade agreements, with Korea and China. They allow foreign corporations (but not local corporations) to sue for expropriation.

Such cases were rare until the early 1990s, but the Productivity Commission says there were 42 worldwide last year.

Speaking from Hawaii on the sidelines of talks expected to wrap up the Trans Pacific Partnership agreement with Australia and 11 other Pacific-facing nations, La Trobe University public health specialist Deborah Gleeson said she feared Australia would be unable to carve out sufficient exemptions.

Australia has asked to exempt the Pharmaceutical Benefits Scheme, Medicare, the Therapeutic Goods Administration and the Office of the Gene Technology Regulator from investor-state dispute settlement procedures.

"There is likely to be a lot of unhappiness among other countries about specific Australian programs being carved out, because that begs the question of what happens to their programs," she said.

The United States has secured an investor-state dispute settlement in each of its agreements apart from the 2005 Australia-US agreement, in which the Howard government refused to give way.

Trade Minister Andrew Robb said from Hawaii that Australia was party to investor-state dispute settlement provisions in 29 agreements and "the sun has still come up".

The talks continue until Friday.

In The Age and Sydney Morning Herald

Read more >>

Newsflash. Cigarette sales are sliding. Previously suppressed Treasury figures say so.

The Commonwealth Treasury has entered the debate over cigarette sales, publishing previously secret information that shows sales falling since the introduction of graphic health warnings and plain packaging.

The Treasury collects data on sales per stick in order to levy tobacco excise, but has until now withheld it from publication in order to protect taxpayer confidentiality.

Added to the Health Department’s website quietly last week amid debate over the effectiveness of plain packaging, the Treasury data shows 3.4 per cent fewer cigarettes were sold in 2013 than 2012. Plain packaging became mandatory on December 1, 2012.

The Treasury data is consistent with national accounts data which shows a decline of 0.9 per cent in the amount of tobacco and cigarettes sold between 2012 and 2013. The national accounts show a further slide of 7.6 per cent in the three months to March after the first of a number of big hikes in tobacco excise announced late last year.

The Bureau of Statistics bases the national accounts measure on a survey of households, whereas the Treasury collects information on every stick and pouch of tobacco sold.

The Treasury data suggests that adjusted for population growth of 1.7 per cent the number of sticks sold per person slid around 5 per cent between 2012 and 2013.

The ABS data has consumption of tobacco the lowest ever recorded...

Both measures conflict with industry claims that tobacco sales climbed by 59 million sticks or roll-your-own equivalents in 2013. The claimed 0.3 per cent increase said to be sourced from the data analysis firm InfoView although the data behind it has not been publicly released.

Further declines are in store when tobacco excise jumps by a further 12.5 per cent in December, and then by 12.5 per cent in December 2015 and 2016. The increases will be on top of the regular six-monthly indexation increases which now move in line with average weekly earnings rather than the consumer price index.

The Health department website links to a briefing by the chief executive of Imperial Tobacco Alison Cooper which says that during the first six months of plain packaging the Australian tobacco market shrank “roughly 2 to 3 per cent”.

The president of the Australian Council on Smoking and Health Mike Daube said the Treasury data was clearly more reliable than the unpublished industry figures.

“It’s worth noting that in publishing the Treasury data the health department said it was an indicator of tobacco volumes in the Australian market. It was a gentle guide to those who need guide dogs and white sticks that these are the most relevant figures,” he said.

“The whole debate is dishonest,” he added. “We’ve always said that the main focus of plain packaging is long term. No-one said plain packaging was going to stop everybody smoking overnight .”

British American Tobacco spokesman Scott McIntyre agreed that smoking rates were declining. “Smoking rates have been declining in Australia for a very very long time,” he said. “But since plain packaging the rate of decline has halved. That’s what we are arguing.”

In The Age and Sydney Morning Herald





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Rudd's hike in cigarette tax is far bigger than you think. And it should be

So you’ve heard cigarette taxes will soar 60 per cent. You don’t know the half of it.

Buried within the budget proper in May was a time bomb, which when taken together with the measures confirmed Friday will send cigarette prices through the roof.

The budget changed the method by which the excise on tobacco products is regularly increased. From March the half-yearly increases will no longer be determined by inflation (which was 0.8 per cent in the past half year) but by the growth in average ordinary time earnings (which was nearer 3 per cent).

It’s a big difference, and as the higher growth rate compounds it gets bigger. Putting it together with the four promised four increases of 12.5 per cent means the cigarette excise will double in five years.

Which is just as well, if we want smokers to give up.

Giving up turns out to be much harder than the anti-smoking brigade would have you believe.

A new survey from the US National Bureau of Economic Research finds that for adults the effect of cigarette taxes on smoking is “small and not usually statistically significant”. After examining the relationship between smoking and cigarette taxes in fifty states over twelve years the authors find that “at best, increases in cigarette taxes will be associated with a small decrease in cigarette consumption”.

The author’s stark summation: “It will take sizable tax increases, on the order of 100 per cent, to decrease adult smoking by as much as 5 per cent”.

As it happens, an increase of 100 per cent - a doubling - is exactly what Kevin Rudd has set in motion. It’s the only sort of increase the US authors believe will have much effect. Which doesn’t mean smoking hasn’t been sliding for other reasons...

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A graph prepared by the Australian Treasury shows tobacco use per person slipping in what looks like a straight line since the start of the 1980s. The end of television advertising, smoke-free workplaces and changing social norms would be among the reasons. The occasional excise hike scarcely registers. A University of Sydney study of the 25 per cent hike in 2010 found it almost doubled the proportion of smokers who quit or tied to quit, but only for a few months. After a short time the proportion trying to quit returned to where it had been.

The study concluded that in order to consistently boost quitting the tax hikes would need to be regular, which is also was Kevin Rudd has set in motion.

A much-quoted Treasury study of the 2010 tax hike finds it cut tobacco imports by 11 per cent (all of Australia's’ tobacco is imported). But that “cut” was over a two-year period, meaning some of it was the slide that is occurring all the time. And it doesn’t mean 11 per cent of Australia’s smokers quit. Far from it. Many would have simply smoked less. If you are one of those who smoked less, I have grim news. It probably doesn’t mean you took in less nicotine. A US survey of smokers who cut back found the concentrations of nicotine-related substances in their blood remained just as high. Although they smoked fewer cigarettes, they smoked each one "more intensively,” using mechanisms such as inhaling for longer, having more puffs per stick and (perhaps subconsciously) blocking the ventilation holes on the filters.

Another reason the 2010 tax hike cut tobacco imports was that it stopped some young people from ever smoking in the first place. Unlike adults, teens and sub teens are incredibly sensitive to price when it comes to buying cigarettes. They don’t have much access to money. It’s why the manufacturers used to sell cigarettes in packets of four. One estimate is that a 50 per cent increase in cigarette prices will cut teenage smoking by 41 per cent. It will cut adult smoking by 5 per cent.

Once we get money and we are already smoking we will spend it on cigarettes rather than save it (although we won’t go so far as to go without food). It might be why smokers are poorer than non-smokers, even where their incomes are the same. A US finding is that each year of adult smoking is associated with a 4 per cent cut in net worth.

The stickiness of smoking (addiction is the word) means that hikes in cigarette taxes can be very effective in raising more money. Yes, they raise it from poor people, but it is partly the smoking that is making them poor. If the tax hikes are really big, and repeated, they might just do those people a favour. And they are highly likely to stop young people from ever being sucked in in the first place.

In The Canberra Times


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MYEFO Monday, Cigs up November 1

University research grants in doubt

The government will release its midyear budget update next week, prompting accusations it is bringing the document forward to avoid factoring in worsening revenue predictions and jeopardising its promised surplus for this financial year.

It is understood that the midyear economic and fiscal outlook will be released as early as Monday, more than a month earlier than last year's release on November 29.

The Reserve Bank minutes published yesterday contributed to the downbeat assessment of the economic outlook, a scenario that paves the way for interest rate cuts in coming months.

The government has promised to return the budget to surplus this financial year but is having to make more cuts because the economic outlook has worsened since the budget in May and the cost of dealing with asylum seekers has blown out.

The Herald understands university research grants worth $240 million are at risk after the government put on hold this year's grants round amid speculation it would not be restarted.

So-called discovery grants in fields including science, economics and medicine are normally announced in late October. Informally, academics have been told not to expect announcements this year and that next year's round is also on hold.

Yesterday, in Senate estimates hearings, George Savvides, the managing director of Medibank Private, the government-owned health insurer, confirmed it was set to hand the government a $300 million special dividend, which would be the second such payment in three years...

Other areas that have been subject to speculation concerning savings include superannuation and a 25 per cent increase in tobacco taxes.

The government, which faces an election next year, is sticking to its surplus promise despite falling revenues, declining commodity prices and an uncertain global outlook.

The budget predicted a slender surplus of $1.5 billion for this financial year. Last financial year it recorded a deficit of $47 billion.

The opposition spokesman on finance, Andrew Robb, said that releasing the midyear statement early would avoid the forecasts being based on assumptions more downbeat than they are at present.

''Releasing it this early will be a cynical snow job to disguise the anticipated haemorrhaging of tax revenue resulting from softening commodity prices and terms of trade,'' he said. ''They've brought it so far forward it's meaningless.''

He pointed to the Reserve Bank minutes, which noted that despite a small recovery in commodity prices, mining investment was likely to peak earlier and at lower levels than had been forecast.

The government would not comment on when the midyear budget update would be released but one source was keen to dispute the claims that a release next week would be unusually early, saying previous midyear forecasts - in 2008, 2009 and 2010 - were released in early November.

In today's Sydney Morning Herald and Age


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A warning at the Trans Pacific Partnership negotiations...

Don't end up like Australia, vulnerable to legal action from the likes of Philip Morris

Delegates attending trans-pacific free trade negotiations in the United States are being warned their countries could end up like Australia if they agree to allow corporations to sue governments in international courts.

Australia is fending off a challenge to its plain cigarette packets legislation from Philip Morris International under the terms of an obscure Hong Kong investment treaty even though Philip Morris has lost its case against Australia in the High Court.

“The Philip Morris company's persistence with the investor state dispute settlement case shows such procedures are a threat to democratically enacted legislation and national judicial decisions”, Australia’s Patricia Ranald told stakeholders forum at the negotiations in Leesburg, Virginia.

The United States is insisting on so-called investor state dispute settlement provisions in the Trans Pacific Partnership even though it does not have them in its existing free trade agreement with Australia and even though Australia has said it will not sign a deal that includes them.

The Trans Pacific Partnership will encompass Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam, many of whom already have in their agreements with the United States clauses that allow corporations to sue governments in supra-national forums...

Philip Morris International moved the head office of its Australian subsidiary to Hong Kong shortly before it launched action against Australia under the terms of Hong Kong treaty in what Dr Ranald said was jurisdiction shopping.

“Philip Morris International described itself as a US-based company when it made a submission in 2010 to the US trade representative supporting an investor state dispute settlement process in the trans pacific partnership.”

“However, it claimed to be a Swiss-based company when it used an investor state dispute settlement process to sue the Uruguayan government for damages under a Uruguay-Swiss investment agreement when Uruguay introduced legislation restricting tobacco advertising.”

“Philip Morris can also claim to be a Hong Kong company because Philip Morris Asia, incorporated in Hong Kong, invested in Australia by becoming the sole shareholder of Philip Morris (Australia) after the Australian government announcement of its intention to legislate for plain packaging of tobacco.”

Speaking as convener of the Australian Fair Trade and Investment Network the Sydney University academic told the forum Australia’s problems showed none of the eleven nations negotiating the treaty should agree to provisions that would allow corporations to sue them extra-nationally.

Sean Donnelly from the US Council for International Business told the forum investor state dispute settlements procedures did no more than give international investors access to the rule of law.

He said business would like more protections, but believed what the US was proposing struct the right balance.

In today's BusinessDay


Investor State Disputes Settlement and the TPP - Patricia Ranald



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Message to Ukraine: Don't mess with our plain packs

And what business is it of yours anyway?

Australia has taken a hard line with Ukraine in the first round of its assault on Australia’s plain cigarette packaging rules at the World Trade Organisation in Geneva.

On Saturday the former Soviet republic asked the WTO set up a panel to hear a dispute on “measures concerning trademarks and other plain packaging requirements applicable to the tobacco products”.

The Ukraine has next to no cigarette trade with Australia but is home to a Philip Morris International subsidiary employing 1400 people. Corporations are not permitted to appeal to the WTO in their own names.

The Ukraine statement says Australia’s law requiring all cigarettes to be sold in plain packets is “more trade restrictive than necessary to achieve the stated health objectives and constitute an unnecessary obstacle to trade”.

Rather than agreeing to the establishment of a disputes resolution panel as is customary in less serious disputes Australia rejected the request, arguing the law was “a sound, well-considered measure designated to achieve a legitimate objective, the protection of public health”.

Public health measures are permitted under WTO rules so long as they don’t unnecessarily restrict trade.

Australia’s rejection of the request for a panel is a symbolic rather than a practical measure... The Ukraine will have to ask for a second time at the next World Trade Organisation meeting on September 28. Australia would be unable to reject a second request.

The dispute would take some months to hear during which time Australia could continue to require plain cigarette packets from December 1.

If the disputes panel finds against Australia the WTO will have the right to impose trade sanctions, should Australia continue to enforce the law.

Australia is fending off a second attack on its plain packaging laws in Hong Kong where Phili9p Morris International has moved the headquarters of its Australian holding company. It is arguing Australia has breached the requirements of an Australia - Hong Kong investment treaty that prevents it depriving Hong Kong entities of their investments.

British American Tobacco has begun an advertising campaign in New Zealand against proposed plain packaging laws warning of action against New Zealand in the WTO.

In today's  Sydney Morning Herald and Age


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Behind the smoke: The corporate war on us

Wednesday column

It’s easy to laugh at big tobacco. Fresh from defeat at Australia’s High Court it has taken its fight against plain cigarette packets to New Zealand where British American Tobacco warns such legislation could expose the nation to legal challenges (no kidding) and to Hong Kong where Philip Morris moved the shares of its Australian subsidiary presumably to take advantage of an obscure 1993 Hong Kong-Australia investment treaty.

Philip Morris Australia, now known as Philip Morris Asia, will argue the treaty prevents Australia from depriving a Hong Kong entity of its investments or subjecting it to “measures having effect equivalent to such deprivation”. Which it does, with a caveat. As a party to the treaty Australia is permitted to deprive a Hong Kong company of its investments so long as it does so “under due process of law for a public purpose related to the internal needs of that party on a non-discriminatory basis”. So Australia ought to be in the clear.

But the almost comic attempt to get mileage out of the treaty (moving from Australia to Hong Kong in order to complain that it was being discriminated against because it was from Hong Kong) masks a broader more serious attempt to turn trade treaties into instruments that allow corporations to sue governments.

The World Trade Organisation allows no such thing. It’s disputes settlement procedure allows a nation to haul another nation before a disputes settlements panel, but not corporation to do so.

That could be why on Friday it will be the Ukraine which will ask the WTO to set up a panel to to hear its plain packaging dispute with Australia rather than a tobacco company. There’s a suspicion that the Ukraine is acting on behalf of a tobacco company, perhaps fuelled by its ranking on the Transparency International Corruption Perceptions Index (at the corrupt end of the scale, sandwiched between Russia and Zimbabwe) and by the fact that it has next to no tobacco trade with Australia...

The dispute will take four months to hear. With appeals it could take up to 14 months. But it won’t unduly trouble Australia. A member of the WTO rather than a corporation will be taking action, it will have to show clearly how Australia’s plain packs law offends against WTO rules (which allow non-discriminatory measures that benefit health) and because the Ukraine’s national interests are not at stake it is likely to run out of enthusiasm before Australia does.

Big tobacco, and fellow travellers in surprising places, want much more.

They want what is known as an Investor State Dispute Settlement Mechanism. They want it in order to allow them to drag Australia and other sovereign governments before specially constituted international courts.

They don’t usually put it that bluntly.

Here’s how Philip Morris International put it in a briefing note for the US trade representative negotiating the so-called Trans Pacific Partnership with eleven nations including Australia: “Philip Morris International considers the availability of an investor-state dispute settlement mechanism - including the right for investors to submit disputes to independent international tribunals - a vital aspect of protecting its foreign investments.”

It is clear what Philip Morris is getting at. Four of the 30 paragraphs in the briefing note seen by BusinessDay complain about Australia’s plain packaging law.

As it happens, the US trade representative is unable to do the bidding of Philip Morris. US law prevents federal agencies from promoting the sale of tobacco overseas. But the trade representative is willing to do the bidding of other corporations that would like to sue foreign governments in supranational courts.

In fact in all but one of the 13 free trade agreements negotiated by US, its representatives have managed to insert such a clause. The exception is the free trade agreement with Australia. Although criticised at the time for giving too much away to the United States in return for very little, on the question of an outside Investor State Dispute Settlement Mechanism the Howard government stood firm.

The Gillard government is standing firm too. The multinational nature of large Australian corporations means it would be effectively be giving our corporations (but not our citizens) an international right of appeal against laws approved by the High Court.

The US is unlikely to give up. It already has such a clause in its agreements with Canada, Chile, Mexico, Singapore and Peru - five of the nations that would form part of the Trans Pacific Partnership.

It’s best hope would be that a new Abbott government saw things differently. It would, if it succumed to lobbying from Australia’s own Chamber of Commerce and Industry.

ACCI is lobbying hard, putting out a statement this month headed crudely: “Australian Foreign Investment Requires Right to Sue Foreign Governments”.

It says its “campaign” is backed by the International Chamber of Commerce, which is hardly surprising but also hardly a sign the backers have Australia’s interests at heart.

Julia Gillard and trade minister Craig Emerson are standing up to them. Will Tony Abbott?

In today's Sydney Morning Herald and Age


Philip Morris International TPPA Stance



"Australian Foreign Investment Requires Right to Sue Foreign Governments

Statement by Peter Anderson, ACCI Chief Executive, August 9 2012

Australia’s largest and most representative business organisation, the Australian Chamber of Commerce and Industry (ACCI), together with leading business groups and some of Australia’s foremost legal experts on trade policy, have launched a campaign for trade agreements to include, on a case by case basis, provisions that allow private companies to sue foreign governments for breach of contract or property rights.

The business campaign seeks to restore Australian support for these rights, known as Investor-State dispute settlement (ISDS) provisions. Case-by-case support was withdrawn by the Gillard government in its 2011 policy statement ‘Trading our Way to More Jobs and Prosperity’.

The campaign features a joint letter signed last month by sixteen business organisations and legal experts, addressed and sent to the Prime Minister.

In launching the campaign’s public phase, ACCI Chief Executive said:

“If Australian companies are to fully grasp opportunities of the Asian century and emerging markets of Africa and the Indian Ocean Rim, trade agreements must provide investor certainty for private companies, not just governments. Investors are put off if they don’t have a secure legal frameworks with enforceable rights by courts or commercial arbitration.”

“Especially in developing countries where legal systems are ambiguous or suspect, Australian companies investing off-shore need confidence to take legal action and compel international arbitration against governments which infringe property and contractual rights.”

“The recent focus on in-bound foreign investment must not overshadow the prosperity flowing from Australian companies successfully investing in emerging markets.”

“ISDS provisions support Australian companies in their investments in foreign countries and provide an efficient mechanism for companies to seek to directly rectify any adverse situations” the joint letter says.

Since 2011, ACCI has tried to persuade the Gillard government to restore a case-by-case approach to ISDS in trade agreements, including Trans Pacific Partnership and Indian Ocean Rim negotiations.

As recently as 13th July in Brisbane, business organisations forming ACCI’s General Council resolved to support a public campaign given no-change in the government’s approach.

“The government’s refusal to consider inclusion of such provisions in current or future regional and bilateral free trade agreements is a flawed approach which reduces security for Australian firms seeking to invest internationally” the joint letter says.

Together with the International Chamber of Commerce, ACCI last week held seminars on international commercial dispute arbitration across five Australian capitals, including judge from the Supreme People’s Court of China.

“Those arbitration seminars starkly reminded businesspeople that investment is stymied and Australian businesses ripped-off if legal rights are not protected and enforceable on foreign shores.”

Aside from ten business groups, the co-signed letter, attached, includes support from the Chartered Institute of Arbitrators, leading barristers (including a former Commonwealth Solicitor General) and legal academics."


ACCI Lobbies for Investor-state Dispute Settlement Provisions




EXTRA READING

. An affront to the rule of law: international tribunals to decide on plain packaging, The Conversation


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Plain packs: The new lines of attack. Big tobacco tries the WTO and TPPA

Big tobacco has opened up a new front in its war against Australia’s plain packaging laws.

The World Trade Organisation has revealed that within hours of Australia’s victory in the High Court Wednesday the former Soviet republic of Ukraine upgraded to formal a complaint against Australia’s law and demanded the establishment of a disputes panel.

Australia will be required to argue its case before the World Trade Organisation in a hearing and appeals process that could take up to 14 months.

“It’s a remarkable coincidence,” trade minister Craig Emerson told the Herald. “The Ukraine was engaged in informal talks with us up until the High Court win, and then went formal.”

Asked whether he thought big tobacco companies were behind the Ukraine’s decision Dr Emerson said he was “not aware of tobacco being a big industry in Ukraine, so one would wonder why it would have a big interest in this”.

Once a substantial tobacco grower, the Ukraine now imports tobacco to manufacture cigarettes which it exports to Europe rather than Australia.

An adverse finding would put Australia in breach of World Trade Organisation rules requiring compensation or a backdown. A recent finding against Australia’s quarantine rules saw it open its market to New Zealand apples for the first time in 89 years...

“Members usually abide by the umpire’s decision,” Dr Emerson told the Herald. “But we do not expect to lose. The WTO rules allow us to regulate for health.”

The hearing will not prevent Australia withdrawing branded cigarette packets from sale on December 1 as planned and allowing only the sale of cigarettes in plain olive green packets until the dispute is resolved.

Dr Emerson’s department is battling big tobacco on a second front in negotiations over the Trans Pacific Partnership Agreement encompassing Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

At the behest of tobacco companies including Philip Morris International the United States is demanding the agreement include a so-called investor state dispute settlement mechanism that would allow firms such as Philip Morris to appeal to an outside body over sovereign decisions it did not like.

The provision goes further than anything in the existing Australia US Free Trade Agreement.

“We will not agree to the provision,” Dr Emerson said. “Philip Morris has indicated it wants the investor state dispute settlement mechanism in the Trans Pacific Partnership Agreement in order to pursue Australia over the plain packaging of cigarettes. We will not accommodate them.”

“This is being pushed by US representatives. Australia is saying no.”

Labor and the Coalition combined in the Senate Thursday to vote down a Greens resolution that would have required Australia to make public its negotiating position in the Trans Pacific Partnership Agreement.

"The negotiations are being conducted in secret,” said Greens trade spokesperson Peter Whish-Wilson. “While draft texts of the agreement were provided to AT&T, Verizon, Cisco, the Motion Picture Association, and other industry lobbyists - advocacy organisations and other citizens are denied access."

Dr Emerson said there was no point in publishing draft negotiating positions because they “shifted around”.

“Negotiating positions have no status. Sometimes they represent ambit claims, and people should not get excited about leaked draft texts.”

“What matters is whether the Australian government will behave in Australia’s national interests, and we will,” he said.

In today's Canberra Times and Sydney Morning Herald


Philip Morris International TPPA Stance




Now for even worse news.

The Australian Chamber of Commerce and Industry is lobbying for the same provision.


"Australian Foreign Investment Requires Right to Sue Foreign Governments

Statement by Peter Anderson, ACCI Chief Executive, August 9 2012

Australia’s largest and most representative business organisation, the Australian Chamber of Commerce and Industry (ACCI), together with leading business groups and some of Australia’s foremost legal experts on trade policy, have launched a campaign for trade agreements to include, on a case by case basis, provisions that allow private companies to sue foreign governments for breach of contract or property rights.

The business campaign seeks to restore Australian support for these rights, known as Investor-State dispute settlement (ISDS) provisions. Case-by-case support was withdrawn by the Gillard government in its 2011 policy statement ‘Trading our Way to More Jobs and Prosperity’.

The campaign features a joint letter signed last month by sixteen business organisations and legal experts, addressed and sent to the Prime Minister.

In launching the campaign’s public phase, ACCI Chief Executive said:

“If Australian companies are to fully grasp opportunities of the Asian century and emerging markets of Africa and the Indian Ocean Rim, trade agreements must provide investor certainty for private companies, not just governments. Investors are put off if they don’t have a secure legal frameworks with enforceable rights by courts or commercial arbitration.”

“Especially in developing countries where legal systems are ambiguous or suspect, Australian companies investing off-shore need confidence to take legal action and compel international arbitration against governments which infringe property and contractual rights.”

“The recent focus on in-bound foreign investment must not overshadow the prosperity flowing from Australian companies successfully investing in emerging markets.”

“ISDS provisions support Australian companies in their investments in foreign countries and provide an efficient mechanism for companies to seek to directly rectify any adverse situations” the joint letter says.

Since 2011, ACCI has tried to persuade the Gillard government to restore a case-by-case approach to ISDS in trade agreements, including Trans Pacific Partnership and Indian Ocean Rim negotiations.

As recently as 13th July in Brisbane, business organisations forming ACCI’s General Council resolved to support a public campaign given no-change in the government’s approach.

“The government’s refusal to consider inclusion of such provisions in current or future regional and bilateral free trade agreements is a flawed approach which reduces security for Australian firms seeking to invest internationally” the joint letter says.

Together with the International Chamber of Commerce, ACCI last week held seminars on international commercial dispute arbitration across five Australian capitals, including judge from the Supreme People’s Court of China.

“Those arbitration seminars starkly reminded businesspeople that investment is stymied and Australian businesses ripped-off if legal rights are not protected and enforceable on foreign shores.”

Aside from ten business groups, the co-signed letter, attached, includes support from the Chartered Institute of Arbitrators, leading barristers (including a former Commonwealth Solicitor General) and legal academics."


ACCI Lobbies for Investor-state Dispute Settlement Provisions



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Plain packs. Could our government stuff up them too?

Its track record suggests so.

Crispin Hull knows a thing or two about the High Court. He has literally written the book on it.

Here's an extract from his column in Saturday's Canberra Times.

IT LOOKS as if the Government is about to give the tobacco companies a leg to stand on in their objections to plain packaging.

If the Government cops another hiding in the High Court it will be entirely of its own making. The successful refugee challenge, remember, related to Howard-era legislation. If the tobacco companies have a win, or a partial win, it will be in relation to Gillard Government legislation...

Its legislation gives the Minister huge power to make regulations to fix up any unintended consequences of the plain-packaging legislation as they affect the operation of the Trademark legislation.

It is like a catch-all repair mechanism for minority government fearful that it would not get parliamentary approval to legislate to fix any unintended consequences – particularly an unintended consequence of leaving the Government exposed to a successful compensation claim.

But changes it proposes to the regulation-making power in the Trademarks Act looks to me to self-evidently unconstitutional.

Now here comes the technical bit, but bear with me.

The new legislation provides the Minister with a sweeping regulation-making power. It says, “Regulations made for the purposes of [giving effect to the plain-packaging legislation]: (a) may be INCONSISTENT with this Act; and (b) prevail over this Act . . . to the extent of any inconsistency.

But basic constitutional law tells you that a Minister cannot make regulations inconsistent with an Act of Parliament. The Minister, like everyone else, must obey the law. Further, it is beyond the legislative power of the Commonwealth to delegate its power to the Executive so that the Minister in effect is legislating.

On first reading, I thought it was a misprint. Usually, the regulation-making power is described as to be NOT INCONSISTENT with the Act.

It will not take the High Court long to knock this one on the head and declare the legislation invalid or at the very least declare invalid any regulation the Minister purports to make that is inconsistent with any law of the Commonwealth Parliament.

Who drafted this stuff? Why is the Government risking another humiliation in the High Court, especially at the hands of the tobacco companies, whose arguments against the substance of plain-packaging are otherwise specious, contradictory, disingenuous and an affront to public health...

Continued at crispinhull.com.au

It's time to worry.


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Plain Pack wars: The Dominican Republic takes on Australia!

Ouch.

From the World Trade Organisation June 7 intellectual property council meeting:

Australia’s plain packaging bill for cigarettes

In this new agenda item, the Dominican Republic objected to a draft Australian law requiring cigarettes to be sold in plain packaging without logos or trademarks. The brands would be identified simply in a standard typeface with large graphic health warnings.

Australia originally notified the draft and the public consultation on it under the Technical Barriers to Trade (TBT) Agreement, in document G/TBT/N/AUS/67, which contains details of the requirements. (See also this Australian government web page, which includes images of samples of the proposed packaging.)

Support or sympathy for the Dominican Republic came from Honduras, Nicaragua, Ukraine, the Philippines, Zambia, Mexico, Cuba and Ecuador.

The Dominican Republic said it has “serious and grave” concerns that the proposed law would also violate the WTO’s intellectual property agreement and the linked Paris Convention. Among the legal concerns was that it would be a “special requirement” that would “unjustifiably” encumber the use of trademarks “in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings” (TRIPS Article 20).

The proposed law, the Dominican Republic argued, would hurt tobacco producers in small and vulnerable economies. It would fail to reduce smoking because the lower costs of the packaging and the competition on price — the only remaining marketing tool available — would make cigarettes cheaper and encourage higher consumption. It would also make counterfeiting easier, it said. But it added that it does recognize countries’ right to protect public health.

Australia explained why the law has been proposed — as the next available step in the campaign to deal with a major and lethal health hazard. Higher excise duties and the possibility of using anti-counterfeiting labelling would make the cigarettes more expensive and prevent smuggling, it said. Australia will do this in a way that complies with its international obligations, it added.

New Zealand, Uruguay and Norway said Australia’s draft law is justified. India did not comment on the law specifically but said studies show that plain packaging does reduce smoking. India, Brazil and Cuba stressed their view that countries have the right to implement public health policies without intellectual property being an obstacle — referring directly or indirectly to the 2001 Doha Declaration on TRIPS and Public Health.

Brazil, Chile, Ecuador and China described the issue as complex, requiring balance and a closer examination. Switzerland said it understands both sides of the debate and expects Australia to abide by its TRIPS obligations.

The World Health Organization (WHO), an observer in the TRIPS Council provided information on its policies and on the WHO Framework Convention on Tobacco Control.

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Please, put a floor under cigarette and alcohol prices

Wednesday column

So Cate Blanchett is a bad look for an advertising campaign. I can think of a worse one: Piles and piles of $100 bills parading themselves as reasons why we should feel warm towards tobacco companies.

As an exercise in winning us over the mobile billboards picturing the stacks of money British American Tobacco says it will use to take on the government when it legislates for plain packaging are sad rather than persuasive.

That an industry once so tuned in to the psyche of Australians (and schoolboys - I remember) should be reduced to threats against a government with far more lawyers, far more billions, much more power, the support of the Opposition and much more legitimacy than it will ever have speaks volumes about how the world around it has changed.

If piles of money had been the chief tactic adopted by the mining industry it would be facing the originally-designed super profits tax forevermore.

But amid the pathos of a once-mighty industry boxing from memory lies an impressive idea.

The head of British American Tobacco in Australia David Crow set the ball rolling. He said with nothing but price left to compete on manufacturers would cut cigarette prices until they were perhaps only half what they are today.

Cheap prices "basically means more people will smoke - more kids will smoke,” he said, in an implicit acknowledgement that would be a bad thing, and also an implicit acknowledgment that he and his mates have been overcharging by a wide margin.

Anti-smoking campaigners responded by saying the government could react by increasing the tobacco excise. But that wouldn’t directly address the problem Crow identifies. The increases would come into force after the event and would do nothing to stop shops selling cigarettes as loss-leaders below cost as Coles and Woolworths tried to do earlier this year with beer.

The cigarette manufacturers might even help them if they saw it as a way to stay in business.

And it is low prices, not low excise that does the damage...

US economist Gary Becker won the 1992 Nobel Prize in part for his revolutionary development of the theory of rational addiction. It had previously been thought that addicts were not much influenced by price because they were hooked. Becker suggested instead that addicts rationally decided to be become hooked, often on the basis of price, and could rationally decide to to give up, also on the basis of price so long as they thought a new price would last.

Measurements to support the theory suggest that a 10 per cent increase in the price of cigarettes cuts sales by about 4 per cent, a 10 per cent increase in the price of alcohol cuts sales by around 5 per cent.

Because a lot of the heavy drinking is done at low price points and lot of the take up of smoking is done by at low price points, an increase in the minimum prices is likely to have a much more powerful effect than an increase in the average price.

Even better the payoff from increasing the minimum price is extraordinarily steep.

The University of Sheffield has told the Scottish government a minimum retail price of 25 pence per unit of alcohol would cut consumption 0.2 per cent; a minimum price of 35 pence would cut consumption 1.3 per cent, and a minimum price of 55 pence an extraordinary 10 per cent.

In September Scotland began legislating for a minimum price of 45 pence per unit of alcohol, in whatever form it was sold. Completely separate from and unrelated to alcohol taxation the law will make it illegal to sell alcohol cheaply. It will make no difference to the price of most drinks, and according to the UK Institute for Fiscal Studies supermarket chains stand to net the supermarket chains an enormous windfall as they are forced to pocket the benefit of low prices they would otherwise have passed on.

University of Aberdeen researchers reckon alcohol manufacturers will make more money too, while selling less product.

In Australia alcohol is sold for about half that. For as little as $10 a poor or desperate addict can obliterate themselves with a cask containing 30 standard drinks.

The steamlined system of alcohol taxation recommended by the Henry Review would help, but in the meantime and as a backup the obvious solution is to quickly impose a minimum price of at least double the effective minimum now and to impose a minimum price per stick of tobacco as well.

In Canada the University of Victoria has proposed a minimum price of $1.50 per standard drink sold in shops and $3.00 per standard drink sold in restaurants and bars, reviewed annually and indexed to the rate of inflation.

When a different method of restricting alcohol consumption was trialled in Tennant Creek in 1995 a university study found it cut sales 19 per cent, cut hospital admissions for alcohol-related conditions 29 per cent, cut admissions to the women’s shelter, and turned pay-day Thursday from one of the busiest days in the police lockup to the second quietest.

A legislated minimum price would be an act of humanity.

Christopher Pyne seemed to suspect to so. Quietly in 2006 the then assistant minister for Health and Aging in the Howard government commissioned the Flinders University National Centre for Education and Training on Addiction to conduct a feasibility study.

Letters went out addressed to “Dear Hotel, Bar Club and Liquor Industry Staff” in 2008 after the government had changed.

When I and another journalist got wind of the proposal the newly elected Labor health minister Nicola Roxon disowned it saying Labor had no plans to introduce a floor price.

She has since returned to the idea and this time the Australian National Preventive Health Agency will size it up.

It’s about time.

Published in today's SMH and Age



Feasibility Study on Setting a Floor Price on Alcohol Products

“Dear Hotel, Bar, Club and Liquor Industry Staff,

The National Centre for Education and Training on Addiction (NCETA) has been
contracted by the Australian Government Department of Health and Ageing to
conduct a feasibility study on setting a floor price for alcohol products.

This study is being conducted nationally to determine if state and territory
governments, working in conjunction with liquor licensing bodies, can
introduce a floor price to control high-risk alcohol consumption.

For the purposes of this study, an alcohol floor price is defined “as a
minimum fixed price per standard drink applied to all alcohol products in
Australia.

Please note that an alcohol floor price is not a synonym for an increased
levy or tax on alcohol. It is a distinct and unique strategy.

A key strategy that is being used to inform the feasibility study is
obtaining input from relevant stakeholders in the community.

I would like to invite you and/or your organisation, as an important
stakeholder, to make a written submission on the feasibility of setting a
floor price for alcohol products.

An electronic version of the submission package can be downloaded from the
NCETA website at http://www.nceta.flinders.edu.au.

Enquiries about the submission process can be made directly to Allan
Trifonoff, Deputy Director (Programs) on 08 8201 7511.

The deadline for submissions is: 5.00 pm EST, 22 September 2008. Electronic
submissions are preferred and should be forwarded to nceta@flinders.edu.au.

We look forward to receiving your input on this important matter. Thank you
in advance for your time and consideration.”



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Evil. Coles does more than merely sell cigarettes

Sunday Telegraph:

COLES is importing cigarettes from Germany and selling them at discount prices to lure low-income smokers into its supermarkets.

The grocery giant has priced the ``home-brand-style'' packs of 25 cigarettes at around $11 almost $4 a pack less than Australian-made Winfield and other leading brands.

They are believed to be the cheapest on the market since the federal Government raised cigarette taxes by 25 per cent in April...

``Coles has introduced a small number of branded cigarette lines sourced from overseas, available exclusively in our stores,'' a Coles spokesman said. He said the deal was established to offer more choice for customers, not to undermine the federal Government's cigarette tax.

But a Coles employee, who did not want to be named, said she had been told to ``push the overseas cigarettes'' to customers struggling with higher prices after the tax rise.

``When customers come in and complain that their usual cigarettes are too expensive we suggest they try one of the new ones, like Tradition,'' she said.

``I have been selling cigarettes for four years now. Lately I have noticed people just want the cheapest ones"...

I am able to chose where I shop.

Wesfarmers, which owns Coles, also owns Bunnings.

We need a leglislated minimum price for cigarettes, and also for alcohol.


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Why stopping smoking is hard

Every January perhaps as many as half a million people resolve to give up smoking. By the start of each February most of them are back on the cigarettes again. If, like me, you never started, thank your lucky stars. The latest economic research suggests that it's far more difficult to give up than had previously been believed.

Even people who think they are giving up may be filling their bodies with just as much nicotine as before. And some of the measures designed to cut back smoking and protect the rest of us may be counterproductive.

Each year 11,000 Australians take part in a survey run by the Melbourne Institute of Applied Economic and Social Research and originally designed to measure changes in income and working arrangements. It also asks participants whether they smoke.

Last year two of the institute's researchers, Hielke Buddelmeyer and Roger Wilkins, looked for common threads linking those Australians who had succeeded in giving up smoking between one survey and the next. The biggest was pregnancy. The biggest thread linking those Australians who had taken up smoking was divorce.

Then they examined the effect of the extra bans on smoking in public places introduced in some states... They found that while these encouraged older Australians and the very young to quit, people aged 18 to 24 were actually less likely to quit in those states in which a ban had been introduced.

This "rebellion" effect appears to pop up all over the place when it comes to fighting smoking. It had been thought that increasing the price of cigarettes would cut the number sold and improve the health of smokers. It certainly cuts the number sold. In Australia, a price increase of 10 per cent cuts sales by about 4 per cent. But a price increase doesn't necessarily cut the amount of nicotine taken into smokers' bodies.

Late last year an economist, Francesca Cornaglia, decided to measure nicotine levels directly, or as directly as she could. Continine is a byproduct of nicotine, present in saliva. With a colleague from the Institute for Fiscal Studies at University College London, she linked records of continine concentrations state by state in the United States with information on the number of cigarettes sold per person and their price.

She found that while increases in cigarette taxes did cut the number of cigarettes sold, they appeared not to cut at all the level of continine in smokers' saliva. As she put it: smokers were smoking fewer cigarettes but were smoking each one "more intensively".

Smokers appear to adjust by having more puffs from each cigarette, inhaling for longer and (perhaps subconsciously) blocking the ventilation holes on the filter. (Interestingly she found that so-called heavy smokers may not be smoking that heavily at all. After about 10 cigarettes a day, they smoke each extra one far less intensively in order to merely top up their nicotine levels while avoiding an overdose. They appear to have an inbuilt nicotine regulation mechanism.)

Cornaglia found that smoking intensity increased throughout the 1990s as cigarettes became more highly taxed, and that this itself may be a health hazard. Smoking down to the filter leads smokers to inhale more dangerous chemicals. And she found that it's the poorer, mainly black Americans whom higher prices have forced to smoke the most intensively.

Cornaglia then turned her attention to the level of continine in the saliva of non-smokers. Her findings have made her particularly unpopular among those who would like to ban smoking everywhere they could. She presented them to economists at the Australian National University in November.

She found that increases in the tax on cigarettes improve the saliva of non-smokers quite dramatically, especially the saliva of children exposed to their parents' smoke. Throughout the 1990s the number of non-smoking Americans taking in dangerous levels of nicotine halved. Higher cigarette prices improve the health of the rest of us.

But when it comes to banning smoking, a more complex picture emerges. Banning smoking on public transport, in shopping centres and in schools appears to improve non-smokers' health. But banning it in places where smokers "go out", such as restaurants and bars, makes the health of non-smokers worse. It pushes smokers away from those establishments and back into their homes where they pump smoke into the air breathed by their children and loved ones.

Cornaglia suggested a better public health measure would be to allow the creation of special smoking establishments where smokers could breathe smoke over each other. It is a suggestion unlikely to cut ice with NSW's crusading Minister for Cancer, Frank Sartor.

From mid-next year all areas of all hotels, clubs and nightclubs open to the public will be completely smoke-free. Smoking in the indoor areas of cafes and restaurants was banned in 2000.

But Cornaglia said it is more important to protect the health of children at home than the health of the non-smoking adults who choose to go into smoking establishments. Children at home have no say in their exposure to smoke, they are particularly prone to tobacco-related diseases, and if they are exposed they may do worse at school and earn less in later life.

As uncomfortable as her arguments may be to anti-smoking zealots, they are unlikely to be welcomed by the cigarette manufacturers. They have been arguing for years that second-hand smoke at home does no damage.

The latest economic research on smoking provides little comfort to anyone, and certainly not to anyone trying to give up as part of a new year's resolution. Short of getting pregnant there's no particularly successful way to do it, and merely cutting back won't make all that much difference to your health.

The best advice from the economics profession is to go cold turkey. Little wonder it's called the dismal science.

Read more >>