The Multinational Monitor

July/August 1987 - VOLUME 8 - NUMBERS 7 & 8

T H E   T O B A C C O   T R A P

Burning the South

U.S. Tobacco Companies in the Third World

by Susan A. Motley

During the past 10 years the domestic tobacco industry has faced tough times. Anti-smoking legislation has been introduced in dozens of states, product liability suits are mounting and the Surgeon General has talked of making the country "smoke-free" by the year 2000.

As a result, millions of Americans have kicked the habit and countless others have cut back on their cigarette consumption. To augment their flagging domestic sales, the tobacco companies are increasingly heading south, where antismoking campaigns are just getting off the ground, health warnings are few and far between, and the market is unregulated.

Smoking for Peace

Tobacco companies first began shipping their wares to the Third World after World War II, under the "Food for Peace" program, also known as P.L. 480, "The Agricultural Trade, Development and Food Assistance Act." It was a calculated and rather well-coordinated effort on the part of the U.S. government and the major tobacco manufacturers to create and develop a strong market in the Third World for mild Western tobaccos and cigarettes.

In the first 25 years of the program, the United States exported almost $1 billion worth of tobacco. Developing countries like Thailand, the Philippines and Malaysia purchased tobacco with long-term, low-interest loans from the U.S. government. If borrowing countries used profits from the sale of this tobacco to finance U.S.-approved development projects, they could then cancel the initial loan. Though relatively small in scale, the"Food for Peace" program began the process of opening the South to Western-style cigarettes.

By the late 1960s, U.S. tobacco companies were selling to dozens of countries. And BAT (British American Tobacco), once considered the king of tobacco in the Third World, found itself in stiff competition with aggressive U.S. companies for Third World markets. Philip Morris, the first U.S. tobacco company to concentrate heavily on international cigarette marketing, had international sales that exceeded domestic sales by 1970. In the next decade, its international sales skyrocketed. From 1984 to 1985 U.S. tobacco sales rose only 1 percent, while foreign volume jumped 6.5 percent during the same period, according to Philip Morris' 1985 Annual Report. The company's share of the overall market increased by an estimated 6.6 percent in that one year alone. Sales were up everywhere outside the United States, from new markets in Turkey to old markets in the Middle East.

Other companies followed Philip Morris' lead. R.J. Reynolds, more accurately known as RJR/Nabisco Inc., established manufacturing facilities throughout Latin America, Europe and Asia.

Today four multinational to bacco companies - Philip Morris, R.J. Reynolds, BAT Industries, and the German Federal Republic's Ruperts/Rothman which is partially owned by Philip Morris - produce approximately 40 percent of the world's cigarettes. The remaining 60 percent are produced by state monopolies in China, Japan, the Soviet Union, France, Italy and Eastern Europe.

Marlboro Country

When the tobacco multinationals move into a country, they often attempt to replicate the Western-style tobacco industry from top to bottom. Their goal: to capitalize on the existing popularity of the mild Virginia "blond" tobacco and expand it. In order to guarantee local support, they appoint former government officials, bankers and members of ruling families to their corporate boards.

In many countries tobacco companies are welcomed because the industry produces jobs, export earnings and a taxable product. Tobacco is one of the most heavily taxed commodities in the world. The Tobacco Institute claims that in 1983 tobacco accounted for $15.7 billion in U.S. federal, state, local and export taxes. During the same year, the industry generated, directly and indirectly, 2.3 million jobs. This pattern is repeated and often intensified throughout the world. In China, 8 percent of the government's revenues come from tobacco sales. In financially strapped Brazil, the tobacco industry contributes 11.6 percent of the country's revenues. "The most important taxpayer in Brazil is the cigarette industry, which contributes 37 to 40 percent of the total amount collected by the Industrialized Products Taxation," report Drs. Fernando L. Lokschin and Fernando C. Barros of Brazil in the New York State Journal of Medicine. Brazilian tobacco consumers pay the highest rate of sales tax in the world, twice that which U.S. consumers pay. In 1983 as much as 75 percent of the price of a pack of cigarettes in Brazil went to government coffers. Brazil earned $300 million in tobacco exports in 1983 and almost $1 billion in tax revenues. And the tobacco industry provided some 3 million jobs.

Tobacco is grown in 120 countries, from the equator to the temperate zones. In both developing and developed countries it tends to be a small farmer's crop. Although the ini tial cost of seed, tools, curing barns and grading sheds, fuel for curing and fertilizer is high, the extension programs provided by tobacco companies arrange loans, provide fertilizer and in secticides at cost, offer farmers free seeds, and instruct farmers in modern agricultural skills.

Due largely to these types of subsidies, the Brazilian city of Santa Cruz now claims to be the tobacco capital of the world, much to North Carolina's annoyance. There are some 100,000 tobacco farmers located just in its southern province of Rio Grande Do Sul.

The industry's support is crucial to tobacco's attractiveness to farmers who could be making less costly, though not as profitable, use of their land cultivating food crops. Ten years ago the Food and Agriculture Organization reported that 10.9 million acres of arable land worldwide had already been converted from food to tobacco production. Approximately 69 percent of this land was located in the Third World. Though surrounded by farmland, Santa Cruz, Brazil must now import the majority of its supply of fresh vegetables and fruits from areas which are more than 100 miles away. The World Heath Organization (WHO) estimates that tobacco production increased the developing world's food bill from S8 billion in 1971 to $50 billion in 1980.

Tobacco production also has serious environmental costs. Throughout the Third World, tobacco production leads to accelerated rates of deforestation and erosion as farmers cut trees for the fuel needed to cure tobacco. It can take an acre of woodland to cure a single acre of tobacco in developing countries. Two to three hectares of forest are required to cure one ton of tobacco.

BAT initiated a program to make the tobacco growers energy self-sufficient. The company planted close to 10 million trees in its African stronghold and urged each tobacco farmer to plant 3,000 eucalyptus trees. But with debts mounting each growing season, few fanncrs were willing to convert a portion of their cropland back to an "unprofitable" forest. In Brazil BAT planted about 120 million trecs in 20 years. But with 100,000 growers curing tobacco, the cutting far outstrips the planting.

The tobacco industry nurtures and guides every element of its business, from growing and manufacturing to marketing. Nowhere, however, is its savvy and expertise more developed than in selling.

Making a Habit

Each year the tobacco industry spends billions of dollars trying to encourage people to pick up the smoking habit. Throughout the developed 1 \ti orld there are mandatory and voluntary guidelines on A here and how these dollars can be spent. For example, Britain's ads can't feature heroes orportray smoking as a pastime of the ri; h and successful. In the United States, advertisers agreed not to have young people sell their products.

Although ads in the United States and Britain often fail to meet these voluntary guidelines, the advertising and promotional campaigns used by the industry in the West are rather innocuous compared to those used in the Third World. The official position of BAT is that "local practices should not be incompatible with promotional standards in the industrial nations." The reality for BAT and the other tobacco multinationals is a developing world advertising policy that flies in the face of accepted advertising standards in the United States and other Western countries.

Brazil, where cigarette consumption grows at a rate of 6 percent each year, provides an excellent example of the laissezfaire environment available to the tobacco industry. There are no restrictions on tobacco promotion. Billboards litter the countryside. More importantly, the advertising is aggressive and aimed at the young, providing no health warnings but promising success, happiness and social status.

Throughout the Third World labels on cigarette packages warning of health hazards are the exception rather than the rule. And the cigarettes sold may "contain twice as much tar as cigarettes sold in western countries," notes the International Organization of Consumers' Unions.

In countries where restrictions on advertising have been initiated, tobacco companies have found ways around them. When The Sudan banned all advertising, Philip Morris altered its billboards: cigarette packs were replaced with cigarette lighters displaying the Marlboro logo.

When ads are banned in particular markets, the industry often plants ads in magazines and other publications which are earmarked for export to those areas. Radio broadcasts, such as those from Monte Carlo to Middle Eastern countries that have banned ads, often include a barrage of cigarette commercials.

Tobacco companies insist that their ads are not aimed at getting people to start smoking, but instead are intended to convert existing smokers from one brand to another.

But the World Health Organization says that the effects are just the same. The "highly sophisticated and ruthless campaigns promoting smoking," noted WHO's 1983 report on smoking and health, are encouraging millions to light up.

By the early 1980s, the growth in total consumption of cigarettes in the Third World was already averaging slightly more than 3 percent per year.

In Pakistan, the average per capita consumption of cigarettes has increased 8 percent each year since 1975. Though very few women smoke, more than 60 percent of the men smoke. According to a WHO report on "Smoking in Developing Countries," lung cancer was the fourth most common tumor in adult Pakistani men in 1973. By 1981, it had become number one.

Throughout the Third World the figures are strikingly similar. In India total cigarette consumption rose by 400 percent between 1970 and 1980, according to WHO. And the Worldwatch Institute reports that between 1975 and 1984 per capita consumption of tobacco increased by 138 percent in Egypt, 85 percent in China and 48 percent in Kenya.

The tobacco industry "is expanding unchecked" throughout the Third World, notes WHO, and the results are cause for alarm.

"In the absence of strong and resolute government action, we face the serious probability that the smoking epidemic will have affected the developing world within a decade and that a major avoidable public health problem will have been inflicted on countries least able to withstand it," states WHO.

But despite the sobering prospects, there are encouraging signs. Throughout the world, antismoking groups are springing up, pressuring their respective governments for warning labels and advertising curbs. In the Middle East, health ministers from several Gulf states joined together to call for mandatory health warnings on all cigarette packages as well as tar and nicotine contents. The Zambian government has banned cigarette advertising in all media, with offenders subject to fines and/or jail sentences. In Singapore, the government is attempting to enforce a complete ban of cigarette-related advertising.

The investments arc large and the stakes high. More than two million people worldwide now die each year because of tobacco-related ailments. Indeed, if the Third World's consumption of tobacco continues to increase, malnutrition and infectious diseases may soon take a back seat to smoking-related diseases.

Tobacco in China

In China, the world's largest producer and consumer of tobacco, there has been an astronomical increase in cigarette consumption. Despite a total ban on advertising, there are an estimated 300 million smokers in the country. And some reports have put the annual rate of increase at close to 10 percent.

Although the health effects of China's tobacco addiction have been difficult to calculate, a somewhat dated study of lung cancer in Shanghai demonstrates the sobering statistics. Between 1963 and 1975 the incidence of lung cancer in China's largest city doubled. Today Shanghai is estimated to have a higher rate of lung cancer than much of the developed world.

Over 1,000 brands, with names like Peony, Golden Orchid and Golden Deer, are sold inside the country. The Sailing Boat herb cigarette is reputed to relieve asthma and coughing. Another is labelled "healthy."

Dr. Grey Dimond, one of the first American doctors permitted to enter China when it re-opened its doors to foreigners, found little concern about smoking, even among physicians. The substantial amount of research being conducted on bronchitis did not include one study on smoking.

It was not until the late 1970s that the effects of smoking on health were widely discussed. In 1978 the Guangming Daily ran a story by two prominent Chinese physicians which revealed to the public for the first time the causative effect of cigarettes in bronchitis, emphysema, lung cancer and heart disease. The article also blamed the "Gang of Four" for China's lax attitude toward tobacco. That same year, the country began its first attempt at publicizing the hazards of smoking.

Today one arm of government attempts to discourage smoking while another is deeply involved in keeping tobacco production efficient and tobacco consumption up. The Ministry of Light Industry runs more than 83 cigarette factories, employing 90,000 workers. Their output is staggering. In 1985 the country produced 2.3 million metric tons of tobacco, 30 percent more than it produced in 1984. The Shanghai factory averages about 41 billion cigarettes per year.

The multinational tobacco companies are eager to capitalize on China's seemingly insatiable appetite for cigarettes, a market estimated to be worth some $6 billion each year. In the early 1980s R.J. Reynolds became the first company to ' complete a successful agreement with China. Philip Morris and Gallaher (U.K.) followed immediately. All three brought , modern manufacturing and packaging machinery into the ' country, provided training in its use and taught Western ' methods of tobacco blending. In exchange, the companies were allowed to stay and manufacture their cigarettes on Chinese soil. Gallaher and L & M cigarettes are now manufactured in the Guangdong Province, and a factory in the Fujian '' Province produces Camels. -S.M.

Susan A. Motley is a freelance writer based in Hampton, Virginia.

Worldwide Smokers

Country % Male % Female
China 90 3
Morocco 90 -
Nepal 87 72
Papua New Guinea 85 80
Philippines 78 -
Indonesia 75 10
Bangledesh 70 20
Thailand 70 4
France 70 50
Denmark 68 49
Republic of Korea 68 7
Spain 66 10
India 66 26
Poland 63 29
Zambia 63 56
Japan 63 12
Uruguay 60 32
Argentina 58 18
Tunisia 58 6
Country % Male % Female
Yugoslavia 57 10
Netherlands 57 42
Malaysia 56 2
Italy 56 32
Brazil 54 37
Nigeria 53 3
Kuwait 52 12
Colombia 52 18
Romania 52 9
Switzerland 50 37
Turkey 50 50
Ghana 50 -
Ireland 49 36
Guyana 48 4
Austria 46 13
Hungary 45 23
Mexico 45 18
Chile 45 26
Venezuela 45 26
Country % Male % Female
Israel 44 30
Soviet Union 44 10
Czechoslovakia 43 11
Cuba 40 -
Norway 40 34
Egypt 40 1
East Germany 40 29
U.K. 38 33
Canada 37 29
Australia 37 30
Hong Kong 37 5
United States 35 28
New Zealand 35 29
Peru 34 7
Uganda 33 -
Sweden 30 30
Ivory Coast 24 1

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