Pacific Agreement on Closer Economic Relations (PACER Plus)

The New Zealand Drug Foundation – Te Tūāpapa Tarukino o Aotearoa welcomes the opportunity to comment on PACER Plus, the proposed free trade agreement between New Zealand and Australia and the Pacific Forum Island Countries.

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The Drug Foundation’s interest

While we have traditionally taken a New Zealand-based focus, our organisation has increasingly adopted an international perspective, reflecting the transnational dimensions of many drug and alcohol issues. We have a particular interest in the Pacific Island countries given the special nature of New Zealand’s relationship and our significant people to people links. We hold serious concerns about the potential health and social impacts of free trade agreements involving the Pacific Island countries.

This submission focuses on our concerns as they relate to alcohol and tobacco. These are not ordinary commodities, and as such, we continue to recommend that alcohol and tobacco both be excluded from any free trade agreement for goods, services and investment that involves the Pacific Island countries. We also highlight several broader concerns relating to the relationship between trade liberalisation and the social determinants of health, and call for public health experts to be included in any negotiations on a free trade agreement with the Pacific Island countries.

We are members of the International Harm Reduction Association, International Drug Policy Consortium, Global Alcohol Policy Alliance and Asia Pacific Alcohol Policy Alliance. We were involved in consultations on the development of the World Health Organisation’s Western Pacific Regional Strategy to reduce alcohol-related harm and the WHO’s Global Strategy on reducing alcohol-related harms due to be presented to the World Health Assembly in 2010.  

Tobacco and alcohol in the Pacific

Consumption and harms

Alcohol and tobacco use in the Pacific Island countries and their related harms are widely believed to be on the increase across the region. Tobacco and alcohol use have serious social, economic and health consequences for these small island states. They are a burden on public health systems and business, a drain on public funds, and they undermine the health of citizens and their capacity to lead fulfilling and productive lives.

The WHO Global Status Report on Alcohol 2004 shows that while per capita alcohol consumption in most developing countries in the Western Pacific region was low compared with developed countries, it is rapidly increasing.[1] Patterns of consumption are also changing with growing and heavier use of alcohol by young people and a rise in the proportion of female drinkers. Rates of tobacco use in the Pacific Island countries are high (22-57% in males; 0.6-51%) in females) and for nearly all male populations, are higher than in Australia and New Zealand.[2]

According to the WHO, alcohol is the leading risk factor for the burden of injury and disease in ‘low mortality developing countries’, the category which encompasses the Pacific Island countries. The harmful use of alcohol is associated with over 60 types of diseases and other health conditions including psychiatric disorders, several types of cancer and noncommunicable diseases such as cirrhosis, as well as unintentional and intentional injuries. It is also associated with other high-risk behaviours, including unsafe sex and the use of other psychoactive substances. In addition to the individual drinker, alcohol-related problems have a significant effect on others including family members, victims of violence and accidents associated with alcohol use, and the community as a whole. Heavy alcohol use takes a particular toll on youth, and has been linked to high rates of youth criminal behaviour and reduced educational outcomes.

Alcohol-related problems including addiction, family violence and injuries represent an additional burden on poor families and communities already struggling with poverty and adversely impacts on human development. Yet perversely, per capita alcohol consumption and its associated harms tend to rise with economic growth.[3] In the Pacific Island countries, many of which are experiencing rapid social and economic transitions, the impacts of alcohol harms use are likely to be the greatest on the most vulnerable communities.

Tobacco causes over 40 diseases, many of them fatal or disabling. Smoking is responsible for over 90% of all cases of lung cancer, 75% of emphysema and nearly 25% of ischaemic heart disease. In the Western Pacific region, tobacco use is a major contributor to the burden of disease, accounting for up to 18% of the total disability-adjusted life years (DALYs) lost.[4] Much of the disease burden and premature mortality attributable to tobacco use disproportionately affect the poor. 

Tobacco and poverty are linked in other ways. In the poorest households of some low-income countries, as much as 10-17% of total household expenditure is on tobacco, meaning impoverished families have less money to spend on essential items.[5] The economic costs of tobacco use to society are staggering. The high price of treating tobacco-related diseases is compounded by productivity losses. Interestingly, there is a growing body of evidence showing that as tobacco consumption declines, consumer spending in other areas increases and the net overall effect is an increase in employment. Conversely, increased consumption of tobacco hinders development at personal and community levels.[6]

Pacific Island governments have a commitment to the ‘Healthy Islands’ concept, which is concerned with “improving the political, social, cultural, economic, and physical determinants of health”. Just as health has economic determinants, economies benefit from having healthy populations. By improving public health outcomes, Pacific Island countries are also likely to improve their economic outcomes. For these reasons, tobacco and alcohol control are important for the realisation of the Healthy Islands Vision.

No ordinary commodities: public health versus trade objectives

Alcohol and tobacco should not be considered ordinary consumer commodities. Alcohol is an addictive substance that can lead to long term dependence. It is associated with a range of acute and chronic health harms and has been classified by WHO as a Class 1 carcinogen, alongside asbestos, formaldehyde, mustard gas and plutonium-239. Were it to go before the New Zealand Government’s Expert Advisory Committee on Drugs using the same criteria it uses to classify new recreational drugs, it would be classified as a Class B (High Risk) drug.[7]  Tobacco products are highly addictive and ultimately lethal to half of all users, when consumed in a ‘normal’ way.

Consumption rates of tobacco and alcohol are profoundly influenced by the market conditions (including the trade environment, government regulation and excise laws) under which they are permitted to be sold.[8] There is robust and unequivocal evidence to show that the most effective public health measures to limit harms from alcohol and tobacco are those that seek to limit or reduce demand for and consumption of those products and to regulate their supply, by restricting access, limiting promotion and increasing prices.[9]

Free trade agreements have precisely the opposite effects. The opening of domestic markets to goods and service providers from other countries creates a more competitive trading environment. The likely (and intended) consequences of enhanced competition are that the prices of some goods and services will fall, and a wider range of products and services will enter the market. Manufacturers and service providers may also invest more heavily in marketing their goods and services to consumers. The combined effect of these developments is a rise in demand for and consumption of products, something which may be desirable for ordinary consumer products but is clearly undesirable when they are goods that are inherently harmful such as alcohol and tobacco.

In several countries, where trade barriers relating to tobacco produces have been eliminated, there has been a rapid increase in the numbers of tobacco brands entering the market and in manufacturers’ efforts at advertising and promotion of tobacco. Empirical analysis using data from 42 countries over the period from 1970 to 1975 clearly demonstrates that trade liberalisation has led to increases in cigarette smoking with the most significant impact in low-income and middle-income countries.[10] In relation to alcohol markets, studies have shown that in a number of developing countries, rapid increases in the availability and marketing of alcohol has increased consumption and alcohol-related harm.[11]

Public health policy to mitigate tobacco and alcohol-related harms is clearly at odds with commercial free trade imperatives. This presents serious problems for Pacific Island countries already facing rising harms from tobacco and alcohol. Our major concern is that trade obligations stemming from a free trade agreement would seriously weaken these governments’ abilities to introduce effective tobacco and alcohol policies and regulations. Although trade agreements generally provide limited exceptions in order to protect health, these are often difficult to invoke in practice and are frequently open to challenge as a barrier to trade or other form of protectionism.[12] In other cases, the provision in some agreements that exempts harmful goods on public health grounds is too narrow, too complex or simply overruled by the dominant commercial principles of the agreements.

The claim that regulation can still be employed to try and counter negative effects that liberalisation of trade in tobacco and alcohol may have, as long as it is non-discriminatory, is one that is often made by proponents of free trade. Yet in some circumstances, there are legitimate and important public health reasons for treating imported and domestic products differently. For example, alcohol control strategies might seek to limit exposure to new foreign alcohol products with higher alcohol content or those targeting youth, by implementing differential taxes to favour domestic brands with weaker strengths. This measure could be open to challenge as not in compliance with obligations regarding equal treatment of imported and domestic products, even though it is grounded in sound public health principles. While some countries have successfully defended challenges to restrictive alcohol policies, many Pacific Island countries lack the resources to mount expensive legal defences through the international trade courts. Pacific Island countries would also be particularly vulnerable to the dumping of surplus alcohol products. Cheap left-over beers and spirits from Australia and New Zealand could flood these markets in the same way that cheap unhealthy mutton flaps have done.

We strongly believe that the only way to ensure that Pacific Island governments retain full regulatory flexibility over the most effective public health strategies to mitigate the harms from alcohol and tobacco is to permanently exclude tobacco and alcohol products and services from the scope of PACER Plus (and from all existing and future free trade agreements with the Pacific Island countries). We note that in calling for public submissions, the Ministry of Foreign Affairs and Trade acknowledges that PACER Plus will not be a traditional trade negotiation in which commercial interests alone define New Zealand’s approach. We believe that excluding tobacco and alcohol from PACER Plus is eminently consistent with the envisaged non-traditional nature of this agreement.

Trade liberalisation and the broader social determinants of health

Trade liberalisation can affect health and social outcomes via a diverse set of channels, in addition to the effects on tobacco and alcohol consumption described above. Trade liberalisation in developing countries has been associated with greater income inequality and economic insecurity, and has the potential to deprive developing countries, which are heavily dependent on tariffs, of much needed revenues.[13] The resulting combination of increases in poverty and social stress with decreased public spending is a prescription for decreases in health status. Trade liberalisation has also facilitated the availability of highly processed, calorie-rich, nutrient-poor food in developing countries.[14] Another adverse consequence for health arises from provisions in trade agreements that are designed to restrict access to generic medicines.

We believe that the potential health and social impacts of any future trade agreement with the Pacific Island countries requires careful study. To this end, it is imperative that public health officials are included in all trade negotiations and that public health considerations are explicitly enshrined in any future agreement.

We share concerns articulated by several development NGOs that a PACER Plus that is modelled on a standard free trade agreement could result in the significant loss of manufacturing in the Pacific, with concomitant large increases in unemployment.[15] A conventional free trade agreement that imposes widespread reductions in tariffs would also result in a significant loss in government revenue for these small island states and lead to the erosion of essential public services including health and education. Accordingly, we believe that it is important that any future agreement is firmly based on the development needs and aspirations of the Pacific Island countries.

Recent research has drawn attention to the links between the rise of addiction and the psychological impacts of free markets and a culture of materialism.[16] Many Pacific Island countries are already experiencing rapid social and economic changes as they become increasingly integrated into the global economy. We believe that the aggressive promotion of a consumerist culture that accompanies the free trade agenda will further erode traditional community and family structures in the Pacific Island countries, undermining social resilience and creating fertile conditions for a rise in addiction.

We hold grave concerns at reports that Australia and New Zealand are fast tracking the PACER Plus process and ignoring wishes previously expressed by officials from the Pacific Island countries for more time to prepare.  We believe that it is vitally important that Pacific island states are given adequate time and resources to undertake national research and to support capacity building prior to any negotiations on PACER-Plus.

Recommendations

The Drug Foundation recommends that the Ministry note that:

• Alcohol and tobacco use are associated with serious and widespread health, social and economic harms and in the Pacific region, and that these are on the increase.
• Tobacco and alcohol are not ordinary commodities and should not be treated as such in trade agreements.
• A traditional free trade agreement would limit the capacity of signatory Pacific Island countries to adopt the most effective measures to mitigate the harms from alcohol and tobacco.
• The removal of barriers to trade in tobacco and alcohol will cause their consumption and related harms to rise.
• Trade liberalization has the potential to seriously undermine health status in the Pacific Island countries through a range of mechanisms.

In light of the above, we recommend the following:

• The health and social consequences of any future trade agreement with the Pacific Island countries need to be carefully studied.
• Public health experts must be included in all negotiations on a trade agreement and public health considerations need to be enshrined.
• Alcohol and tobacco should be permanently excluded from any future (and all existing) free trade agreements in goods, services and investments that involve that Pacific Island countries. This exclusion should extend to all measures that affect the supply, distribution, sale, advertising, promotion or investment relating to these extra-ordinary commodities.  
• New Zealand should support Pacific Island countries in their efforts to implement more effective tobacco and alcohol policies and regulations.
• Any final trade agreement must ensure that it reflects the developmental goals and aspirations of the Pacific Island countries, rather than the commercial imperatives of New Zealand and Australian businesses.

References

[1] WHO. Global Status Report on Alcohol 2004. [available from URL: www.who.int/substance_abuse/publications/global_status_report_2004_overview.pdf]

[2] Rasanathan K & Tukuitonga CF. Tobacco smoking prevalence in Pacific Island countries and territories: a review. N Z Med J. 2007;120(1263):U2743J

[3] Caetano R and Laranjeira R. A Perfect Storm in developing countries: economic growth and the alcohol industry. Addiction 2006; 101:149-52;   Room R and Jernigan D. The ambiguous role of alcohol in economic and social development. Addiction 2000;95:S523-35.

[4] WHO Regional Office for the Western Pacific. Fact sheet on Tobacco. [Available from URL www.wpro.who.int/NR/exeres/978BE0FD-AE30-46C6-8F75-1F40AE7B57BC.htm

[5] WHO. Tobacco and Poverty: a vicious cycle. Geneva, 2004.

[6] Stanton H. The social and economic impacts of tobacco in Asia and the Pacific. Tobacco and Development Bulletin No 54,2001; pp.55-58, Research Studies Network, Australian National University.

[7] Sellman JD, Robinson GM, Beasley R. Should ethanol be scheduled as a drug of high risk to public health? J Psychopharmacol 2009;23:94-100

[8] SPC 2005. Tobacco and alcohol in the Pacific Island Countries Trade Agreement: impacts on population health. Noumea, New Caledonia: Secretariat of the Pacific Community.

[9] Babor T, et al. Alcohol: no ordinary commodity. Oxford University Press 2003;   Anderson P, Chrisholm D, Fuhr DC. Effectiveness and cost-effectiveness of policies and programmes to reduce the harm caused by alcohol. Lancet 2009; 373:2234-46

[10] Taylor A, et al. The impact of trade liberalization on tobacco consumption. In: Tobacco Control in Developing Countries, Oxford University Press, 2000.

[11] WHO. Alcohol and public health in eight developing countries. Leanne Riley and Mac Marshall (Ed).

[12] Zeigler DW, The alcohol industry and trade agreements: a preliminary assessment. Addiction, 104(Suppl. 1), 13-26;   SHORE. Economic Treaties and Alcohol in the Western Pacific Region, Centre for Social and Health Outcomes Research and Evaluation, August 2006

[13] Stiglitz J. Trade agreements and health in developing countries. Lancet. 2009; 373(9661):363-5

[14] Blouin CB, Chopra M, van der Hoeven R, Trade and social determinants of health, Lancet, 373(9661):502-5

[15] Oxfam. PACER Plus and its Alternatives: which way for trade and development in the Pacific? Briefing Paper July 2009;  Kelsey J. A people’s guide to PACER. Pacific Network on Globalisation, 2004.

[16] Alexander BK. The roots of addiction in free market society. Canadian Centre for Policy Alternatives. April 2001.