Back in 2012, I argued against a carve out of tobacco from trade and investment rules, saying this:
Let’s turn now to the argument, made by many critics of the current system, that existing trade rules that go beyond protectionism undermine national sovereignty, including the ability to regulate, and thus intrude into domestic health regulation. ...
The question then arises as to whether special rules—that is, the “carve-out”—for tobacco are needed to prevent this interference. On this point, the issue of too much intrusion of trade and investment rules is not specific to tobacco. This is a more general problem with these agreements. As a result, rather than develop new rules for the tobacco industry, it may be worth thinking more broadly about problems arising from international economic agreements intruding into domestic regulation. Tobacco is unique in some ways, but its dangers have close parallels with many other products that cause health concerns. It is not clear that any differences between tobacco and other products merit a special regime. One of the most famous WTO disputes involved a French ban on asbestos, a product even more widely cited as a health hazard than tobacco. Thus, to the extent there is a problem, having special trade rules apply to tobacco is not the solution. (emphasis added)
To clarify what I was going for there: Don't carve tobacco out of trade/investment agreements, just fix ISDS and IP rules!
Now we have this new proposal from USTR, as reported by Inside U.S. Trade, for a carve out (of some sort) of tobacco from ISDS in the TPP:
U.S. trade officials have reached out to some other Trans-Pacific Partnership (TPP) countries to informally float the idea of excluding tobacco-related challenges from being brought under the deal's investor-state dispute settlement (ISDS) mechanism, according to informed sources. This move signals the United States may be ready to bring its position on this issue closer to that of public health groups, which have demanded tobacco be completely carved out from the agreement.
Sources said the Office of the U.S. Trade Representative has indicated to these TPP countries that it may propose language carving out tobacco-related disputes from ISDS at the upcoming TPP meetings in Australia.
But a USTR spokesman said the U.S. does not expect to table a new tobacco proposal in Australia. "TPP countries continue to debate how to address tobacco public health issues in the agreement," the spokesman said. "The United States has not tabled any new U.S. proposal on tobacco products and is still engaged on congressional and stakeholder consultation on an appropriate approach. We do not expect to table a new proposal in Australia."
Here are some initial thoughts in reaction:
First, we haven't seen any actual text yet (and USTR stresses there is no proposal), so take that into account with any of the analysis that follows.
Second, in case there were any doubts, it should now be clear how little influence I have on U.S. trade policy!
Third, it seems odd to me to exclude tobacco measures from all ISDS challenges. Doing so means that a TPP nation could expropriate a tobacco factory without providing compensation; or that it could tax foreign-owned tobacco companies at a rate higher than it taxes domestically-owned ones. Putting aside my other criticisms of ISDS for a moment, that is a strange result.
And fourth, clearly, this proposal is in response to concerns expressed by public health advocates that investment rules undermine the ability of governments to regulate tobacco for public health reasons. By carving out tobacco in this way, I take this proposal as an acknowledgement by the U.S. government that current investment rules could interefere with public health regulation. (Or maybe they don't think it interferes, but gave up trying to convince public health folks otherwise?) The carve out is designed to address this problem.
But if that's the case, why have a system where investment rules undermine public health regulation in all sectors other than tobacco? Why not just fix the investment rules so they have no chance of interfering? Tobacco is far from the only public health issue, and in my view isn't even the biggest one. If you are worried about tobacco-related challenges, why not food-related challenges as well? Trans fat bans, sugary-food regulations, or even burger taxes could all be challenged. Carving out tobacco suggests that ISDS does cause problems for public health regulation, but we are willing to ignore that for non-tobacco public health issues. It surprises me that public health advocates would take this view. If they agree to ISDS with a tobacco carve out, it will not be easy to go back in to a signed agreement later and add new exclusions. If they want room to regulate public health, why not push for a general revision to the investment rules? Is it just a practical political judgement that this is all that can be achieved right now?
In terms of legal drafting, the easiest solution to the problem of regulatory autonomy would be to focus the investment rules on non-discrimination, so that you could regulate public health (or other policy areas) as much as you like, as long as you do so in a non-discriminatory manner. Current rules go beyond that in ways that make it pretty easy to challenge tobacco and other regulations even where they do not discriminate, and that's where the problem lies. (Note that I said easy to challenge; not necessarily easy to win that challenge).
However, politics may be the more important consideration here, with the U.S. government trying to balance out the competing voices pushing policy in particular directions. Getting people to rethink ISDS is not easy (believe me!), so perhaps this is seen as a less difficult solution. At the same time, though, the politics of tobacco are not going to be that simple. It's not just the public health community that needs to be assuaged. Presumably there are some key members of Congress from tobacco-producing states who also have a strong voice on these issues, and they will not be eager to go along with a tobacco carve out.