Tom Bollyky on the TPP Tobacco Carveout

CFR Senior Fellow, and former USTR official, Tom Bollyky makes the case for the tobacco carveout from ISDS in the TPP. Here’s an excerpt, but read the whole thing:

The Obama Administration has done itself a disservice by not making the basis for the tobacco carve-out clearer. It has allowed cigarette companies to mobilize opposition by characterizing the carve-out as a campaign against ISDS that will eventually implicate products from other industries. It has also undermined the White Houses efforts to ease the publics concerns with ISDS, which do not end with tobacco. The TPP specifically respects the legitimacy of environmental, health, and safety regulations and includes stricter limits on ISDS claims, but the value of these provisions are discounted by those citing the tobacco carve-out as proof the changes are not protective enough.

In the end, the TPP tobacco carve-out says a lot about the special role of tobacco in U.S. and international law, but less about investment disputes generally. It is an exception motivated by a unique combination: a widely subscribed treaty binding all other TPP countries, an executive order mandating U.S. trade policy, and a pattern of tobacco industry abuse in the face of a proven public health threat. It is a constellation of factors unlikely to reoccur in other health and environmental areas.

If the White House hopes to move the TPP toward congressional passage, it will need to make this argument much more forcefully. Otherwise, the TPP may have to wait to be part of the next presidents legacy, if it happens at all.

He makesabout as strong a case as you can make, but with all due respect to Tom, I’m not convinced that having the Obama administration be more forceful and clear about this will help. I think they have been pretty forceful and clear, and have put a lot of effort into promoting the carveout as good policy. Their inability to convince people is about the fundamental flaws in the policy, not their lack of effort.

I’ve weighed in all this before (includinghereandhere), and for the reasons stated there, I don’t think the tobacco carveout makes much sense. Let me just add the following.

With this carveout, the drafters haveexcluded tobacco control measures from ISDS, but they have not excluded those measures from any other obligations. They are not carved out of the core non-discrimination provisions, not out of the TBT chapter, not out of the IP chapter, not out of anything else. All those provisions apparently work fine, with no need for a carveout. So right away, if you support this carveout, you are indicating that there is a particular problem with ISDS that triggers a need for a carveout.

What might the problem with ISDS be? Well, for one thing, companies can bring lawsuits on their own, without a government filter. But that issue is not unique to tobacco, and if we were rankingindustrieswho were using and/or abusing ISDS, tobacco companies would be pretty low on the list.

Another issue is that some of the investment provisions are broad enough that you can make a credible claimagainst what at least some people would consider reasonable, non-discriminatory public policy measures. But again, this isn’t a tobacco issue at all. That’s just the nature of obligations such as the minimum standard of treatment. They are written broadly enough that you can make a non-frivolous claim against a wide range of non-protectionist laws and regulations.

A third issue is the absence of general exceptions. The GATT general exceptions are included in Chapter 29 in relation to many TPP chapters, but do not apply to the investment chapter. Perhaps the reason we don’t need to worry about the impact of trade obligations on domestic health policy (including tobacco control) is the carefully written exceptions that apply.

The tobacco companies are almost completely irrelevant to allof these issues. They have broughttwo cases against tobacco control measures, and one of these claims has already been rejected. This grand total of two is a tiny percentage of the hundreds of cases brought by a wide range of industries. I have no idea if there will be any more cases on tobacco measures, but it seems pretty clear that the tobacco industry will continue to be a negligible player here.

Thus, the issue here is not with tobacco; it’s with the impact of ISDS on public policy generally. The tobacco carveout acknowledges the problem, but does not address it, even though there are plenty of ways to do so.