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03/12/2016

Parliament votes to cut ties with Philip Morris

Trade & Society

Parliament votes to cut ties with Philip Morris

The majority of MEPs oppose the renewal of an EU agreement with Philip Morris to fight the trade in illegal tobacco. The Commission will make its decision on 16 March. EurActiv France reports.

The controversial agreement between the EU and Philip Morris, one of the world’s biggest tobacco companies, on illegal tobacco trafficking should not be renewed, the European Parliament said on Wednesday (9 March).

At this week’s Strasbourg plenary session, a majority of MEPs adopted a non-binding resolution calling on the Commission not to extend its agreement with the American cigarette manufacturer, which expires on 9 July this year.

The 2004 agreement brought an end to legal action taken by the EU and the member states against Philip Morris (PMI), in a trade-off aimed at recovering customs duty lost as a result of tobacco smuggling.

In return, the cigarette company committed to intensify its fight against tobacco smugglers and counterfeiters, but also to pay the EU $1.25 billion over 12 years. 90% of this money goes to the member states and 10% to the European Commission budget.

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The arrangement in force for the last 12 years was designed to reduce the illegal trade in tobacco within the EU and to make up some of the lost customs duty, estimated to cost EU countries some €10 to €12 billion per year.

Following the same logic, the EU then concluded similar agreements with Japan Tobacco in 2007 and British American Tobacco and Imperial Tobacco in 2010. These agreements are still in force.

The European Parliament’s vote may not be binding, but MEPs hope it will influence the Commission’s decision on whether to extend the agreement, due to be announced next Wednesday (16 March).

“I can’t imagine that the Commission will ignore the Parliament’s opinion on this subject. […] In delegating responsibility for the regulation of tobacco products to the manufacturers themselves, it is clearly creating a conflict of interests,” said Françoise Grossetête, a French Republican MEP (EPP group).

Doubtful efficiency

The agreement has also attracted strong criticism for its record of efficiency in fighting tobacco smuggling and counterfeiting.

According to European Commission Vice-President Kristalina Georgieva, the anti-smuggling agreement has led to “an 85% reduction in the volume of smuggled genuine PMI cigarettes seized by member states between 2006 and 2014”.

But this reduction in the smuggling of Philip Morris cigarettes “has not led to an overall reduction in the European black market for tobacco”, she added.

For many MEPs, expecting a big cigarette maker to lead the fight against fraud is nonsensical. “It’s like entrusting the fight against organised crime to Al Capone,” said French Green MEP José Bové.

“All the big industries, like the pharmaceuticals sector, are supposed to tackle the counterfeiting of their products. But the tobacco sector is the only one to have this special agreement that includes financial compensation,” Grossetête said.

The problem of “cheap white” cigarettes

Another drawback of the agreement is the proliferation of “cheap white” cigarettes as the black market has shrunk. Manufactured legally outside the European Union, in countries like Belarus, Ukraine, China and the United Arab Emirates, these cigarettes are then smuggled into the EU, avoiding customs duty. The number of “cheap white” cigarettes found in the European Union has exploded in recent years.

Not belonging to an identifiable brand, “cheap whites” are not covered by the Philip Morris agreement, which only concerns counterfeits of its own brands. “600 million cigarettes were seized in 2015, a large proportion of which were ‘cheap whites’,” the Commissioner said.

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