US tobacco firm presses hard to open overseas markets to snuff
When the Hong Kong government decided to snuff out smokeless tobacco last summer, banning it for public health reasons, it did not count on the formidable opposition of the United States Tobacco Company. In the six months before the ban was finally signed into law on Jan. 16, the firm mounted a massive governmental, diplomatic, and private campaign against it. US Tobacco's Hong Kong campaign is a case study in how an aggressive multinational company can pull the levers of government to effect its own commerical ends. The case may serve as a preview of coming battles in the smokeless tobacco wars to be waged beyond Hong Kong.
US Tobacco tried to block the ban because Hong Kong is the gateway to the lucrative Asian market for snuff. Hong Kong's stand is seen as influencing other Asian Pacific countries. Already, New Zealand has followed Hong Kong in instituting a ban on smokeless tobacco. Australia and Singapore are considering similar bans. The Hong Kong ban may also endanger a tentative agreement the company had announced for the sale of snuff in the People's Republic of China. With 300 million smokers, China is the largest tobacco market in the world.
US Tobacco set up its Hong Kong office in 1985 to promote sales throughout Asia of Skoal Bandits, a moist snuff popular with young users. In its efforts to kill the Hong Kong ban, the firm also used the United States Commerce Department, the State Department, four US senators to whom it made hefty campaign contributions, the Department of Health and Human Services, the American Chamber of Commerce in Hong Kong, a powerful Hong Kong legal firm, and representatives of its own Connecticut-based multinational company. Its chief weapon was the threat of action by yet another US government arm, the office of the US trade representative, through trade retaliation under Section 301 of the US trade law.
The precise role of US Tobacco in attempting to influence US and Hong Kong government policy - or in the company's view, have its case heard - is murky. But more than 40 interviews tracing the ban and the company's attempt to overturn it disclose a pattern that raises serious questions about US policy on possible future bans.
Snuff is definitely big business. US Tobacco, based in Greenwich, Conn., had net earnings in 1985 of $93.5 million on net sales of $480 million.
There are several clues as to how persistently, US Tobacco has pursued its goals. One is a letter dated Oct. 23, 1986, and signed by four US senators: Christopher Dodd (D) and Lowell Weicker (R) of Connecticut; Robert Kasten (R) of Wisconsin; and Robert Dole (R) of Kansas, then Senate majority leader. In the letter, addressed to Sir David Akers-Jones, chief secretary of the Hong Kong government, the senators said the proposed ban might ``constitute an unfair and discriminatory restriction on foreign trade.'' The words ``unfair'' and ``discriminatory'' are terms of law used to signal possible retaliatory trade action.
According to Federal Election Commission figures available for 1986 (through Oct. 1), US Tobacco contributed a total of $26,000 to the political-action committees of these four Senators, an amount representing nearly a third of US Tobacco's total contribution of $88,850 for that period to 53 candidates in Congress. Senator Kasten's PAC received $9,000, Senator Dodd's, $8,000, Senator Weicker's, $5,000, and Senator Dole's, $4,000.
Dole said, ``I assume US Tobacco initiated it [the letter]. Don't they make smokeless tobacco?'' An aide for Kasten confirmed that, but the other two senators declined to comment.
When the letter from the four senators arrived in late October, the Hong Kong government was at first worried it was the opening shot in a trade war.
A Hong Kong spokesman says his government first considered a ban when it received a Skoal Bandits import permit request in May from a US Tobacco distributor. A company spokesman says US Tobacco learned about the proposed ban from a newspaper article in mid-July but made no effort to oppose it until November. That view is at variance with what US officials and spokesmen for the Hong Kong government say.
By the time John Chambers, Hong Kong's secretary for health and welfare, announced, on Oct. 29, regulations banning smokeless tobacco, both foreign and domestic, as a hazard to public health, the company had apparently been lobbying against the ban for at least two months. Mr. Chambers said that day that Hong Kong had made its decision based on studies by international health authorities. The US surgeon general's 1986 report on smokeless tobacco warned that those who use it risk oral cancer, gum disease, and addiction. According to the surgeon general, there are 12 million smokeless tobacco users in the US, at least 3 million of whom are under 21. The World Health Organization, which labeled snuff a carcinogen, has tentative plans for an international meeting on the health hazards of smokeless tobacco.
Chambers pointed to the ``intended introduction'' of Skoal Bandits as one of the principal reasons for Hong Kong's ban.
A US Tobacco spokesman denies that the firm targets teens, saying the ``target market for smokeless tobacco products are adult males 18 years old and older.'' He admits ``a lot of high-school-age youngsters'' in some states are buying it despite laws against sale to minors.
US Tobacco began lobbying to derail the proposed Hong Kong ban sometime last summer. The date is in dispute, because there are different versions of a crucial meeting between a US consulate representative in Hong Kong and Wilfred Tsui, Hong Kong's principal assistant secretary for health and welfare. Mr. Tsui says they met in June and that the consulate representative asked him several medical questions, said he was aware of conflicting scientific health evidence, and asked about steps to appeal the ban. Mr. Tsui called the inquiry ``legitimate and normal.''
A second and conflicting version was learned about by Dr. Gregory Connolly, director of the office for nonsmoking and health of the Massachusetts Department of Public Health. Dr. Connolly was responsible for that state being the first in the nation to require health warning labels for smokeless tobacco and ban its sale to those under 18. He was consulted by Hong Kong as an international authority on the hazards of smokeless tobacco.
According to Connolly's information, the meeting was held on Aug. 13 between Tsui and a US consulate representative, who requested the names of people, including the US surgeon general, with whom the Hong Kong government had been in touch and any documents or communications from them. Reportedly, the US consulate representative also asked why Hong Kong was treating this product differently from other tobacco products (which might be construed as trade discrimination) and whether Hong Kong was aware of conflicting scientific evidence on the health effects of smokeless tobacco.
In Washington, a State Department spokesman said the US consulate staff had made it clear to Hong Kong officials that ``the US government does not take a position on the proposed legislation [the ban] but is concerned that the American company involved should properly understand the procedures and receive a fair opportunity to state their case.''
The spokesman said one meeting and later phone calls took place between late summer and fall, involving ``a number of consular staff,'' after an initial call from the company to intercede with Hong Kong. The State Department spokesman said that in mid-October the company was told that no protest could be lodged with Hong Kong on the ban because it was clearly a health bill, not a trade bill. However, the US consulate press spokesman acknowledges that no formal notification of this was given to the Hong Kong government.
Having tried unsuccessfully to use US legislative and diplomatic channels to stop the ban, US Tobacco then approached the American Chamber of Commerce in Hong Kong. Although US Chamber offices are not supposed to lobby for individual companies, the Hong Kong chamber wrote a letter to Secretary of Trade Eric Ho warning him that the ban ``would be excessive and discriminatory and contrary to free trade.''
In addition to these approaches, US Tobacco lobbied members of Hong Kong's legislative council, its executive council, various members of the health and trade ministries, and sent a petition to the governor asking that its product not be banned.
A Hong Kong government spokesman says there has been ``a lot of pressure..., exceptional protests'' from the company about what the colony considers a health, not a trade, measure. But a spokesman for US Tobacco denies the health argument, saying the questions about snuff are ``still unresolved.... Smokeless tobacco hasn't been scientifically proven [to be] the cause of any human disease, including oral cancer.''
The company sticks to its claim that the Hong Kong ban is solely a trade issue, and a spokesman says: ``Any ban aimed specifically at smokeless tobacco, while Hong Kong continues to allow the sale of all other tobacco products, we perceive as clearly a discriminatory restriction on international trade.''
A spokesman for the Smokeless Tobacco Council, the public relations arm of the business, concurs that the industry has been singled out: ``With $2.7 billion worth of exports in 1984, tobacco is an important segment of US foreign trade. The Smokeless Tobacco Council considers the Hong Kong ban to be a serious international trade issue.''
A spokesman for US Tobacco denies that it ever requested anyone to threaten retaliatory trade action.
In a letter to the Hong Kong government, US Rep. Henry Waxman (D) of California (one of the authors of the Comprehensive Smokeless Tobacco Act of 1986, which mandated federal health warnings) said that ``the sale and use of smokeless tobacco represents a public health threat to any country which permits its sale.''
Next: The fight over snuff moves to other countries.