TWN Info Service on WTO and Trade Issues (Oct12/04)
10 October 2012
Third World Network

Panel set to examine Australia's plain tobacco packaging
Published in SUNS #7449 dated 2 October 2012

Geneva, 1 Oct (Kanaga Raja) -- The Dispute Settlement Body (DSB) of the World Trade Organisation (WTO) on 28 September agreed to establish a panel, at the request of Ukraine, to examine certain measures imposed by Australia concerning trademarks and other plain packaging requirements applicable to tobacco products and packaging.

This was a second-time request and panel establishment was automatic.

Uruguay, New Zealand, Norway, Zimbabwe, Honduras, Dominican Republic, Zambia, Nicaragua, Indonesia, the United States, Chinese Taipei, Turkey, Oman, Japan, the European Union, the Philippines, Ecuador, Korea, India, Brazil, Argentina, Singapore, Guatemala, and Canada reserved their third party rights to the dispute.

According to its communication to the DSB, Ukraine said that the dispute concerns certain Australian laws and regulations that impose trademark restrictions and other plain packaging requirements on tobacco products and packaging.

It added that Australia's measures impose significant trademark restrictions and other so-called "plain packaging" requirements regarding the appearance and packaging of tobacco products.

The challenged measures are contained in the Tobacco Plain Packaging Act 2011 and its implementing Tobacco Plain Packaging Regulations 2011; and the Trade Marks Amendment (Tobacco Plain Packaging) Act 2011.

According to the Ukrainian communication, the measures are applicable to all tobacco products grown or manufactured for human consumption. They impose criminal penalties for virtually any action, including manufacture, supply, or packaging of tobacco products, that is not in compliance with the "tobacco product requirements" of the Plain Packaging Act and its implementing Regulations.

The Plain Packaging Act provides that "[n]o trade mark may appear anywhere on a tobacco product" other than as permitted by the Regulations. The Plain Packaging Act further provides, inter alia, that "[n]o trade mark may appear anywhere on the retail packaging of tobacco products," permitting the appearance of only the brand name, variant, business or company name and other marks pursuant to the relevant legislative requirements. The appearance of the brand name is regulated by the Plain Packaging Act and the implementing Regulations.

Ukraine said that the Plain Packaging Act further requires that tobacco product packages be "drab dark brown" (specified as Pantone 448C in the Regulations) in a matte finish, with no other colours, logos, or brand features visible on the package, other than the brand and variant name in a standard form and font below the graphic health warning.

Tobacco product packaging will continue to contain graphic health warnings, which are increasing from 30 percent to 75 percent of the front surface of each package and continue to cover 90 per cent of the back surface of the package. The Plain Packaging Act and its implementing Regulations also regulate the physical features of retail tobacco packaging, imposing a standard form on the type and size of the package to be used.

The Plain Packaging Act provides that cigarette packs and cartons must have a standardised shape with no decorative elements, and that cigarette packs must have flip-top openings. The lining of cigarette packs must only be foil backed with paper, or a material allowed by the Regulations.

Ukraine stressed that Australia's measures, especially viewed in the context of Australia's comprehensive tobacco regulatory regime, appear to be inconsistent with a number of Australia's obligations under the TRIPS Agreement, the Technical Barriers to Trade (TBT) Agreement, and GATT 1994.

These violations nullify or impair the benefits accruing to Ukraine under the aforementioned Agreements, it said.

In its statement at the DSB, Ukraine said that Australia's measures deny the essence of the rights that are protected under the TRIPS Agreement and erode the protection of intellectual property rights, thus raising concerns.

These measures impose severe restrictions on the use of validly registered trademarks and impose a significant number of product and packaging requirements that will standardise tobacco products and their packages in Australia, it added.

Following the notification (by Australia) of the Tobacco Plain Packaging Bill to the WTO in April, Ukraine said that it had on several occasions and in various fora expressed its serious concerns over these measures which it said are inconsistent with a number of Australia's WTO obligations.

In that context, Ukraine and several other WTO Members posed specific questions to Australia in an attempt to obtain additional information from Australia concerning the basis for these measures and their alleged consistency with Australia's obligations.

Regrettably, said Ukraine, Australia never directly responded to the many constructive questions posed by Ukraine.

Ukraine said that it wished to emphasise that every government, including the Ukraine government itself, clearly has a sovereign right to introduce regulations to protect and improve the health of its population.

However, Ukraine considers that governments should pursue legitimate health policies through effective measures without unnecessarily restricting international trade and without nullifying intellectual property rights as guaranteed by international trade and investment rules.

Ukraine considered that Australia's plain packaging requirements violate a number of Australia's obligations under the TRIPS Agreement, the TBT Agreement and the GATT.

In particular, it considered that the plain packaging measures are inconsistent with the TRIPS Agreement and the Paris Convention because the measures fail to give effect to the trademark holder's legitimate intellectual property rights as protected under these agreements. In addition, it considered that the measures are clearly more trade restrictive than necessary to achieve the stated health objectives and thus violate Article 2.2 of the TBT Agreement as an unnecessary obstacle to trade.

Finally, it considered that the plain packaging measures adversely affect competitive opportunities for imported products and foreign trademark right holders and thus fail to respect the national treatment requirement set out in several provisions of the WTO Agreements.

In its statement, Australia said that like all WTO Members, it and Ukraine are confronting the global tobacco epidemic. It added that it is aware of the substantial progress which Ukraine has made in implementing tobacco control measures in accordance with the WHO (World Health Organisation) Framework Convention on Tobacco Control, to which both Australia and Ukraine are parties.

This progress includes, since 16 September of this year, a wide ban in Ukraine on tobacco advertising, sponsorship and promotion; from 4 October 2012, new health warnings on cigarettes, covering 50% of the front and back of packs; and from 16 December 2012, a ban on smoking in all public and work places including cafes, bars and restaurants. Ukraine has also implemented significant increases in tobacco excise in recent years.

Australia noted that Ukraine, like itself, was a member of the Working Group which developed the Guidelines for implementation of Article 11 of the Framework Convention, which include a recommendation that parties should consider adopting tobacco plain packaging.

These Guidelines were adopted by consensus of the Conference of the Parties to the Framework Convention, together with the Guidelines for implementation of Article 13, which also recommend plain packaging.

Australia's tobacco plain packaging measure is clearly in line with these Guidelines, it stressed.

Given Ukraine's own tobacco control initiatives in accordance with the Framework Convention and its membership of the Article 11 Working Group, Australia said it is "surprised and disappointed" that Ukraine has decided to challenge Australia's tobacco plain packaging measure.

"This step is at odds with the policies being pursued within Ukraine to comply with the Framework Convention."

Indeed, Australia added, in implementing an increasingly comprehensive suite of tobacco control measures, Ukraine appears to be following a similar path to the progressively more comprehensive and stringent approach to tobacco control which has been adopted over time by Australia.

According to Australia, the tobacco plain packaging measure is a sound, well-considered measure designed to achieve a legitimate objective - the protection of public health. The WTO Agreements recognise the fundamental right of WTO Members to implement measures necessary for the protection of the public health of their citizens.

"The measure applies to all tobacco products, regardless of origin, and is clearly non-discriminatory. The tobacco plain packaging measure does not undermine the protection afforded to trademarks as required under the TRIPS Agreement. Nor is the measure more trade restrictive than necessary to fulfil its legitimate objective," said Australia.

According to trade officials, Uruguay expressed support for Australia, saying that it could not remain silent in this fight against "the most serious pandemic confronting humanity."

It added: "The norms of the Multilateral Trading System cannot and should not force its Members to allow that a product that kills its citizens in unacceptable and alarming proportions continues to be sold wrapped as candy to attract new victims."

According to trade officials, New Zealand and Norway also supported Australia. New Zealand said that it is also considering plain packaging measures, while Norway said that countries are under the obligation to adopt measures to protect public health.

On the other hand, trade officials said that Zimbabwe, Honduras, Dominican Republic, Nicaragua and Indonesia supported Ukraine.

According to trade officials, Zimbabwe said that 200,000 farmers and their families in the country depend on tobacco for their livelihood.

Honduras said that the WHO Framework Convention is indicative and non-binding, while Nicaragua said that tobacco is one of the most important items in the country's exports. +