published in the Multinational Monitor, July/August 1997
Multinational Monitor: How did the foreign tobacco companies get into Thailand?
Dr. Hatai Chitanondh: Before 1990, Thailand had a government tobacco monopoly and a closed market. Cigarette imports were banned, with some exceptions.
In 1989, we had a fight with the Office of the U.S. Trade Representative (USTR). That was the beginning of the Section 301 dispute between Thailand and the United States. Section 301 of the U.S. trade bill says that if any country has a policy of preventing U.S. goods entering into that country, the United States would retaliate against that country by several means. For example, they can raise the tax of various imports of that country into the United States.
In the two or three years before the Thai-U.S. dispute, the United States forced open cigarette markets in Japan, Taiwan and South Korea using 301. Those countries yielded to U.S. pressure within a few months. But Thailand was totally different.
Before the United States used 301 against Thailand, I got some inside information that the minister of finance was preparing a list of foreign cigarettes to be brought into the country. I was then the deputy permanent secretary of the ministry of public health. I called a press conference and disclosed on March 13, 1989 that foreign cigarettes were going to come into the country. I was not afraid of the cigarettes themselves -- the product -- but I was afraid of the sophisticated marketing techniques of the foreign companies, which I feared would cause an increase in cigarette consumption in Thailand.
The health sector, the medical association, and almost all of the public joined in opposing the entrance of foreign cigarettes.
The U.S. Cigarette Exporter Association (U.S. CEA) at first thought it woould be easy to come into Thailand. But with the explosion of opposition, they realized that it would not be possible to come in. So they submitted a petition to the USTR on April 10.
The USTR accepted the petition and initiated an investigation on May 25, 1989. It had a timetable of one year for the investigation. During that time, we campaigned and got support from all around the world: from the Asia-Pacific Association for the Control of Tobacco, from the World Health Organization and from our friends in the health sector in the United States -- for example, the American Lung Association, the American Heart Association, American Public Health Association, and so on.
With all of the world support, the USTR decided it could not win bilateral negotiations -- the United States is a big country and if it forced a small country like Thailand to open its market to tobacco, it would lose prestige. So they sent the case to GATT in October of that year.
MM: How was the GATT case resolved?
Chitanondh: The GATT case is a landmark case. The GATT ruled that Thailand could not keep its market closed. But it also ruled that Thailand could take measures to limit the health consequences of the introduction of foreign cigarettes. Acceptable measures included: number one, a total ban on advertising; number two, a tax on tobacco products which can be set at any level, as long as it is applied equally to domestic and foreign cigarettes; number three, controlled distribution of cigarettes (for example, a prohibition on sales to people who are under the age of 18); and number four, a requirement that cigarette ingredients be disclosed.
So it seems that the United States won the case, because Thailand had to open the market to foreign cigarettes. But in reality, Thailand won the health aspects of the case.
After that case, the United States would no longer dare to use Section 301 to pressure other countries over cigarettes. They planned to use this to pressure China to open the cigarette market. Imagine! China has 300 million smokers -- the number of smokers in China is bigger than the whole U.S. population. The USTR planned to use this pressure upon China but they decided not to do it because of the Thailand case. So they had to use a 301 case upon all products, not particularly cigarettes, to pressure China after that.
MM: Which foreign companies have entered the Thai market after that case?
Chitanondh: Philip Morris, BAT (British American Tobacco); R.J. Reynolds; Japan Tobacco; Brown & Williamson; and Rothman.
MM: What kind of marketing techniques have they introduced, given the sorts of marketing restrictions Thailand has imposed?
Chitanondh: After we opened the market to the foreign cigarettes, we passed two tobacco control laws. They are very strong laws. The first law is the Non-Smokers Health Protection Act. It prohibits smoking in public places.
The second law is the Tobacco Product Control Act. It bans sale of tobacco products to people under 18. It places a total ban on advertising, in all media, with two exceptions: foreign printed materials that are imported, and live telecasts. It prohibits several kinds of promotion. For example, free sampling is not allowed, exchanges are not allowed and there is a ban on advertising of non-tobacco products that have cigarette logos on them. There must be disclosure of the ingredients of each cigarette brand. And there are 10 different, strong health warnings, each occupying 25 percent of cigarette packages, printed in black and white.
So the foreign cigarettes cannot advertise or promote their products. That's why the market share of foreign cigarettes has been less than 3 percent every year since the opening of the market.
It has been more than five years now that the foreign cigarettes got into the Thai market. In their documents, the foreign companies predicted that in the first year they would have about 15 percent market share and that in the second year they would reach 25 percent. But it has been almost five years now and they cannot reach more than 3 percent.
But they have been trying to circumvent our laws by many means.
MM: How have they been trying to circumvent the laws?
Chitanondh: First, they give out objects such as ashtrays and wall clocks with cigarette logos to retail establishments and restaurants. The restaurants put the ashtrays, for example, on their tables. But according to our law, that is advertising and thus illegal. Our law says that advertising means any act that enables people to see, hear or know about a product for commercial purposes. So I had to give a press interview with a picture showing what the companies had been doing, and warning restaurant owners that they could be arrested for illegally advertising cigarettes and liable for large fines -- about 6,000 U.S. dollars for each offense.
After the press interview, the restaurants and retailers removed the wall clocks and ashtrays. I have to do this all the time. Coverage in the media is very effective.
The companies have also sponsored cultural events. First, Philip Morris sponsored a Tony Bennett concert. But they could not show their logos at the place where the show was held. Later, Philip Morris sponsored the Philip Morris ASEAN Art Award, a series of art contests in each of the ASEAN countries -- Thailand, Malaysia, Singapore, Indonesia, Philippines, Brunei and now Vietnam.
I came out and opposed the Tony Bennett concert and the Asian Arts award. They are still undertaking these sponsorships, and we are still opposing it, but it has been difficult to explain to the public that cultural sponsorship is a marketing technique. It's not a philanthropy, or giving back to the society; the tobacco companies are trying to create positive associations between the good things and smoking.
There has not been sports sponsorship in Thailand because the companies cannot show cigarette logos.
In 1993, they had a car rally called the 555 Subaru Rally. (555 is the name of a cigarette brand.) They had the 555 on their cars, on their clothes, on their instruments, and they were seen in the news. That was illegal, so I gave a press interview press saying it was illegal, but the government authority didn't do anything about it. After the 1993 rally, I wrote to the main sponsor, Singha Beer, explaining that it was illegal. Since then, they have had the race every year but they don't use the 555 logos; instead they put on dash, dash, dash.
They have also tried to circumvent the advertising law. We have three cable television systems in Thailand. They show tapes of various sports that are sponsored by tobacco, where cigarette logos are displayed. Government authorities have not taken any action.
At the beginning of this year, an importer of "tobacco diversification"products took out two-full-page, color advertisements in magazines, advertising Camel Trophy clothing. That was illegal, according to our law. You cannot advertise any products that have cigarette logos on them. In this case, the Tobacco Consumption Control Office already complained to the police. I don't know how the case has been handled. We are afraid that the justice system might not be responsive. In developing countries, the bureaucratic systems are sometimes highly corrupt; they get money under the table and they don't do anything.
Lately, the cigarette importers have also tried to advertise by what we call point-of-sale promotion. They don't show cigarette logos -- they know that's impossible. So they just put up a color picture above the cigarette section in the retail shops. For example, they put up a picture with the words, "Get Lucky." People will know that is for Lucky Strike. Or they put up a color picture of the Marlboro cowboy, without a logo, and people know that that is for Marlboro. In this case, I am trying to collect all the pictures and I'll give a press interview. Because although they don't show cigarette logos, it is advertising according to our law, and it is illegal.
The latest thing about marketing, the thing about which I am most afraid, is low prices. Marlboro cigarettes here are manufactured in and imported from Malaysia. When they arrive in Thailand, the C.I.F. price is only 20 U.S. cents -- 20 cents! Imagine! It is probably the cheapest in the world. Even though we have quite high taxes -- the import tax is 30 percent of the C.I.F. price and then they have to pay the excise tax which is 68 percent of the retail price and a 7 percent value added tax -- the retail price stays very low. Marlboro retails for about one U.S. dollar. This is probably the cheapest in the world.
I think this is dumping. Right now, they only have 3 percent market share. They don't make money at the moment, but their goal right now is to get more people addicted. If cigarettes are cheap, people smoke more.
MM: Are the companies lobbying to have the regulations repealed or rolled back?
Chitanondh: They would love to, but they cannot do it.
At one time they tried. About three or four years ago, a former public health minister tried quietly to reduce the size of the health warning on the cigarette packages. But I found out about it so we were able to publicize it in the newspaper, and he didn't dare to do it.
MM: What has the U.S. embassy been trying to do, after the 301 case, to change regulations?
Chitanondh: About four years ago, when I was still at the Ministry of Health, we asked the Ministry of Finance, which supervised the Thailand tobacco monopoly, to ban all chewing tobacco because it was dangerous to our people, especially children. Thailand had not historically had chewing tobacco; it was brought in in a very small amount because there were foreign tourists coming into Thailand and some asked to buy it in shops.
The minister of finance agreed with us and banned imports of smokeless tobacco. At that time, the U.S. embassy tried to intervene. But the ban was GATT legal because it applied equally to domestic Thai production. The U.S. embassy tried to intervene but we didn't care.
Another issue is the disclosure of the cigarette ingredients, which is mandated in Article 11 of the Tobacco Product Control Act. This bill was enacted in 1992, five years ago, but the details of this Article 11 must be announced by the ministry of regulation later.
Five years after passing the law, we have not been able to issue the regulations because the cigarette importers have been opposing it all along, helped by three embassies -- the United States, Great Britain and Japan. The embassies argue that ingredients are a trade secret and protected under the World Trade Organization. We argue that it's not a violation of trade secrets according to the World Trade Organization because we don't reveal the ingredients to the public, and the GATT ruling established our right to protect the health of our people. If we find that any cigarette brand has too high a content of some dangerous chemicals, we can tell the producer of that brand to reduce the level of that particular chemical, for example.
Until recently, they have successfully helped the cigarette companies resist the regulation.
MM: Were the regulations finally adopted?
Chitanondh: Yes, it will be published in the Royal Gazette soon, and 180 days after that it will become effective. There are only three places in the world where this kind of regulation is law. One is Canada, the second is Massachusetts and the third is Thailand.