American Journal of Law & Medicine

Flexibilities in WTO Law to Support Tobacco Control Regulation


Cases concerning the regulation of tobacco have long existed within the World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade 1947 (GATT 1947), (1) although often these cases have not centered on the detrimental health impact of tobacco products. With the 2012 circulation of the Report of the WTO Appellate Body in U.S.--Clove Cigarettes, (2) the potential friction between international trade law and tobacco regulation in the context of public health has come to the fore. In that Report, the Appellate Body found in part against the United States' flavored cigarette ban. (3) Combined with the ongoing WTO challenges to mandatory plain tobacco packaging in Australia--Tobacco Plain Packaging, (4) governments might begin to fear that the WTO agreements represent an insurmountable barrier to ambitious tobacco control measures. However, careful examination of the Clove Cigarettes case alongside the two other recent Appellate Body Reports (U.S.--Tuna H (Mexico) (5) and U.S.--COOL (6)) on the WTO's Agreement on Technical Barriers to Trade (TBT Agreement) (7) demonstrates that the TBT Agreement has ample flexibility to accommodate health objectives underlying tobacco regulation.

The other WTO agreements raised by complainants in the case against Australia are the General Agreement on Tariffs and Trade 1994 (GATT 1994) (8) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). (9) The GATT 1994 contains explicit exceptions acknowledging the importance of the protection of human life or health, meaning that even a tobacco control measure that might otherwise violate a substantive provision of the GATT 1994 may be justified on the basis of health. (10) As for the TRIPS Agreement, although many of its provisions remain under-explored in WTO case law, it too contains principles and flexibilities to support health measures that may restrict the use of trademarks, strengthening the defenses available to countries like Australia that wish to pursue plain packaging or similar requirements.

In Part II of this Article, I first outline the disputes concerning tobacco that have arisen within the dispute settlement system of the WTO and the GATT 1947, highlighting the aspects relevant to health. I then explain in Part III the significance within WTO dispute settlement of health-based evidence and the WHO Framework Convention on Tobacco Control (WHO FCTC). (11) Parts IV, V, and VI of the Article identify the various exceptions and flexibilities available for accommodating health objectives in connection with tobacco control measures within, respectively: the GATT 1994 and the General Agreement on Trade in Services (GATS); (12) the TBT Agreement; and the TRIPS Agreement. On this basis, I conclude that WTO law poses no obstacle in principle to rigorous regulation of tobacco for health reasons.



Under the GATT 1947, two disputes arose in relation to measures concerning cigarettes. One of these concerned the U.S. system of production control and price support for domestically produced tobacco and did not discuss health issues. (13) The other was a 1990 claim by the United States against, inter alia, Thailand's prohibition on importation or exportation of tobacco and cigarettes in the absence of a license, which had been granted only to the Thai Tobacco Monopoly (a stated-owned monopoly created by statute). (14) Noting that "Thailand had not granted licences for the importation of cigarettes during the past 10 years," the Panel found that Thailand had acted inconsistently with Article XI: 1 of the GATT 1947, (15) which precluded "prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures ... on the importation of any product of the territory of any other contracting party" (16)--Article XI of the GATT 1994 contains the same provision today with respect to WTO Members. (17)

With respect to Thailand's reliance on Article XX(b) of the GATT 1947 as a defense on the basis of health (as discussed further below in the context of Article XX of the GATT 1994), the Panel "accepted that smoking constituted a serious risk to human health and that consequently measures designed to reduce the consumption of cigarettes fell within the scope of Article XX(b)." (18) However, the Panel found that the effective prohibition of the importation of cigarettes was not "necessary to protect human ... life or health" as required by the terms of that provision because of the availability of GATT-consistent measures reasonably available to Thailand to achieve its health goals. (19) For example, the Panel suggested that Thailand could ban cigarette advertising and increase cigarette prices. (20) In reaching this conclusion, the Panel referred to various World Health Organization (WHO) documents and took account of the WHO's own submissions, which had been provided in response to an invitation by the Panel with the agreement of the parties. (21)


The two most important cigarettes cases that have come before the WTO are U.S.--Clove Cigarettes and the ongoing Australia--Tobacco Plain Packaging dispute, which I discuss in turn below. Two other cigarette disputes have been decided in the WTO relating to various taxes, charges, customs valuation, and related measures, (22) but these cases have not focused on health aspects of tobacco control.

1. U.S.--Clove Cigarettes

In this dispute, Indonesia challenged section 907(a)(1)(A) of the U.S. Federal Food, Drug and Cosmetic Act, which prohibits cigarettes and their component parts from containing--as a constituent or additive--a flavor, herb, or spice that is a characterizing flavor of the product or its smoke, excluding tobacco and menthol. (23) The Panel found the measure consistent with Article 2.2 of the TBT Agreement (discussed below), (24) and Indonesia did not appeal this finding, which means that the U.S. measure is not regarded as creating an unnecessary obstacle to international trade or as more trade-restrictive than necessary to fulfill a legitimate objective. However, the Panel and Appellate Body both found the measure inconsistent with the national treatment obligation in Article 2.1 of the TBT Agreement (25) (also discussed below). Essentially, this was because the prohibited products "consist primarily of clove cigarettes imported from Indonesia, while the like products that are actually permitted under this measure consist primarily of domestically produced menthol cigarettes." (26)

The United States had argued that banning menthol cigarettes would impose too great a burden on its healthcare system and would risk the creation of a black market in menthol cigarettes. (27) However, the Appellate Body said that "it is not clear that the risks that the United States claims to minimize by allowing menthol cigarettes to remain in the market would materialize if menthol cigarettes were to be banned, insofar as regular cigarettes would remain in the market." (28) The United States criticized this aspect of the Appellate Body Report, stating before the Dispute Settlement Body that the Appellate Body reached this conclusion without reference to "facts on the record." (29)

An advisory committee to the U.S. Food and Drug Administration (FDA) concluded in 2011 that "[r]emoval of menthol cigarettes from the marketplace would benefit public health in the United States." (30) Before the Panel, the United States indicated that the impact of banning menthol had not yet been "sufficiently evaluated." (31) Thus, despite the United States' significant win under TBT Article 2.2, its loss under Article 2.1 in this case may have resulted in part from an absence of sufficient evidence before the Panel linking the distinction drawn by the measure between clove and menthol cigarettes with the health objectives of the measure. The more discriminatory a measure is (for example, the greater the detrimental impact on imported products in comparison with domestically produced products), the more evidence will be required to support it. In this case, the United States had not produced sufficient evidence to convince the Appellate Body that the significant exclusion of (largely domestically produced) menthol cigarettes from the ban on flavored cigarettes was justified on health grounds. This case therefore underscores the significance of evidence in supporting regulatory distinctions, particularly where those distinctions appear to discriminate against or between imported products.

2. Australia--Tobacco Plain Packaging

Ukraine, Honduras, and the Dominican Republic have all requested the establishment of panels in the Australia--Tobacco Plain Packaging dispute, which concerns Australia's Tobacco Plain Packaging Act 2011 (Cth). (32) That federal legislation, which was fully implemented on December 1, 2012, mandates standardized labeling and packaging of all tobacco products sold in Australia. (33) Cigarettes must be sold in "drab dark brown" packets, without graphic logos, and with graphic health warnings covering seventy-five percent of the front of the pack and ninety percent of the back. (34) Brand and variant names must appear in a specified font, size, and color. (35) As explained by other authors in this Issue, the Australian legislation has already withstood a challenge by tobacco companies in the High Court of Australia (Australia's highest court) under Australia's constitution and is also facing an investment claim by Philip Morris Asia Limited under the Australia-Hong Kong Bilateral Investment Treaty. (36) The WTO dispute includes claims under the GATT 1994, the TBT Agreement, and the TRIPS Agreement, raising novel issues particularly under the latter agreement. Nevertheless, for reasons explained elsewhere, (37) and in view of the flexibilities in the three agreements as discussed further below, Australia has a strong chance of defending the legislation within the WTO dispute settlement system, particularly because it applies to all domestically produced and imported tobacco products and involves no obvious discriminatory element. …

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