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The “Likeness” of E-Vapour Products and Cigarettes in the World Trade Organization

Published online by Cambridge University Press:  21 July 2017

Marina FOLTEA  and
Anna MARKITANOVA
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Abstract

The regulation of e-vapour products is a relatively new topic. While the e-vapour product sector is fast evolving, the optimal regulation of these products is yet to be fully understood. Some wisdom may be borrowed from the regulation of cigarettes, but many tobacco-relevant policies may not be applied to these new products. Evaluations are underway on many aspects of e-vapour products, for example: their safety, potential health risks, illicit trade, taxation and advertising. This paper examines yet another dimension – one which arises at the intersection of international health and trade law – namely whether e-vapour products and cigarettes may be found “like” in a WTO dispute challenging trade restrictive measures applying to e-vapour products.

In particular, the analysis focuses on a hypothetical ban on the importation, distribution, sale and offering for sale of e-vapour products (referred to as a general ban) – a measure that is either being contemplated or already implemented in some domestic jurisdictions. It finds that e-vapour products and cigarettes may be “like” under WTO law. In the event that a positive finding is made on other remaining tests necessary to determine discrimination (importantly the “less favourable treatment”) and provided the regulating member finds no solid evidence to justify the ban under GATT Article XX, a general ban on e-vapour products risks being found WTO inconsistent.

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Articles
Information
European Journal of Risk Regulation , Volume 8 , Special Issue 2: Special Issue on the Implementation in Europe of the WHO Recommendations on Food Marketing to Children , June 2017 , pp. 342 - 363
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© Cambridge University Press 

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Footnotes

*

Dr Marina Foltea (MILE, PhD, University of Bern) is Managing Director of Trade Pacts – a trade and investment advisory firm based in Geneva, Switzerland. This article is based on a presentation for the SIEL Annual Conference, held in Johannesburg, South Africa, in July 2016. The author can be emailed at marina.foltea@tradepacts.com. Anna Markitanova is Associate at WTI Advisors and an LLM graduate from the International Economic Law and Policy (IELPO) programme, University of Barcelona, Spain. The author can be emailed at amarkitanova@ielpo.org. These authors are highly indebted to Lukasz Gruszczynski (Polish Academy of Science), Vitaliy Pogoretskyy (ACWL, Geneva), Fernando Gonzales-Rojas (Monterrey Institute of Technology) and one anonymous reviewer for very helpful critical remarks on previous drafts.

References

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2 Electronic Nicotine-Delivery Systems (ENDS) and Electronic Non-Nicotine Delivery Systems, Report by WHO, Conference of the Parties to the WHO Framework Convention on Tobacco Control, FCTC/COP/7/11, 1, available at <http://www.who.int/fctc/cop/cop7/FCTC_COP_7_11_EN.pdf> (accessed 31 March 2017).

3 See <http://globaltobaccocontrol.org/e-cigarette/policy-domains> (accessed 31 March 2017).

4 The global market for EVPs in 2015 was estimated at almost US$ 10 billion. About 56% of this market was accounted for by the United States of America and 12% by the United Kingdom. 21% of the market was divided between China, France, Germany, Italy and Poland (3–5% each). The structure of the market may, however, change given that alternative nicotine delivery systems that heat-not-burn tobacco have been launched and nicotine inhaler technology that does not require a heating mechanism has been developed.

5 United States – Taxes on Petroleum and Certain Imported Substances, 17 June 1987, GATT B.I.S.D. (34th Supp.), 136, para. 5.2.2. (1988).

6 WTO Appellate Body Report, “European Communities – Measures Affecting Asbestos and Products Containing Asbestos”, WT/DS135/AB/R adopted 12 March 2011 (EC–Asbestos), para. 99.

7 For a very good discussion on the relative importance of the “likeness” test in establishing discrimination at WTO compared to the “less favourable treatment” test, see Pauwelyn, Joost, “The Unbearable Lightness of Likeness” in Marion Panizzon, Nicole Pohl and Pierre Sauvé (eds), GATS and the Regulation of International Trade in Services (Cambridge University Press 2008)Google Scholar.

8 The fact that the likeness analysis is a stand-alone element of discrimination and independent research topic is confirmed by the WTO jurisprudence and academic work, including entire monographs. See, for example, Diebold, Nicolas, Non-Discrimination in International Trade in Services “Likeness” in WTO/GATS (Cambridge University Press 2010)Google Scholar; Choi, Won-Mog, “Like Products” in International Trade Law: Towards a Consistent GATT/WTO Jurisprudence (Oxford University Press 2003)Google Scholar.

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13 FCTC/COP/7/11, supra note 2, 1.

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21 See, e.g. Professor Stanton Glantz, who claims that EVPs are at least a third as bad as cigarettes or higher: Glantz, Stanton, “Accumulating evidence suggests e-cigarettes are 1/3 to 1/2 as bad as cigarettes (maybe higher)”, Center for Tobacco Control, Research and Education, University of California San Francisco, available at <http://tobacco.ucsf.edu/accumulating-evidence-suggests-e-cigs-13-12-bad-cigs-maybe-higher> (accessed 31 March 2017)+(accessed+31+March+2017)>Google Scholar.

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23 Saitta, Daniela, Ferro, Giancarlo Antonio and Polosa, Ricardo, “Achieving appropriate regulations for e-cigarettes”, (2014) 5(2) Therapeutic Advances in Chronic Disease, The National Center for Biotechnology Information 50–61, <http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3926346/> (accessed 31 March 2017)CrossRefGoogle Scholar.

24 WTO Appellate Body Report, EC–Asbestos, supra note 6, para. 113, where the AB disagrees with the Panel that disregarded the role of harm in establishing likeness in physical characteristics.

25 WTO Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R, adopted 4 October 1996, (Japan–Alcoholic Beverages II) para. 120.

26 Van den Bossche, Peter and Zdouc, Werner, The Law and Policy of the World Trade Organization (3rd edn, Cambridge University Press 2014) 389 Google Scholar.

27 WTO Appellate Body Report, EC–Asbestos, supra note 6, para. 117.

28 The Tobacco Atlas, “E-cigarettes should be regulated in such a way as to reduce smoking of combusted tobacco to the greatest extent possible, available at <http://www.tobaccoatlas.org/topic/e-cigarettes/> (accessed 31 March 2017)+(accessed+31+March+2017)>Google Scholar.

29 A third of former smokers who have tried EVPs but no longer use them said they had used them as part of a quit attempt. Action on Smoking and Health (ASH) Fact Sheet, “Use of e-cigarettes (vapourisers) among adults in Great Britain (2016), <http://www.ash.org.uk/files/documents/ASH_891.pdf> (accessed 31 March 2017). Moreover, a Report on EVPs commissioned by Public Health England finds that electronic cigarette use might be effective in relapse prevention and smoking cessation. Britton, John, Bogdanovica, Ilze, “A Report on E-cigarettes”, Public Health England 2014, <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/311887/Ecigarettes_report.pdf> 18 (accessed 31 March 2017)Google Scholar.

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31 WHO, Framework Convention on Tobacco Control, Report on Electronic Nicotine Delivery Systems, FCTC/COP/6/10 dated 21 July 2014, <http://apps.who.int/gb/fctc/PDF/cop6/FCTC_COP6_10-en.pdf> 7 (accessed 31 March 2017)+7+(accessed+31+March+2017)>Google Scholar.

32 Pepper, Jessica, et al., “Effects of advertisements on smokers’ interest in trying e-cigarettes: the roles of product comparison and visual cues”, (2014) 23 Tobacco Control iii31, available at <http://tobaccocontrol.bmj.com/content/23/suppl_3/iii31.full#xref-ref-16-1> (accessed 31 March 2017)CrossRefGoogle ScholarPubMed.

33 ASH Factsheet, supra note 29.

34 Phillip Morris International, Investors Day, 26 June 2014, Presentation by Bonvin, Bertrand, Peitsch, Manuel and de Wilde, Frederic, slide 92, <http://investors.pmi.com/phoenix.zhtml?c=146476&p=irol-presentations> (accessed 9 July 2016)+(accessed+9+July+2016)>Google Scholar.

35 Supra note 17, 8.

36 ibid 8.

37 “Smoke Signals”, The Economist, 23 April 2016, <http://www.economist.com/news/business/21697275-philip-morris-health-company-smoke-signals> (accessed 31 March 2017)+(accessed+31+March+2017)>Google Scholar.

38 See Global Trade Solutions, <http://www.dutycalculator.com/hs-lookup/1072756/hs-tariff-code-for-electronic-cigarette/> (accessed 31 March 2017).

39 ibid.

40 World Customs Organization Harmonized System Committee, Amendments to the Compendium of the Classification Opinions, <http://www.wcoomd.org/en/topics/nomenclature/instrument-and-tools/hs_classification-decisions/~/media/DBBA67A8D4A44E318508231A9F688BEA.ashx> VI, (accessed 31 March 2017)+VI,+(accessed+31+March+2017)>Google Scholar.

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42 ibid.

43 WTO Appellate Body Report, EC–Asbestos, supra note 6, para. 102.

44 Grace, Rondolph, Kivell, Bronwyn and Laugessen, Murray, “Estimating cross-price elasticity of e-cigarettes using a simulated demand procedure” (2015) 17(5) Nicotine Tobacco Research 592–598, abstract available at <http://www.ncbi.nlm.nih.gov/pubmed/25548256> (accessed 11 September 2016)CrossRefGoogle ScholarPubMed.

45 Stoklosa, Michal, Drope, Jeffrey, Chaloupka, Frank J, “Prices and E-Cigarette Demand: Evidence From the European Union” (2016) 18(10) Nicotine Tobacco Research 1973–1980 CrossRefGoogle ScholarPubMed.

46 See the FCTC Report prepared for the COP 7 meeting, Doc FCTC/COP/7/11 August 2016, supra note 2.

47 The Cross-Price Elasticity is also mentioned in WTO Appellate Body Report, Korea – Taxes on Alcoholic Beverages, WT/DS75/AB/R, adopted on 11 January 1999, (Korea–Alcoholic Beverages), paras. 109, 121, 134 and 152.

48 WTO Appellate Body Report, Japan–Alcoholic Beverages II, supra note 25, 6.

49 ibid 25.

50 ibid 25.

51 Mitchell and Voon, supra note 11, 398, referring to the WTO Appellate Body Report, EC–Asbestos, supra note 6, para. 102.

52 It is to be noted that the FCTC treats the two categories as separate types of goods.

53 See FDA announcement available online at <http://www.fda.gov/TobaccoProducts/Labeling/RulesRegulationsGuidance/ucm394909.htm> (accessed 31 March 2017).

54 See the EU Tobacco Directive containing requirements of introducing labelling and technical standards for EVPs, European Commission, <http://europa.eu/rapid/press-release_IP-16-1762_en.htm> (accessed 31 March 2017), Directive 2014/40/EU of the European Parliament And of the Council of 3 April 2014 on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products and repealing Directive 2001/37/EC, (2014) OJ L 127, available at <http://ec.europa.eu/health/tobacco/docs/dir_201440_en.pdf> (accessed 31 March 2017).

55 On the aim and effect test see Hudec, Robert E, “GATT/WTO Constraints on National Regulation: Requiem for an ‘Aim and Effects’ Test” (1998) 32(3) The International Lawyer 619–649 Google Scholar. See also Porges, Amelia and Trachtman, Joel P, “Robert Hudec and Domestic Regulation: The Resurrection of Aim and Effects” (2003) 37(4) Journal of World Trade 783–799 Google Scholar, who advocate in favour of “aim and effects” test and claim that the “‘aim and effects’ approach can be considered both in comparing the products themselves, or in comparing the treatment of the products”.

56 WTO Appellate Body Report, EC–Asbestos, supra note 6, para. 99.

57 WTO Appellate Body Report, EC–Asbestos, supra note 6, para. 103.

58 Van den Bossche and Zdouc, supra note 26, 388.

59 WTO Appellate Body Report, EC–Asbestos, supra note 6, para. 114.

60 WTO Appellate Body Report, United States – Transitional Safeguard Measures on Combed Cotton Yarn from Pakistan, WT/DS/192/AB/R, adopted on 8 October 2001, (US–Cotton Yarn) para. 96.

61 WTO Appellate Body Report, Philippines–Distilled Spirits, supra note 12, para. 205.

62 WTO Appellate Body Report, Philippines–Distilled Spirits, supra note 12, para. 96.

63 Farsalinos and Polosa, supra note 23, 67–86.

64 Supra note 37.

65 Davidson, Lauren, “Vaping takes off as e-cigarette sales break through $6bn”, The Telegraph, 23 June 2015, <http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11692435/Vaping-takes-off-as-e-cigarette-sales-break-through-6bn.html> (accessed 31 March 2017)Google Scholar.

66 It is more difficult to argue “likeness” on non-nicotine delivery systems (ENNDS) – currently a much smaller market, which would require more data and research.

67 As established by the WTO Appellate Body Report, United States – Measures Affecting the Production and Sale of Clove Cigarettes, WT/DS406/AB/R adopted on 4 April 2012, (US–Clove Cigarettes), para. 87, other elements of the analysis include the findings on: (i) whether the measure at issue is a “technical regulation”; and (ii) whether the imported products are accorded “treatment no less favourable” than like domestic products. These elements are not falling within the purview of this paper and are subject to further research.

68 US–Clove Cigarettes, supra note 67, para. 120.

69 US–Clove Cigarettes, supra note 67, para. 120.

70 WTO Appellate Body Report, EC–Asbestos, supra note 6, para. 24.

71 WTO Panel Report, European Communities – Measures Affecting Asbestos and Asbestos Containing Products, WT/DS/135/R adopted on 18 September 2000 (EC–Asbestos) para. 8.35. For a detailed analysis on whether a measure qualifies as a technical regulation under the TBT Agreement see Gruszczynski, Lukasz, “The TBT Agreement and Tobacco Control Regulations” (2013) 8(1) Asian Journal of WTO & International Health Law and Policy 115 Google Scholar.

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73 ibid 529.

74 WTO Panel Report, United States – Measures Affecting the Production and Sale of Clove Cigarettes, WT/DS406/R adopted on 2 September 2011, (US–Clove Cigarettes) para. 7.119.

75 ibid paras. 7.231 and 7.247.

76 US–Clove Cigarettes, supra note 67, para. 116.

77 US–Clove Cigarettes, supra note 67, para. 156. See also Appleton, Arthur E, “National Treatment under the TBT Agreement” in Anselm Kamperman Sanders (ed.), The Principle of National Treatment in International Economic Law (Edward Elgar 2014) 110 Google Scholar.

78 US–Clove Cigarettes, supra note 67, para. 111.

79 WTO Panel Report, United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, WT/DS381/R, adopted on 15 July 2011, (US–Tuna II (Mexico)), paras. 7.223–7.225 and WTO Appellate Body Report, United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, WT/DS381/AB/R, adopted on 16 May 2012, (US–Tuna II (Mexico)), para. 235.

80 Frieder Roessler,”The Scope of Regulatory Autonomy of WTO Members under Article III:4 of the GATT: A Critical Analysis of the Jurisprudence of the WTO Appellate Body”, European University Institute, RSCAS PP 2015/04, Robert Schuman Centre for Advanced Studies Global Governance Programme, 1.

81 Unlike the exhaustive list of legitimate exceptions under Art. XX of GATT 1994, the scope of the measures’ regulatory purposes that are considered legitimate under the TBT Agreement is not very clear and therefore, the regulatory power of WTO Members under the TBT Agreements is potentially wider.