22.6.09

Tobacco, trade, and recession

US Tobacco Law signed, as reported by CNN:

"President Obama signed landmark legislation Monday giving the Food and Drug Administration new power to regulate the manufacturing, marketing and sale of tobacco. President Obama says the new law 'represents change that's been decades in the making.' The Family Smoking Prevention and Tobacco Control Act gives the FDA power to ban candy-flavored and fruit-flavored cigarettes, widely considered appealing to first-time smokers, including youths. It also prohibits tobacco companies from using terms such as 'low tar,' 'light' or 'mild,' requires larger warning labels on packages, and restricts advertising of tobacco products."

The interesting here is the probable effect the law has on fans of Indonesia's kretek cigarettes, which will most likely be included in the list of banned products. Reportedly, the problem for Indonesia is that the ban is only on the kretek but not on other, arguably similar, tobacco products such as menthol as this report states. The seeming existence of "less favorable treatment" could lead to a possible WTO dispute. More importantly for us, what effect does this have on our tobacco industry? What with Philip Morris being a major player here in the Philippines.

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Meanwhile, the World Bank predicts that the Philippines will "be one of the few countries in Asia-Pacific region to slip into 'outright recession'" this year.

In this regard, a PIDS paper entitled "Asia’s Underachiever: Deep Constraints in Philippine Economic Growth", which indicates that our culture, pervasive corruption, and outmoded institutions as the culprits behind our under-achieving economy, could be relevant reading.