State needs to change role in tobacco trade
(China Daily)
Updated: 2005-04-08 09:43

The Framework Convention of Tobacco Control, the first international legally-binding treaty against tobacco use, came into effect on February 27. China, one of the signing countries, will implement the convention after it is ratified by the National People's Congress, China's legislature.

Initiated by the World Health Organization (WHO) in 1998, the convention was accepted by 192 member countries of WHO in 2003.

Many see this as the start of a global anti-tobacco movement.

Surely the convention will contain the spread of tobacco use around the world now that 192 governments have committed to this course.

It is only a matter of time until the governments of these countries pass the convention as it aims to solve one of the biggest problems threatening the health of human beings.

However, to what extent the convention will work remains a big question.

One thing adding to the complexity of the problem, or perhaps directly producing the complexity, is that tobacco use is no longer a pure health issue.

Instead, it has much to do with trade, advertisements and marketing. So, it has become a matter of money for interested groups, and therefore, of course, governments themselves are interested in tobacco.

The case in China is special because of a particular system of producing and distributing tobacco. The government must think long and hard, perhaps harder than in other countries, about the choice between health and money.

China is different from most other countries because it is one of the few countries with a State monopoly on tobacco production and distribution.

According to the Law of the People's Republic of China on Tobacco Monopoly, promulgated in June 1991, all types of tobacco including cigars, cigarettes, redried leaf tobacco and cigarette papers all come under the State monopoly.

The State Tobacco Monopoly Bureau is in charge of production, delivery, imports, exports and technological co-operation overseas.

In December 1996 the advertising of tobacco in the media was banned.

According to Zhou Yangmin, an expert specializing in tobacco businesses, the argument behind the State monopoly is that since most tobacco users are unwilling to quit or find it very hard to do so, it is impossible for the government to ban the substance completely. But to limit the damage tobacco does to health, the government raises production and delivery taxes of tobacco products in the hope that this will limit the business to some extent.

The fact is, however, that the tobacco business is prospering in China.

According to a WHO report released in late February, among the world's 1.1 billion smokers, 360 million live in China. They make up one-third of the world's tobacco consumption each year.

The taxes collected from tobacco planters, producers and sellers account for around 10 per cent of the State tax income.

According to He Zhenyi, a researcher with the Institute of Finance and Trade Economics under the Chinese Academy of Social Sciences, tobacco producers amount to more than one-third of the top 100 tax payers in China. In 2004 they paid a total of 83 billion yuan (US$10 billion) in taxes.

He found that GDP growth is at the same pace as the growth in the taxes and profits turned in by the tobacco industry. "Tobacco and energy are the two supporting pillars of the State's taxes," he said.

Around 60 million people work in the tobacco industry and nearly 2 million rural households in Southwest China's Yunnan Province depend on planting tobacco, according to Zhou Yangmin.

But of course the other side of the coin is that tobacco costs heavily in health terms.

A long-term smoker is 10 to 20 times more likely to develop lung cancer and two to three times more likely to get coronary heart disease.

The number of smokers is rising each year. It is estimated that the rate of apoplexy in China will be four times that in Western countries in two decades because of smoking.

A 1989 report said economic losses caused by tobacco use was 27.1 billion yuan (US$3.26 billion), 3 billion yuan (US$362 million) more than the taxes collected from cigarette production.

It is obviously difficult for the government to find the best way to deal with the tobacco issue when facing a new commitment to control tobacco for the newly-signed convention.

Wang Yulin, a researcher with the Institute of Tobacco Economics under the State Tobacco Monopoly Bureau, said tobacco prices, advertisements and the packaging of tobacco products will see significant changes.

"Signing the treaty means the government has confirmed in legislation that tobacco causes harm, especially by damaging the economy, which is totally different from our traditional opinion about the role of tobacco in the economy."

Another expert in tobacco control, Zhu Xuancai, said it is unrealistic at the moment to enhance tobacco control through raising prices or taxes.

"Given the heavy pressure to raise incomes both for central government and local ones, controlling tobacco may lead to huge costs. Chinese society, however, seems not ready to pay that cost," Zhu said.

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