Tobacco companies, business groups, and Republican lawmakers oppose this carve-out, arguing it undermines the investor-state dispute settlement (ISDS) system and will lead to health exceptions in future trade deals for other consumer goods such as alcohol and sugar.
Trade critics and Democrats welcome the carve-out for tobacco control measures but argue the need for that exception underscores the threat that investor-state disputes pose to other public health and environmental regulations, which aren’t carved out.
If protection for antismoking rules seems like small beer in the decision to approve a twelve-country trade deal that took eight years to negotiate, that’s because it is. The U.S. cigarette industry long ago shifted most of its manufacturing (and the associated jobs) overseas, and agricultural tobacco production is not included in the TPP carve-out. But if construed as an issue about ISDS generally, the stakes become higher. The margins for approving trade deals in Congress are razor thin.
To move the TPP closer to congressional passage, President Barack Obama’s administration need not reopen the trade talks to eliminate the carve-out for tobacco or extend it to other areas. But the White House must do a better job addressing the misperceptions that have arisen about the extraordinary nature of the tobacco carve-out and its implications for the potential threat that investment disputes may still pose for other health and environmental regulations.
Exceptions Are the Rule in Trade Agreements
Readers might understandably conclude from the controversy over the tobacco carve-out that exceptions are, well, exceptional in the TPP. The opposite is true.
The number of exceptions in U.S. trade agreements has increased over the last two decades and is a reason for the expanding length of these deals. For all the attention given to the 1994 North American Free Trade Agreement (NAFTA), it is fewer than four hundred pages. This proliferation of exceptions is seen inEuropean Union and Canadian trade deals, as well.
These changes reflect the expanding aims of trade liberalization. The traditional barriers to international commerce—tariffs and quotas—have declined dramatically over the last several decades. As a result, governments seeking freer trade have shifted their focus to other areas like investment, services, procurement rules, regulatory cooperation, and intellectual property. But as governments have sought deeper cooperation, they have also tried to preserve space for existing legal commitments, retain regulatory independence, and reassure trade-wary constituents. Exceptions are the direct result of this careful balancing act.
In many cases, the exceptions reflect the particular subject matter excluded rather than any trade-specific concerns. Most trade deals exclude national security and tax rules. Some exclude firearms and munitions. The TPP exempts from dispute settlement any matters related to the Treaty of Waitangi, a treaty between the UK and New Zealand’s Maori chiefs. Compulsory licenses, which often involve pharmaceutical patents, are the subject of a World Trade Organization declaration and exempted from the expropriation claims that investors may bring under the TPP.
Why Tobacco Is Different
The tobacco carve-out is similar to the other exceptions in the TPP. It reflects the particular status of tobacco in international law and established U.S. trade policy, and was negotiated and included at the insistence of TPP member countries.