TWN Info Service on WTO and Trade Issues (Apr14/02)
22 April 2014
Third World Network  

Panel set on Australia's plain tobacco packaging
Published in SUNS #7775 dated 1 April 2014
 
Geneva, 31 Mar (Kanaga Raja) -- The Dispute Settlement Body (DSB) agreed on 26 March to establish a panel, at the request of Indonesia, to examine certain measures imposed by Australia concerning trademarks, geographical indications (GIs) and other plain packaging requirements applicable to tobacco products and packaging.
 
This was a first-time request by Indonesia but Australia did not object to a panel being established at this instance, as it was entitled to.
 
Cuba, China, Canada, Brazil, Nigeria, Oman, Ukraine, Japan, the European Union, Honduras, India, Malaysia, the Philippines, Thailand, the Russian Federation, India, Norway, Turkey, the United States, Uruguay, Korea, Guatemala, Nicaragua, Mexico, Chinese Taipei and New Zealand reserved their third party rights to the dispute.
 
According to trade officials, so far, five Members (Cuba, Dominican Republic, Honduras, Indonesia and Ukraine) have initiated disputes against Australia's measures concerning plain packaging requirements for tobacco products.
 
In these disputes, three panels have been established (on complaints by Ukraine, Honduras and now Indonesia) but not yet composed.
 
Later, speaking at the DSB under a separate agenda item (see below), Australia raised procedural and systemic issues relating to these disputes raised by five Members since 2012, but with panel proceedings yet to commence in any of the complaints brought against tobacco plain packaging, thus, among others, prolonging the dispute settlement processes, and raising uncertainties for everyone, including other Members planning to put in place restrictions against tobacco consumption, identified by the World Health Organisation as the top killer in the world.
 
In the present dispute, Indonesia, in its communication to the DSB, said that the Australian measures apply to the retail sale of cigarettes, cigars, and other tobacco products, and that the measures establish comprehensive requirements regarding the appearance and form of the retail packaging of tobacco products, as well as the tobacco products themselves.
 
According to the communication, the measures also establish penalties, including criminal sanctions, for the violation of these requirements. The measures require, inter alia, the following:
 
* With respect to the retail packaging of tobacco products, the measures:
 
(i) regulate the appearance of trademarks and geographical indications, including by prohibiting the display of design and figurative features, including those forming part of these intellectual property rights;
 
(ii) prescribe that the brand and variant names forming part of trademarks appear on the front face, top and bottom of the package in a uniform typeface, font, size, color, and placement;
 
(iii) prohibit the display of other words (except for basic information, including country of origin and manufacturer contact details); and
 
(iv) mandate a matt finish and drab dark brown color (Pantone 448C) for retail packaging;
 
* the measures establish that individual cigarettes may not display trademarks, geographical indications or any other marking other than an alphanumeric code for product identification purposes;
 
* the measures provide that individual cigars may carry: the brand name, variant name, country of origin, and an alphanumeric code; these must be displayed in a uniform typeface, font, size, and color on a single band in a drab dark brown color (Pantone 448C); and
 
* the measures regulate other aspects of both tobacco packaging and tobacco products, such as the following requirements: (i) a retail package for cigarettes must be in a prescribed size, form and material; (ii) cigarettes must be white; and (iii) a cigar tube must be cylindrical, rigid, and have an opening of at least 15 mm.
 
Indonesia said that these measures regulating the plain packaging and appearance of tobacco products for retail sale appear to be inconsistent with Australia's obligations under Articles 2.1, 2.2 of the TBT (Technical Barriers to Trade) Agreement, Articles 1.1, 2.1, 3.1, 15.4, 16.1, 16.3, 20, 22.2(b), 24.3 of the TRIPS Agreement, and Article III: 4 of the GATT 1994.
 
In its statement at the DSB, Australia said that its world-first tobacco plain packaging measure has now been in force for over a year, and that as part of its comprehensive range of tobacco control measures, it believes that it is already having a positive impact.
 
It said that tobacco use is the leading global cause of preventable death and is the only legal product that kills up to half of those who use it as intended. According to the World Health Organisation, tobacco kills nearly six million people a year worldwide, meaning someone dies roughly every six seconds from tobacco.
 
It is estimated that tobacco-related deaths will increase to over eight million per year by 2030 worldwide, an increase which will affect developing countries like Indonesia.
 
Australia noted that the harmful effects of tobacco are also of concern to the Indonesian government. It understands that Indonesia is one of the largest tobacco markets in the world. The WHO estimates that 67% of male adults in Indonesia are current smokers and that 57% are daily smokers - the second highest male smoking rate in the world.
 
The WHO has noted that 41% of Indonesian males aged between 13 and 15 years smoke. Global evidence shows that 88% of adults who become daily smokers first used cigarettes by 18 years of age. Female smoking rates, while much lower than male smoking rates, are also increasing.
 
In 2012, said Australia, Indonesia's president Susilo Bambang Yudhoyono signed into law tobacco control regulations aimed at protecting the health of individuals, families, communities and the environment from the hazards of materials that contain carcinogens and addictive substances in tobacco products.
 
Australia recognised Indonesia's efforts to strengthen its tobacco control laws and welcomed recent statements by Indonesia's Minister of Health, Nafsiah Mboi, signalling that Indonesia would seek to accede to the World Health Organisation's Framework Convention on Tobacco Control.
 
Against this background, Australia said that it is disappointed that Indonesia has requested the DSB to establish a panel in relation to tobacco plain packaging.
 
"However, in the interests of ensuring a harmonised panel process and to avoid contributing to any further delay in the multiple disputes relating to Australia's tobacco plain packaging measure, and consistent with its desire to ensure the overall efficiency and effectiveness of the WTO dispute settlement system, Australia today accepts Indonesia's request to establish a panel in this dispute."
 
Australia noted that panels have already been established in September 2012 and September 2013, with Ukraine and Honduras, respectively, and hoped that the three complaints regarding its tobacco plain packaging measure can be managed in the most efficient way possible.
 
Under a separate agenda item, Australia again spoke on this issue, by updating Members on progress in the disputes brought against it concerning tobacco plain packaging, as well as raising some procedural issues.
 
It noted that more than two years have elapsed since WTO dispute settlement proceedings were initiated by Ukraine with respect to Australia's tobacco plain packaging measure, and that since that time, another four WTO Members have started proceedings against Australia concerning the same measure.
 
A record number of Members have joined the disputes as third parties, and tobacco plain packaging has also been the subject of extensive debate in the TBT Committee and the TRIPS Council.
 
Between April 2012 and October 2013, Australia had participated in separate WTO dispute consultations with each of the five complainants - Ukraine, Honduras, Dominican Republic, Cuba and Indonesia - on the tobacco plain packaging measure.
 
As of today, it said, three separate panels have been established by the DSB in relation to Australia's measure: with Ukraine in September 2012, Honduras in September 2013 and today, Indonesia.
 
Australia, Ukraine and Honduras have held several rounds of discussions on panel composition, but at this time it has not been possible to reach agreement. Thus, nearly two years on, panel proceedings are yet to commence in any of the complaints brought against tobacco plain packaging.
 
In December 2012, Australia and Ukraine agreed to suspend panel composition discussions to allow Honduras and Dominican Republic, which had each made a first request for establishment of a panel, time to catch up by having panels established in those disputes.
 
However, following its first request for the establishment of a panel in November 2012, ten months elapsed before Honduras again requested the establishment of a panel in September 2013, said Australia, adding that following panel establishment, Honduras immediately sought to suspend the panel composition process.
 
In the meantime, Ukraine had advised Australia that it wanted to resume composition discussions in relation to its complaint. Australia therefore refused Honduras' request to suspend panel composition, so as to ensure the two processes would proceed together, given Honduras had declined to have the complaints considered by a single panel under Article 9.1 of the DSU.
 
In the most recent development, Australia said that in a letter dated 24 March, Ukraine requested that the Director-General compose the Panel in its complaint against Australia.
 
Australia said that it will today request the Director-General to compose the panel in relation to Honduras' complaint against Australia to ensure harmonisation of the two disputes, consistent with Article 9.3 of the Dispute Settlement Understanding (DSU).
 
It said that the Dominican Republic made its first request for establishment of a panel in December 2012, which it rejected in line with normal practice. In the nearly 16 months since that date, Dominican Republic has not made a further panel request.
 
Australia noted that consultations have also been held with Cuba in June 2013, and that Cuba is yet to request the establishment of a panel.
 
It further said that the progress of these disputes to date raises three issues for Members to consider: the first concerns the role of the WTO dispute settlement system in providing security and predictability to the multilateral trading system; the second relates to the resource implications of the way the complaints have proceeded to date; and the third comprises some of the procedural questions that have arisen.
 
Noting that the general provisions in Article 3 of the DSU set out a number of overarching principles underpinning the operation of the dispute settlement system, Australia stressed that until the complaints about its measure are resolved, there will be uncertainty about tobacco plain packaging, and the application of relevant provisions of the GATT, the TBT and the TRIPS Agreement to it.
 
"That uncertainty has a cost for all Members which extends beyond the circumstances of this case," said Australia, adding that since the introduction of tobacco plain packaging in Australia, a number of Members have indicated that they too are considering introducing tobacco plain packaging.
 
In response, Honduras, Dominican Republic and Cuba have stated in the TRIPS Council and TBT Committee that those other Members should wait until the outcome of the disputes against Australia's measure is known.
 
Australia said that the cost of the continued uncertainty engendered by these proceedings and the failure to proceed to a prompt settlement of the disputes is "a regulatory chilling effect on other WTO Members that may wish to take into account the outcome of the disputes against Australia before implementing their own tobacco control measures."
 
Australia noted that when the measure at issue is genuinely designed to protect public health (as is the case with tobacco plain packaging measures), then the human cost of delays in implementation can be especially serious.
 
"Against that background, prompt resolution of these complaints is essential," it said.
 
Australia said that there are also resource implications of prolonging dispute settlement procedures. Participating as a principal party in a dispute is a resource-intensive exercise for any Member, which is exacerbated when the progress of a dispute is unpredictable, it added.
 
Members may consider that Australia, as a developed country, should be well placed to manage the defence of a complaint lodged by multiple complainants. However, Members may wish to reflect upon the implications should a developing country itself face the sort of situation Australia finds itself in at the moment - a scenario that the DSU would not prevent.
 
Delays in dispute settlement processes also affect the resources of the third parties and the WTO Secretariat, it said, adding that Members are aware of the difficulties the Secretariat is already facing in managing its workload.
 
Highlighting some procedural questions, Australia said that Members will recall the debate in the DSB last September about the application of Article 6.1 to Honduras' panel request. It said it is not seeking to reopen that debate today, "but clearly substantial delay between panel requests undermines the secure and predictable operation of the system."
 
The fact that Australia will today request the Director-General to compose the panel in relation to Honduras' dispute and has agreed to Indonesia's first request for the establishment of a panel demonstrates that Australia's views are not motivated by any interest in delaying the tobacco plain packaging proceedings.
 
"Indeed, prolonged delay is contrary to Australia's interests in these proceedings, and to the effective functioning of the WTO dispute settlement system as a whole."
 
According to Australia, the second procedural issue relates to the request by the Dominican Republic to participate in discussions among the parties on panel composition.
 
While Australia said it is seeking to promote coherence in the progress of the disputes, including panel composition, it would have been extraordinary for Australia to have accepted that request in the absence of a further request by Dominican Republic for establishment of a panel in relation to its own complaint.
 
"Should Dominican Republic have followed normal practice for panel requests, a panel would have been established by now and Dominican Republic would already have joined the panel composition discussions in its own right."
 
Australia said it does recognise that there may be circumstances where prolonging formal dispute processes might be justified. The first is where the parties are seeking to settle the issue bilaterally, including through a mutually agreed solution.
 
"But it is not the case here. Not one of the parties has approached Australia to resolve the dispute through a mutually agreed solution."
 
Alternatively, it said, where the measure or measures at issue are evolving, a complainant may need to delay dispute processes to ensure it is targeting the measure in a way that will be effective.
 
"Again, however, that is not the case here. Australia's measure was foreshadowed by the Australian Government in April 2010, nearly four years ago, and it was notified to the WTO TBT Committee in April 2011. Moreover, the measure has been in full force since December 2012."
 
Australia went on to cite Article 3.3 which provides that prompt settlement of disputes is "essential to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligations of Members."
 
Also citing Article 3.7 which provides that "before bringing a case, a Member shall exercise its judgment as to whether action under these procedures would be fruitful", Australia said that in its view, this means that a Member should not request consultations or a panel and only afterwards start considering whether it has a case that is capable of succeeding.
 
Meanwhile, in other actions, the DSB agreed to establish two other panels, one at the request of Japan over definitive safeguard measures imposed by Ukraine on certain passenger cars, and the other, at the request of China over certain methodologies and their application by the United States to anti-dumping proceedings involving China.
 
Both were second-time requests and panels establishment were automatic.
 
Under a separate agenda item, the European Union blocked a panel request by Argentina over anti-dumping measures imposed by the EU on bio-diesel from Argentina.
 
This was a first-time request and panel establishment will be automatic when the request comes up again before the DSB.