Parliamentary Health Committee SMOKE FREE ENVIRONMENTS (TOBACCO PLAIN PACKAGING) AMENDMENT BILL March 2014

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1 2 Parliamentary Health Committee SMOKE FREE ENVIRONMENTS (TOBACCO PLAIN PACKAGING) AMENDMENT BILL March 2014 The New Zealand Food &Grocery Council (the "NZFGC") welcomes the opportunity to make a submission on the Smoke free Environments (Tobacco Plain Packaging) Amendment Bill New Zealand Food &Grocery Council The NZFGC represents the major manufacturers and suppliers of food, beverage and grocery products in New Zealand. Collectively this sector generates $28.7 billion in the New Zealand domestic retail food, beverage and grocery products market and $26.3 billion in export revenue from exports to 183 countries. Food and grocery manufacturing is the largest manufacturing sector in New Zealand representing 46% of total manufacturing income and 34% of all manufacturing salaries and wages. Food and grocery production and wholesaling in New Zealand directly employs 104,160 people (5% total employment) and, when taking the wider food and beverage value chain (including farming and food retailing/foodservice) into account, employment soars to 344,820 in 85,252 enterprises. This represents around one in five people employed in our country. No matter how you look at it, the New Zealand food, beverage and grocery sector makes a substantial contribution to the New Zealand domestic economy, to our exports and to the general economic well being of the country. The Bill The plain packaging amendment provisions are not provisions for `plain packaging' for tobacco products at all, since the term `plain packaging' is a misnomer. This is because there is no intention of allowing tobacco to be marketed in plain packaging, without decoration or elaboration on in any way. Rather, so called `plain packaging' comprises the following elements: Maintaining and expanding the gruesome and cautionary pictorial and textual health warning messages that are reflective of the consequences of smoking Removing all elements of identifiability for tobacco brands other than name and company details in standardised format font, size, colour and position Increasing to the maximum extent possible on all packaging, the area dedicated to depictions of the consequences of smoking. A key stated intention is to align the requirements for tobacco packaging with Australia.

2 3 Overarching Comments The NZFGC is strongly supportive of encouraging healthy lifestyles and reducing harm in the community. The NZFGC supports all current laws and regulations relating to the production and selling of tobacco noting that these laws and regulations are extensive. The Smoke free Environments Act 1990 has been in operation in New Zealand for over 20 years and was a world leading piece of legislation when it was introduced. New Zealand also uses tobacco excise very effectively as a mechanism for discouraging the use of tobacco products. Further to these measures, New Zealand has been a party to the World Health Organization Framework Convention on Tobacco Control since its commencement in Some of the key non price provisions of the Framework Convention that New Zealand has implemented include the following: Comprehensive banning of tobacco advertising, promotion and sponsorship; Regulation of packaging and labelling of tobacco products including the placement of rotating graphic health warnings; Regulation of supply and on supply to minors; Protection of citizens from second hand smoke in workplaces and indoor public places; Providing smoking cessation support; and Combating tobacco smuggling and illicit trade across countries. The Smoke free Environments Act 1990 and related legislation cover all of the requirements listed above. It is the view of the NZFGC that New Zealand is a world leader in tobacco control and currently exceeds the provisions of the WHO Framework Convention on Tobacco Control. However, provisions to remove a company's use of trademarks and identifying on pack branding, is a significant step with domestic and international implications for the companies involved, for companies not involved, and for the whole country. The reason is that those favouring standardised packaging might claim governments can take such steps for health reasons. This precedence making argument can then be made for standardised packaging for any foods or products for which there is a health concern. This might be the case in future for foods containing fat, salt, sugar or for alcohol, infant formula etc. Eating is not a 100% risk free activity. The flow on potential for the exercise of standardised packaging to products that might present some group in the community with a risk is significant. Before taking the dramatic step to deny companies their ability to make use of their own intellectual property, it is important for decision makers to ask two fundamental but related questions: what evidence supports this step; and will the action achieve the health impact of reduced smoking through the stated objectives of the amending provisions by reducing the social acceptance and appeal of smoking, increasing the effectiveness of warnings and images and removing false perceptions about the harms caused by tobacco. NZFGC considers the evidence is a mix of recycled references and research that does not take account of New Zealand's current labelling requirements. There is no evidence the action of removing branding will make any difference to reduce smoking beyond the measures already in place.

3 4 More importantly, NZFGC opposes the Smoke free Environments (Tobacco Plain Packaging) Amendment Bi for its precedent setting impact on intellectual property generally, food and grocery branding in particular and its impact on New Zealand's reputation as a principled trading nation. Specific Comments International Agreements There is a suggestion that the proposal is consistent with the Trans Tasman Mutual Recognition Arrangement given Australia's position on plain packaging. This may be the case but it appears to ignore the position of New Zealand in international and global trade. By ignoring other, broader trade consequences, New Zealand may well be jeopardising all but trans Tasman trade. The key international agreements, other than trans Tasman arrangements, relevant to so called `plain packaging' of tobacco products are the: Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement) Agreement on Technical Barriers to Trade (TBT) Paris Convention for the Protection of Industrial Property 1967 (the Paris Convention) As well, the WTO Dispute Resolution Procedures would be available to any countries wishing to challenge the legality of `plain packaging' legislation. Australia is already subject to such challenges and there is little doubt that New Zealand would face similar challenges. A key difference would be the cost to the New Zealand taxpayer of mounting the required defence which would be comparatively greater because the New Zealand tax base to draw on is smaller than Australia's. Under the TRIPS Agreement the relevant trade mark related provisions are found in Articles 2, 8, 15, 16 and 20. Article 16 details the rights of trade mark holders and in particular, confers rights on holders that prevent third parties from using the trade marks. This is commonly known as `negative rights' because they do not promote the use of a trade mark but rather protect its misuse. More importantly, Article 20 prevents the unjustifiable restriction on the use of a trade mark in trade. Article 20 allows for encumbrances so long as such encumbrances are justified. It is in this area that the proposed legislation may present problems'. Articles of the Paris Convention are incorporated by reference in the TRIPS Agreement in Article 2.1. Article 6quinquies of the Paris Convention allows a trader to register and use the same trademark in many different jurisdictions. This means "without being forced by the diverse national regulations to use different marks. Plain packaging would go against this very purpose." 2 Article 10bis of the Paris Convention operates similarly in providing protections rather than promoting use and requiring "effective protection against unfair competition"3. Importantly, a decision on the interpretation and application of these Articles would have applicability to any other packaged and labelled good on the market from food and alcohol to cars and aeroplanes where these are deemed to harm human health. The implications could be extremely far reaching. 2 p247 Jeremy Johnson "Plain Packaging for tobacco". New Zealand Law Journal August 2012 p14 Katharine Stephens "Plain speaking", ITMA Review: The Journal of the Institute of Trade Mark Attorneys, Issue 390, Dec 2011/Jan 2012 s Article 10bis(1) Paris Convention for the Protection of Industrial Property 1967

4 5 Role of trademarks and branding Trademarks on retail products provide the single most important mechanism for the trademark owner/product owner to communicate information to consumers regarding products that may lawfully be sold. Under the TRIPS Agreement, the function of trademarks is to enable a trademark owner to distinguish their goods in the course of trade, indicating source, quality and reputation embodied in the trademark. If a trademark owner is not able to display their trademark on their retail product, the function of the trademark is compromised or removed to the extent that the consumer cannot use it in their purchase decision making. Trademarks do not encourage purchase in a mature market, rather they enable consumers to distinguish and choose between competing brands within a category. For example, the use of milk supply trademarks enable milk consumers to identify products among competing milk products, associating with each product the reputation enjoyed by the brand. The same applies to trademarks for tobacco products. The display of trademarks enables consumers to differentiate competing products and choose one brand over another. The provisions in the Bill destroy this key and core function. Intellectual property rights Removing branding has triggered a major international dispute about intellectual property rights. The NZFGC considers there is a significant and major risk for New Zealand to pursue so called `plain packaging' in light of the following factors: International law experts consider the step to be contrary to international agreements that have bound New Zealand (and Australia) since signing up to them. Australia is facing a World Trade Organization (WTO) disputes challenge. The effect of principle based decisions in the WTO and the potential downside for other important New Zealand exports such as infant formula, high fat dairy and alcohol. The precedent setting nature of so called `plain packaging'. In the last 12 months there have been calls for such regulation for products including those mentioned above. By introducing the provisions in the Smoke free Environments (Tobacco Plain Packaging) Amendment Bill 2013, NZFGC believes New Zealand would likely violate its WTO obligations under the TRIPS Agreement in relation to the protection of intellectual property rights of tobacco producers. It would also appear to violate its obligations under the TBT Agreement. NZFGC considers removing the opportunity to use trademarks is not only an encumbrance within the TRIPS Agreement but that it is also unjustifiable because there is no evidence to show such provisions would achieve the health impact of reduced smoking beyond the measures already required. Evidence intended to show a positive outcome are either not relevant to the current status of labelling already mandated in New Zealand or contain methodological flaws that have been documented in several critiques. Evidence that removing intellectual property will further reduce smoking To support the removal of typefaces and company colours on a strip of packaging is to believe that this is a key factor in social acceptance, effectiveness of warnings and swaying choice to smoke at all, rather than as an identification guide between companies' products.

5 D The evidence cited as supporting so called `plain packaging' is generally not referring to the current mandated messaging that covers the bulk of external packaging and which is not glamorous and alluring as much of the research would otherwise suggest. Current packs have pictures of gangrenous toes, infected eyes and lungs, putrid gums and other hideous images coupled with written warnings such as "SMOKING CAUSES MOUTH AND THROAT CANCER" etc. The key research paper referred to in the regulatory impact statement prepared by the Ministry of Health for its 2012 consultation paper on this matter refers to a 2011 literature review by Quit Victoria and the Cancer Council Victoria which in turn refers in the vast majority of instances to older or overseas research not relevant to or reflective of existing New Zealand legislative requirements. The warnings and images applied in New Zealand currently cover 30% of the front of cigarette packs, and 90% of the back. FGC contends the evidence to support the proposed legislative amendments is weak, outdated or non existent. A reliance on this for justification for the measures ignores the range of other, alternative measures available to Government such as financial and further restrictions on areas of use, to achieve the outcome of reduced uptake and appeal of smoking without the need for restricting or prohibiting the use of trademarks. Once tobacco products are undifferentiated by branding, price will be the single distinguishing factor. This will potentially lead to cheaper cigarettes and the unintended consequence of greater consumption. The provisions will also increase the prospect of black market trading because counterfeit plain packaged products are easier and cheaper to produce and enforcement more difficult. This again may lead to increased consumption. A simple alternative that is less likely to draw international opprobrium would be to increase aof puting greater part of a cigarette pack's front panel for messaging (say to 40%), refresh the and gruesome imagery, increase the penetration of education and consequently the opportunity for greater peer pressure against smoking but not regulate on the trade mark features of tobacco brands such as font and colour. NZFGC therefore opposes all clauses in the Smoke free Environments (Tobacco Plain Packaging) Amendment Bill 2013 relating to the removal of intellectual property rights. New Zealand's Integrity and Reputation Internationally, New Zealand is seen as a very principled country in its trading, government, community and relationships. New Zealand is ranked first in the honesty stakes in its business and government dealings a position that parallels the principle based approach New Zealand takes to all of its government to government interactions. It is for this reason that New Zealand has successfully led a number of United Nations activities and played key roles in other international bodies including within the WTO family, international standards organisations and other leading decision making bodies. New Zealand is seen as delivering on its obligations, defending the principles of agreements and treaties even when those matters do not directly impact on New Zealand, and generally being a good global citizen. The Smoke free Environments (Tobacco Plain Packaging) Amendment Bill 2013 would jeopardise New Zealand's standing in international trade and will impact more broadly on New Zealand's trading relationships.

6 7 WTO disputes challenge Australia is facing a WTO disputes challenge4 for which a panel has been established but for which a decision is expected to take at least a year and possibly longer to be reached. The challenge is from five countries including Indonesia (New Zealand's 10th largest trading partner). Justification will be a major element of the consideration. The relevance of research to sustain the case for consumer impact will also be important, particularly in an environment where large graphical depictions of the consequences of smoking have been a feature for a number of years and where the `real estate' for branding is around a 2x6 cm2 strip on a package. There is no doubt that the findings of WTO Dispute Resolution Procedures (the findings from WTO panels and the Appellate Body) have broad implications for subsequent WTO disputes and far reaching applicability across the WTO, whether that is to countries that were not party to the dispute or to goods and services unrelated to the dispute. It is an indication of the significance of the dispute that it has attracted 35 WTO members as third parties, the largest number of third parties to join a dispute in the history of WTO. Legal interpretations applied to disputes on product A are applicable to disputes on product B on the basis that consistency is critical to the implementation of the WTO agreements. A finding in favour of Australia's measure would provide the opportunity for governments to adopt plain packaging for the likes of alcohol and particular foods such as infant formula or high fat cheese where evidence of harm could be suggested. There could also be the flow on impact for trademarks generally on packaging and for the use of similar graphical representations on packaged products. With such a focus on the measure and uncertainty surrounding its status, the NZFGC considers New Zealand would be placing at risk its reputation and integrity by proceeding along the same pathway at this time. Confirmed risks exist for New Zealand irrespective of the outcome. If a panel finds in favour, then plain packaging for food and wine on which the New Zealand economy has a heavy reliance, may well be at risk. If the panel finds against, the compensation to affected companies may be crippling. Either way, the NZFGC considers that the risks are of major significance to New Zealand when a simple alternative is available. Conclusion As stated at the outset, New Zealand has a reputation in international forums and in the global market place that rates us highly on matters of principle, fairness, integrity and meeting our obligations. The NZFGC considers that implementing so called `plain packaging' jeopardises those attributes and has the potential to have far reaching economic consequences of equal or greater significance to the suggested benefits of tobacco plain packaging. Such consequences have been shown in other cases to go well beyond the commodity/industry that is subject to the original WTO dispute. It is the view of the NZFGC that, as a policy to reduce harm, denying companies the use of their typefaces and corporate colours on a strip of packaging when the balance of the packaging is dedicated to graphic depictions and warnings about the consequences of smoking, is not backed by evidence. What is clear is that there are potential long term effects a WT/DS434 Australia Certain Measures Concerning Trademarks and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging a/dispu a/cases a/ds434 e.htm

7 0 of precedent setting in legal and international disputes that could have implications for New Zealand. The decision to deny tobacco companies their trademarks on health grounds must be made with the full knowledge of all the benefits and costs to New Zealand including the application of the decision to a broad range of unrelated commodities, products and industries. There are other solutions on the table which increase the amount of negative messaging about tobacco harm without trampling intellectual property rights as indicated under the heading "WTO disputes challenge" above. The NZFGC considers that the Regulatory Impact Statement accompanying the Bill should have been updated to assess not only the actual impact of a WTO challenge but also the precedential nature of the proposed legislative amendment beyond tobacco products: the overall impact for all New Zealand's traded products. In doing so, the NZFGC suggests that the costs could far outweigh the benefits, especially where the benefits from the proposed amendments are unproven. References Johnson, Jeremy "Plain Packaging for tobacco". New Zealand Law Journal, August 2012, pp Stephens. Katharine "Plain speaking", ITMA Review: The Journal of the Institute of Trade Mark Attorneys, Issue 390, Dec 2011/Jan 2012, pp12 15 Smoke free Environments Act 1990 _http:// act S ac%40ainf%40anif an%40bn%40rn 25 a&p=2 Smoke free Environments (Tobacco Plain Packaging) Amendment Bill nz/bill/government/2013/0186/latest/dlm html?search=ta bill S be%40bcur an%40bn%40rn 25 a&p=1 World Health Organization Framework Convention on Tobacco Control int/publications/2003/ pdf?ua=1 World Intellectual Property Organization Paris Convention for the Protection of Industrial Property id= World Trade Organization Agreement on Technical Barriers to Trade a/legal a/17 tbt.pdf World Trade Organization Agreement on Trade Related Aspects of Intellectual Property Rights e/legal a/27 trips.pdf World Trade Organization WT/DS434 Australia Certain Measures Concerning Trademarks and Other Plain Packaging Requirements Applicable to tobacco Products and Packaging a/dispu a/cases a/ds434 e.htm