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Click here for The Counter Arguments that can be used to defeat this industry argument.

The tobacco industry claims that plain packaging will cause job losses in domestic tobacco manufacturing or packaging industries

This argument is used against all tobacco-control measures in those countries that have domestic tobacco production or manufacturing. However, overall economic benefits for a country in reducing smoking rates are huge and far outweigh any costs to the industry.

“President do not leave us unemployed - Senators protect Casablanca - bad tobacco law = 800 unemployed.” A roadside bill board in Chile from May 2016 paid for by the tobacco industry opposing the Tobacco Control Bill which included provisions for plain packaging
BAT Threatens to Leave Chile

In 2015, BAT threatened to stop operations in Chile when the national legislature was considering a bill designed to strengthen tobacco-control measures, including plain packaging.1 Movement on the bill stalled, but the company closed several factories anyway. However, BAT Chile maintains critical manufacturing facilities in the country. It exports cigarettes to seventeen countries around the world.2 The decision to close some factories in Chile can be interpreted as a decision to consolidate based on cost efficiency and not on local tobacco-control laws.

In Canadain 1994–95

During the campaign for plain packaging, the specter of job losses in the tobacco growing, manufacturing, and packaging sectors was often raised by opponents. Representatives of both Ontario and Quebec growers stated that plain packaging would intensify price competition, causing tobacco firms to move their manufacturing facilities outside Canada. Plain packaging was dropped at that time, but most of the jobs in the tobacco industry were lost anyway. Imperial Tobacco moved all production to Mexico, tobacco-crop production has dropped 87% and tobacco packaging firms have downsized in Canada.3

In the UK

A report commissioned by Philip Morris claimed that plain packaging would lead to between 2,000 and 3,500 jobs lost in the convenience retailing sector, thanks purely to the decrease in revenue through tobacco sales. It claimed a further 2,250 to 3,850 jobs were expected to be lost in the tobacco manufacturing sector, despite a rise in tobacco consumption.4

In JTI’s submission the UK 2012 consultation, it argued that:

“Plain packaging will have a direct impact on investment, trade and jobs. JTI and other manufacturers support 5,700 jobs directly and 66,000 indirectly in the UK, and tobacco generates £12.1 billion in revenue each year for the Government. [p. 3]

Action on Smoking and Health Australia, produced a reportthat examined the tobacco industry's tactics against plain packaging in Australia, and outlined how “The industry hides behind a libertarian cloak, complaining that Australia is an over-regulated ‘nanny state’ that will suffer job losses and further hardship if more regulation such as plain packaging is required by law.”5 However, even when BAT announced the closure of its manufacturing facility in Australia in 2015, it specifically stated that plain packaging was not the reason for the closure.6




The Counter Arguments

  • This argument puts the profits of tobacco companies before the economic and health benefits to society.

  • The tobacco industry exaggerates the impact of strong tobacco control measures, including plain packaging laws, on the local economy. The tobacco industry constitutes a very small fraction of overall production and employment in most countries. Equally important to note is that the number of jobs that depend on tobacco has been falling in most countries, owing to such things as technological innovation and globalization. For most countries, tobacco-control measures will have only a modest impact on employment and will not lead to net job losses.7

  • The economic benefits in reducing smoking rates are huge and far outweigh costs to the industry. New research shows that the total economic cost of smoking, including productivity losses, is more than $1.4 trillion per year — 1.8% of the world GDP — with the burden increasingly being carried by developing countries.8 Any loss of jobs in the tobacco sector would be made up through gains to the economy as a whole.

  • The Economic Impact Assessment for the UK showed that a 1 percentage point reduction in smoking rates resulting from plain packaging would lead to £25 billion net benefit to the economy over ten years owing to reduced healthcare costs and increased productivity.9

  • Even in the short term, reductions in smoking lead to significant healthcare savings. A new study from the US showed that a 10% relative drop in smoking (meaning, for instance, a drop from 20% to 18% in the overall smoking rate) would be followed by an expected $63 billion reduction in healthcare expenditure the next year.10

  • Global tobacco production is dominated by multinational corporations that have been centralizing production for decades. Tobacco companies locate tobacco production and manufacturing facilities where costs are lowest. Thus, decisions are based on global economic factors and not by strong local tobacco-control policies. For example, when Japan Tobacco International closed its last production facility in the United Kingdom, it also closed facilities in Belgium and Germany and moved production to Poland and Romania. JTI said the restructuring would allow the company to optimize its operations.11

  • Money not spent on tobacco by those that have quit is then spent on other goods, generating alternative employment. The transition to a smaller tobacco economy has been ongoing for years in high-income countries since the 1950s, owing to steady declines in smoking.12 Studies show that most countries see no net job losses and that a few see net gains if consumption falls.13

  • The tobacco industry consistently exaggerates the impact of tobacco-control measures on its ability to make profits. In rich economies where smoking rates are falling, tobacco company profits still continue to rise. The companies increase their prices, over and above any tax rises, and so still increase profits.14
  • After plain packaging was introduced in Australia, tobacco companies’ pre-tax profits rose by 30%.15 This was as a result of price increases in all sectors of the tobacco market,16 and from cost cutting, which included relocating production to low-cost economies. BAT Australia’s statement on the closure of its factory in 2014 confirmed that it was due to production costs and that plain packaging was not a factor.17
Notes
  1. Tabacalera anuncia cierre de operaciones en el país por cambios a ley antitabaco. La Tercera. September 7, 2015. Available from: http://www.latercera.com/noticia/tabacalera-anuncia-cierre-de-operaciones-en-el-pais-por-cambios-a-ley-antitabaco/(accessed March 7, 2017).
  2. Euromonitor International. British American Tobacco Chile SA in Tobacco (Chile). August 2016.
  3. Non-Smokers’ Rights Association/Smoking and Health Action Foundation. Available from:https://www.nsra-adnf.ca/cms/file/files/080701_Plain_Packaging_of_Tobacco_Products.pdf.
  4. Quantification of the economic impact of plain packaging for tobacco products in the UK Report for Philip Morris Ltd. May 2013 Centre for Economics and Business Research Ltd.
  5. A. Jones S. Sanders, and ASH (Australia) (2010). “Countering Tobacco Tactics: A guide to identifying, monitoring and preventing tobacco interference in public health.” Action on Smoking and Health (ASH) Australia, Kings Cross, N.S.W
  6. BAT Australasia. “BAT Forced to Close Australian Factory.” Media release. October 31, 2014. Available from: http://www.bata.com.au/group/sites/bat_9rnflh.nsf/vwPagesWebLive/DOA3CJ8E/$FILE/medMD9QD9EF.pdf?openelement (accessed March 5, 2017).
  7. U.S. National Cancer Institute and World Health Organization. The Economics of Tobacco and Tobacco Control. National Cancer Institute Tobacco Control Monograph 21. NIH Publication No. 16-CA-8029A. Bethesda, MD: U.S. Department of Health and Human Services, National Institutes of Health, National Cancer Institute; and Geneva, Switzerland: World Health Organization; 2016.
  8. M. Goodchild ,N. Nargis , and E. Tursan d'Espaignet “Global Economic Cost of Smoking-Attributable Diseases.” Tobacco Control Published Online First: January 30, 2017. Available from: http://dx.doi.org/10.1136/tobaccocontrol-2016-053305.
  9. The Economic Impact Assessment on standardised packaging in the UK.Available from: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/403493/Impact_assessment.pdf.
  10. J. Lightwood and S. A. Glantz. “Smoking Behavior and Healthcare Expenditure in the United States, 1992–2009: Panel Data Estimates” (May 10, 2016). Available from: http://dx.doi.org/10.1371/journal.pmed.1002020.
  11. “Japan Tobacco Set to Close Last UK Plant.”Financial Times. October 7, 2014. Available from: https://www.ft.com/content/ec286170-4e44-11e4-bfda-00144feab7de(accessed March 7, 2017).
  12. U.S. National Cancer Institute and World Health Organization. The Economics of Tobacco and Tobacco Control. National Cancer Institute Tobacco Control Monograph 21. NIH Publication No. 16-CA-8029A. Bethesda, MD: U.S. Department of Health and Human Services, National Institutes of Health, National Cancer Institute; and Geneva, Switzerland: World Health Organization; 2016.
  13. This was the conclusion of a report for the World Bank:“Curbing the Epidemic: Governments and the Economics of Tobacco Control.” Available from: http://tobaccocontrol.bmj.com/content/8/2/196.full. For instance,on page 69 it states,“A study in the United States found that the number of jobs would rise by 20,000 between 1993 and 2000 if all domestic consumption was eliminated.”
  14. A. B. Gilmore, B. Tavakoly, G. Taylor,. and H. Reed, “Understanding Tobacco Industry Pricing Strategy and Whether It Undermines Tobacco Tax Policy: the example of the UK cigarette market. Addiction, 108: 1317–1326. doi:10.1111/add.12159 (2013). Available from: http://onlinelibrary.wiley.com/doi/10.1111/add.12159/full.
  15. N. Chenoweth. “Tobacco Firms in $2.2b payday.”The Australian Financial Review, July 2, 2014. Available from: http://www.afr.com/news/policy/foreign-affairs/tobacco-companies-22b-payday-20140701-j05h1.
    1. M. Scollo, M. Bayly, and M. Wakefield. “Did the Recommended Retail Price of Tobacco Products Fall in Australia Following the Implementation of Plain packaging?” Tobacco Control, 2015; 24:ii90-ii93. Available from: http://tobaccocontrol.bmj.com/content/24/Suppl_2/ii90.full.
    2. Scollo, M. Bayly, and M. Wakefield . “The Advertised Price of Cigarette Packs in Retail Outlets across Australia before and after the Implementation of Plain Packaging: ARepeated Measures Observational Study.” Tobacco Control, 2015; 24:ii82-ii89. Available from: http://tobaccocontrol.bmj.com/content/24/Suppl_2/ii82.full. Scollo, M. Zacher, K. Coomber, M. Bayly, and M. Wakefield. “Changes in Use of Types of Tobacco Products by Pack Sizes and Price Segments, Prices Paid and Consumption Following the Introduction of Plain Packaging in Australia.” Tobacco Control, 2015; 24:ii66-ii75. Available from: http://tobaccocontrol.bmj.com/content/24/Suppl_2/ii66.full.Greenland, L. Johnson , and S. Seifi. “Tobacco Manufacturer Brand Strategy Following Plain Packaging in Australia: Implications for Social Responsibility and Policy.”Social Responsibility Journal, 2016; 12(2):321-34. Available from: http://www.emeraldinsight.com/doi/abs/10.1108/SRJ-09-2015-0127. http://tobaccocontrol.bmj.com/content/24/Suppl_2/ii90.abstract.
  16. Press release available here (accessed March 2, 2017): http://www.bata.com.au/group/sites/bat_9rnflh.nsf/vwPagesWebLive/DOA3CJ8E/$FILE/medMD9QD9EF.pdf?openelement.