INTERNATIONAL TRADE DISPUTE SETTLEMENT BETWEEN AUSTRALIA AND INDONESIA UNDER WORLD TRADE ORGANIZATION DISPUTE SETTLEMENT BODY (WTO DSB) MECHANISM: AUSTRALIA‟S PLAIN PACKAGING ACT 2011
(2013 - 2017)
By Anthoni Nicolas Tarigan ID No. 016201400018
A Thesis presented to the Faculty of Humanities President University in partial fulfillment of the requirements for Bachelor Degree in International Relations Concentration of Diplomacy Studies
2018
THESIS ADVISER RECOMMENDATION LETTER
This thesis entitled “International Trade Dispute Settlement Between Australia and Indonesia under World Trade Organization Dispute Settlement Body (WTO DSB) Mechanism: Australia‟s Plain Packaging Act 2011 (2013 - 2017)” prepared and submitted by Anthoni Nicolas Tarigan in partial fulfillment of the requirements for the degree of Bachelor of Arts in International Relations in the Faculty of Humanities has been reviewed and found to have satisfied the requirements for a thesis fit to be examined. I therefore recommend this thesis for Oral Defense.
Cikarang, Indonesia, 18 January 2018
Recommended and Acknowledged by,
Hendra Manurung, S.IP., MA. Thesis Adviser
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DECLARATION OF ORIGINALITY
I declare that this thesis entitled “International Trade Dispute Settlement Between Australia and Indonesia under World Trade Organization Dispute Settlement Body (WTO DSB) Mechanism: Australia‟s Plain Packaging Act 2011 (2013 - 2017)” is, to be the best of my knowledge and belief, an original piece of work that has not been submitted, either in whole or in part, to another university to obtain a degree.
Cikarang, Indonesia, 18 January 2018
Anthoni Nicolas Tarigan
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PANEL OF EXAMINERS APPROVAL SHEET
The Panel of Examiners declare that the thesis entitled “International Trade Dispute Settlement Between Australia and Indonesia under World Trade Organization Dispute Settlement Body (WTO DSB) Mechanism: Australia‟s Plain Packaging Act 2011 (2013 - 2017)” that was submitted by Anthoni Nicolas Tarigan majoring in International Relations from the Faculty of Humanities was assessed and approved to have passed the oral examinations on 24th January 2018.
Dr. Endi Haryono, M.Si. Chair – Panel of Examiners
Riski M. Baskoro, S.Sos., MA. Examiner
Hendra Manurung, S.IP., MA. Thesis Adviser
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Abstract
Title: International Trade Dispute Settlement Between Australia and Indonesia under World Trade Organization Dispute Settlement Body (WTO DSB) Mechanism: Australia’s Plain Packaging Act 2011 (2013 - 2017) Tobacco is one of the leading preventable causes of death in many countries around the globe. It is recorded that 7 million people are killed annually by the consumption of tobacco through the study conducted by World Health Organization (WHO). Responding to this issue, WHO through the Framework Convention on Tobacco Control (FCTC), has taken numerous steps to reduce the number of death caused by tobacco consumption, one of which is the introduction the concept of plain packaging for tobacco products. The plain packaging policy has been adopted by Australia through the Tobacco Plain Packaging Act 2011. Coming into force on first of December 2012, this Act is believed by Australian Government to be the most effective way in reducing the consumption on Tobacco product. However another problem arouse as Indonesia and two other tobacco producer countries are protesting Australia for the implementation of the Plain Packaging as it is believed to be violating the Intellectual Property Rights Law as well as Technical Barriers to Trade Law. The case was then brought to the World Trade Organization court for seeking the dispute settlement. This study analyzes the crosscutting issues between Australian Government’s action to protect the citizens from the harm of tobacco products and Indonesia’s objection on the action on behalf of Intellectual Property Rights protection. This study will also provide the analysis on how the Plain Packaging Act enforced by the Australian Government has violated the IPR protection based on the provision in the Trade Related Intellectual Property Agreement and WTO basic principles as well as analyzing the role of WTO in the dispute. At the end of the study, the writer would like to conclude that the Plain Packaging Act 2011, imposed by Australian Government has vividly violated several articles of TRIPS Agreement and as the institution that hold the responsibility to oversee the case, the WTO DSB has provided the consultation for both disputing parties which did not reach a mutual solution which then lead to panel establishment in the DSB. Up until 2017, the case is still in the panel stage to hear the decision and report from panel which then be used by WTO DSB in making its final saying. Keywords: Plain Packaging, Intellectual Property Rights, Australia Tobacco Plain Packaging Act 2011, World Trade Organization
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Abstrak
Judul: Penyelesaian Sengketa Perdagangan Internasional antara Australia dan Indonesia dengan Mekanisme Badan Penyelesaian Sengketa Organisasi Perdagangan Dunia (WTO DSB): Australia Tobacco Plain Packaging Act 2011 (2013 - 2017) Tembakau merupakan salah satu penyebab kematian yang dapat dicegah di banyak negara di seluruh dunia. Data penelitian yang dilakukan oleh Organisasi Kesehatan Dunia (WHO) menunjukkan bahwa t juta orang terbunuh setiap tahunnya yang disebabkan oleh konsumsi tembakau. Menanggapi masalah tersebut, WHO melalui Kerangka Konvensi Pengendalian Tembakau (FCTC) telah mengambil banyak langkah untuk mengurangi jumlah kematian yang disebabkan oleh konsumsi tembakau, salah satunya adalah pengenalan konsep kemasan polos untuk produk tembakau. Kebijakan kemasan polos telah diadopsi oleh Pemerintah Australia melalui Tobacco Plain Packaging Act 2011. Mulai berlaku pada awal Desember 2012, Undang-Undang ini diyakini oleh Pemerintah Australia sebagai cara paling efektif untuk mengurangi konsumsi produk tembakau di negara tersebut. Namun, masalah lain muncul saat Indonesia dan dua negara produsen tembakau lainnya mengajukan protes terhadap Pemerintah Australia atas pelaksanaan kebijakan kemasan polos karena diyakini melanggar Hukum Hak Kekayaan Intelektual dan juga Hambatan Teknis terhadap Undang-Undang Perdagangan. Kasus tersebut kemudian dibawa ke pengadilan Organisasi Perdagangan Dunia (WTO) untuk mencari penyelesaian terbaik bagi kedua negara. Skripsi ini menganalisa isu yang bersinggungan antara tindakan Pemerintah Australia untuk melindungi warga negara dari bahaya produk tembakau dan keberatan Indonesia atas tindakan tersebut dengan membawa alasan perlindungan Hak Kekayaan Intelektual. Skripsi ini juga akan memberikan analisa tentang bagaimana Tobacco Plain Packaging Act 2011 yang diberlakukan oleh Pemerintah Australia telah melanggar perlindungan Hak Kekayaan Intelektual berdasarkan ketentuan dalam Perjanjian Kekayaan Intelektual Terkait Perdagangan dan prinsip dasar WTO serta menganalisa peran WTO dalam sengketa ini. Pada akhir penelitian, penulis ingin menyimpulkan bahwa Undang-undang Australia Tobacco Plain Packaging Act 2011, yang diberlakukan oleh Pemerintah Australia telah dengan jelas melanggar beberapa pasal Perjanjian TRIPS dan sebagai institusi yang bertanggung jawab untuk mengawasi kasus tersebut, DSB WTO telah menyediakan konsultasi untuk kedua pihak yang bersengketa, yang tidak mencapai solusi bersama yang kemudian mengarah pada pendirian panel di DSB. Sampai akhir 2017, kasus ini masih di tahap panel untuk mendengar keputusan dan laporan dari panel yang kemudian digunakan oleh WTO DSB dalam membuat pepatah terakhirnya. Kata Kunci: Kemasan Polos, Hak Kekayaan Intelektual, Australia Tobacco Plain Packaging Act 2011, Organisasi Perdangan Dunia (WTO)
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ACKNOWLEDGEMENT
First and the foremost, I would like to express my highest gratitude to the One and Only Almighty God, Jesus Christ. It is only by His grace and guidance I have ever had the ability to finish this thesis. Secondly, I would like to express my endless thank you to my parents, beloved father and mother, who have tirelessly supported me in writing this thesis. The ones who kept telling me to carry on, the ones who always listened to my complaints and tried to understand all of them as well as providing comfort and solutions, the ones who never give up on encouraging me and supporting me all the way they can. Most importantly the ones who never have doubt on me, the ones who keep believing in me that I would make it to the finish line. To both my brothers, thank you also for the encouragement you gave me during this thesis writing. To my thesis adviser, Mr. Hendra Manurung who has been guiding through all the process to finish this thesis. I have nothing to say but thank you. Thank you for your comments and suggestions. Thank you for the lessons you taught me during this thesis writing. To all lecturers of International Relations President University, I would also like to express my gratitude for all the knowledge that have been given during my university study. I would like also to specifically express my gratitude to the Indonesian Chamber of Commerce and Industry – Business Support Desk (KADIN – BSD) for your great support in writing this thesis. Thank you for letting me stay late in the office to write this thesis by using the office computer and internet – that really helped a lot. Thank you for your concern on asking the progress of my writing and the exchange of knowledge. Thank you for connecting me to the networks of the KADIN for the interview to get my thesis done. Special thanks for Mr. Robert Herdiyanto for the help to patiently read and provide comments and suggestions as well as the discussions to help me in finishing this thesis writing. Thank you also for the support
vi of food during the late night stay in the office. You all have great contribution in this thesis. Special thank you also for one-in-a-million type of people, Mr. Yos Adiguna Ginting and Mr. Wilson Andrew, from HM Sampoerna who have spared your time and share your knowledge on the issue in the interview despite your super hectic schedule as the director of such huge company. Thank you also for the time to review my thesis and sending me feedbacks. Thank you for your great support. Last group but never the least, I would like to express a lot of thank for friends, seniors, and colleagues who become my support system I. Thank you for each of your contribution to my personal development and academic journey. Below are those who I am forever indebted companions and friendship: 1. Heydi Tiffany Simanjuntak a.k.a Tukidjah Suhartini Luciferostus and Anggun Dewi Astuty a.k.a Tuti, for being such a great and critical friend who is always be “one-call-away” type of friend. Thank you for your patience in listening my unnecessary stories, thank you for always be there for me, thank you for sharing the good and the bad times, and thank you for so much more. Most importantly, thank you for your sharing and exchange of knowledge in finishing this thesis. 2. Hillary Tanida Stefany Sitompul, for being such a great figure of senior to me since the student union time. Thank you for your guide and support in everything both academic and nonacademic. Thank you for becoming the one who I always run to when I encountered problems in writing this thesis and never failed to come up with a solution to help. Thank you also for teaching me many lessons in this life. 3. Thank you also for my family from the student union. My 7 “buncits” companion – Katarina Claudia, Virly Vriesta, Novia Sutanto, Adriel Albert, Febryan Cliff, Nadya Shabrina, and all the rest of the members. Thank you for your support in writing this thesis and thank you also for coloring up my university life. The journey we had was incredible, let us create more
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incredible journeys years ahead. Special thanks for Claudia, an amazing partner – the best that I ever have so far – during the organization time and even afterwards, thank you for your support, your patience, thank you for sharing every ups and downs moments during the PUSU time and all the lessons that you taught me. Apart of that, thank you also for the Student Affairs Department of President University who have helped a lot during the university life. Thank you all of you my beloved for believing in me even when I could not do the same for myself back at time. For all that have participated and contributed to my process of finishing thesis and my university life, once again, thank you from the deepest of my heart. May God pays back all the favor upon you.
Cikarang, December 2017
Anthoni Nicolas Tarigan
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TABLE OF CONTENT
THESIS ADVISER RECOMMENDATION LETTER ···················· i DECLARATION OF ORIGINALITY ········································ ii PANEL OF EXAMINERS APPROVAL SHEET ··························· iii ABSTRACT ········································································· iv ABSTRAK ··········································································· v ACKNOWLEDGMENT ························································· vi
TABLE OF CONTENT ·························································· ix LIST OF FIGURES ······························································· xi LIST OF TABLES ································································· xiii
LIST OF ABREVIATIONS ····················································· xiv CHAPTER 1 INTRODUCTION ··············································· 1 I.1 Background of the Study ·················································· 1 I.2 Problems Identified ························································· 7 I.3 Statement of Problem ······················································ 9 I.4 Research Objectives ······················································· 10 I.5 Significance of the Study ·················································· 10 I.6 Theoretical Framework ···················································· 10 I.7 Scope and Limitation of Study ············································ 30 I.8 Research Methodology ····················································· 30 I.9 Literatures Review ·························································· 31 I.10 Structure of Thesis ························································ 36 CHAPTER II THE DEVELOPMENT OF AUSTRALIA‟S CONTROL ON TOBACCO PRODUCTS CONSUMPTION: A „TUG OF WAR” GAME ····················································· 38 II.1 Overview of Smoking in Australia ······································ 38
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II.2 Australia’s Control on Tobacco Consumption Prior to Plain Packaging Act 2011 ························································ 44 II.3 Australia’s Control on Tobacco Consumption in the era of Plain Packaging Act 2011 ······················································· 60 CHAPTER III THE DEVELOPMENT OF TOBACCO INDUSTRY IN INDONESIA ···································································· 66 III.1 The History of Tobacco in Indonesia ·································· 66 III.2 Tobacco and Indonesian Economy and Aocial (2011 – 2016) ····· 68 III.3 The Other Side of Indonesian Tobacco Industry: Health and the Prosperity Issues ························································· 77 III.4 Indonesia – Australia Trade Relation on Tobacco (2012 – 2018) ·· 84 III.5 Indonesian Government’s Stand on the Tobacco Industry in the Country and its Relation with Plain Packaging ······················· 87 CHAPTER IV THE AUSTRALIA‟S PLAIN PACKAGING ACT 2011: PROBLEM SOLVING LEADING TO NEW PROBLEM ················ 93 IV.1 The Violation of Intellectual Rights by the Australia’s Plain Packaging Act 2011 ····················································· 94 IV.2 The Role of World Trade Organization in Settling the Dispute between Australia and Indonesia on the Australia’s Plain Packaging Act 2011 ··············································· 109 CHAPTER V CONCLUSION ·················································· 128 REFERENCES ····································································· 130 APPENDICES ······································································ 135
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LIST OF FIGURES
Figure 1-1: Overall Smoking Prevalence in Australia from January 2015 until September 2015, Australian Department of Health ········ 4 Figure 1-2: Before the implementation of plain packaging act and after the implementation of plain packaging act in Australia, Tobacco Labeling Resource Center 2013 ························· 14 Figure 2-1: The Development of Australia’s Taxation on Cigarettes Less than 0.8 gram 2013-2017, Tobacco in Australia 2017 ···· 59 Figure 2-2: The Development of Australia’s Taxation on Cigarettes More than 0.8 gram 2013-2017, Tobacco in Australia 2017 ··········· 60 Figure 2-3: The example of surface and color appearance on tobacco packaging based on the Act, Pizzeys Patent and Trademark Attorney accessed in 2017 ····························· 64 Figure 2-4: The example of writings on tobacco packaging based on the Act, Pizzeys Patent and Trademark Attorney 2017 ·············· 65 Figure 3-1: The Total Production of Cigarettes in Indonesia 2011 – 2015, Indonesia Investments················································ 71 Figure 3-2: The growth of Tobacco Farming Area in Indonesia (2011-2016), Markus, S. (2015). Petani tembakau di Indonesia: Sebuah paradoks kehidupan. Yogyakarta: Leutikaprio ········· 82 Figure 3-3: Indonesia – Australia Trade Relation on Tobacco Products (USD) 2012 – 2016, UN Commission of Trade ······· 85 Figure 3-4: Indonesia – Australia Trade Relation on Tobacco Products (USD) 2012 – 2016, UN Commission Trade ·········· 86 Figure 3-5: Tax of one pack cigarettes product in 2016 as estimated by WHO (case study: one of the most sold brand, Gudang Garam),
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WHO Report on Global Epidemic Report 2017 ·················· 88 Figure 3-6: Tax of other smoked tobacco products other than cigarettes as estimated by WHO in 2016, WHO Report on Global Epidemic Report 2017 ··································· 89 Figure 3-7: Indonesian Tax for other smokeless tobacco products as estimated by WHO in 2016, WHO Report on Global Epidemic Report 2017 ··································· 89 Figure 3-8: The average market share growth of brands segments in Australia prior and after the implementation of Plain Packaging Act, Neil Dryden 2015··························· 92 Figure 4-1: The Overall IPR Index Score of Australia in 2017, IPRI 2017 ······························································ 96 Figure 4-2: The Overall IPR Index Score of Indonesia in 2017, IPRI 2017 ······························································ 97 Figure 4-3 The Trend of Australia’s Intellectual Property Rights Index (IPRI) 2010 – 2017 (prior to after the Implementation of the Plain Packaging Act 2011) IPRI 2017······························ 97 Figure 4.4 The Stages of Dispute Settlement Under WTO DSB, WTO ····· 113
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LIST OF TABLES
Table 2-1: The Development of Tax Increase on Tobacco Products especially cigarette and cigar in Australia from 2007 to 2017 ······················································· 58 Table 3-1: Indonesian Export of Tobacco Products from 2012 until 2015 under HS Code 24, ITC Calculation Based on UNCT ·············· 68 Table 3-2: Smoking prevalence in Indonesia aged 15 years more by 2015 ··· 77 Table 3-3: The profit of tobacco per kg in major tobacco producer area in Indonesia in 2016 (USD), World Bank 2017 ························ 81 Table 3-4: Indonesian Tobacco Import from 2011 until 2016, ITC Calculation Based on UNCT ····································· 83 Table 3-5: The Tobacco Products Trade Relation between Indonesia and Australia (2012 – 2016), ITC Calculation Based on UNCT ······· 84 Table 3-6: The average market share growth of brands segments in Australia prior and after the implementation of Plain Packaging Act, Neil Dryden 2015 ························································ 91 Table 4-1: The Development of the Australia – Indonesia Dispute Settlement on Australia’s Plain Packaging Act 2011 under WTO DSB ······· 124
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LIST OF ABREVIATIONS
WTO World Trade Organization DSB Dispute Settlement Body IPR Intellectual Property Rights FCTC Framework Convention on Tobacco Control NAFTA North American Free Trade Agreement TRIPS Trade – Related Aspects of Intellectual Property Rights WIPO World Intellectual Property Organization ISCSID International Centre for Settlement of Investment Dispute GATT General Agreement on Tariffs and Trade ITO International Trade Organization ITC International Trade Center UNCT United Nation Commission of Trade GDP Gross Domestic Products MFN Most Favored Nations GATS General Agreement on Tariffs and Service AIHW Australian Institute of Health and Welfare DALY Disability-Adjusted-Life-Year WHO World Health Organization IPRI Intellectual Property Rights Index
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CHAPTER I INTRODUCTION
1.1 Background of the Study Tobacco has been a global issue for many years. Not only causing serious illness and death, tobacco also causes indirect economic loss in some countries such as the decreasing of health and productivity which then followed by the increasing of medical expenses. The World Health Organization has recorded around US$ 1.4 trillion global net loss annually caused by tobacco, which is far outweighing the benefit from the tobacco production itself.1 The condition is even worse in the developing countries to which most of tobacco users belong. In the developing countries, most of the tobacco users are middle to low income class, which mostly are the male workers.2 The worst and most happening scenario is that they consume tobacco, they got serious illness, they lost their job, they will be burdened with overwhelming medical expenses, and all their money or even assets will be sacrificed.3 The stories could just end there, but it does not. They have families depending on them, who are left abandoned with no choice but living in poverty.4 This condition contributes a lot to the stagnancy of national development which could have been way better. Referring to the situation and seeing tobacco as one of the main preventable death causes, many countries have tried to come hand in hand controlling the use of tobacco to reduce the victim that reaches the average number of 7 million people killed annually and other economic losses.5 World Health Organization, through the Framework Convention on Tobacco Control (FCTC), acts as the
1 World Health Organization. (2017, May 30). Tobacco kills more than 7 million people per year and is costing the world economy USD 1.4 trillion annually. Retrieved from http://www.who.int/fctc/mediacentre/press-release/wntd-2017/en/ 2 World Health Organization. (2003, November). Gender, Health, and Tobacco. Retrieved from http://www.who.int/gender/documents/Gender_Tobacco_2.pdf\ 3 WHO. (2004). Tobacco Increases the Poverty of Individuals and Families. Retrieved from http://www.who.int/tobacco/communications/events/wntd/2004/tobaccofacts_families/en/ 4 Ibid. 5 World Health Organization. (2017, May 30). Tobacco kills more than 7 million people per year and is costing the world economy USD 1.4 trillion annually. Retrieved from http://www.who.int/fctc/mediacentre/press-release/wntd-2017/en/
1 umbrella organization for the countries to control the consumption and promotional activities of tobacco products. There have been numbers of policies and provisions set under the FCTC to control the use of tobacco, one of which is the introduction of plain packaging for tobacco products.
Besides the plain packaging, the FCTC also set some obligations toward participating countries ensuring the control toward the consumption and promotional activities of tobacco products, as below6:
1. Every country involved in the convention will have to set, implement, supervise, and review a comprehensive national strategic plan in controlling the consumption and promotional activities of tobacco product. The national strategic plan then must be in accordance with the provisions set under the convention. 2. Every country involved in the convention shall then establish a coordinating body for tobacco control and provide the financial and other needed support. The coordinating body will have to cooperate with the executive, legislative, and any related parties to create a national policy concerning the control of tobacco product consumption and promotional activities. 3. The policies set by the each country involved in the convention, will have to be free from any commercial and any other interests. The main objective of the policies is no other than controlling the consumption and the promotional activities of tobacco products. 4. The countries involved in the convention shall also cooperate each other in determining the certain measures in implementing the convention.
6 World Health Organizaion. (2015, January). The WHO Framework Convention on Tobacco Control: An Overview. Retrieved from http://www.who.int/fctc/about/WHO_FCTC_summary_January2015.pdf 2
5. The countries involved in the convention are encouraged to cooperate with any related international organizations to achieve the most effective implementation of the convention. 6. The countries involved in the convention shall be subjected to any funding needed for implementing of the convention through either multilateral or bilateral mechanism of funding.
United Nations is also taking part in the controlling the consumption of tobacco by embracing its member countries to taking seriously the provisions set under FCTC in to their national agenda. It is stated in the goal number 3 point 3a of Sustainable Development Goals (SDG) 2030.
As the participating country that has ratified the FCTC, the Government of the Commonwealth of Australia introduced the national law concerning the plain packaging for tobacco products under the Tobacco Plain Packaging Act 2011 in 2011. This regulation was issued as the effort of the government to reduce and limit the distribution of tobacco products within the country especially cigarettes. Came in to force on the first of December 2012, the act regulates that all the cigarettes and other tobacco products sold in the country have to be put within a homogenous standardized plain packaging. No promotional image, slogan, and trademarks such as color and logo shall be allowed in the packaging as mentioned in the Act below:
―the removal of colours, brand imagery, corporate logos and trademarks, permitting manufacturers to print only the brand name in a mandated size, font and place, in addition to the required health warnings and other legally mandated product information such as toxic constituents, tax-paid seals or package contents.”7
The implementation of the Tobacco Plain Packaging Act 2011 of the Australian Government seemed to meet the objectives of increasing the health of the citizens by decreasing the consumption of tobacco. In a study of smoking
7 The Australia Tobacco Plain Packaging Act 2011 Number 148, Section 20. 3
prevalence conducted by the Ministry of Health of Australia from January 2011 until September 2015, there has been a drastic decline of the smoking prevalence among the Australians after the implementation of Plain Packaging Act 2011. The decline can be seen in the 2.2% decrease of smoking prevalence in the Australians from 19.4% of smoking prevalence prior to the Plain Packaging Act 2011 into 17.2% of smoking prevalence after the plain packaging act came into force in 2012.8
Figure 1-1: Overall Smoking Prevalence in Australia from January 2001 until September 2015, Australian Department of Health 2016.9
However, the fruitful implementation of the Plain Packaging Act by Australian Government has not gained favor from all countries. On the other side of the declining of the smoking prevalence in Australia, there are giant tobaccos
8 Australian Government Department of Health. (2016). Post-Implementation Review Tobacco Plain Packaging 2016. Retrieved from http://ris.pmc.gov.au/sites/default/files/posts/2016/02/Tobacco-Plain-Packaging-PIR.pdf 9 Ibid. 4
industry suffer from some profit loss and down trading. Indonesia, Honduras, Cuba, the Dominican Republic, and Ukraine are some countries opposing this Australia‘s Plain Packaging Act as they believe that it has violated the provisions set under the Agreement of Trade-Related Aspects of Intellectual Property Rights (TRIPS) article 2 paragraph 1, 3 paragraph 1, 15 paragraph 4, 16 paragraph 1, 16 paragraph 3, 20, 22 paragraph 2(b), and 24 paragraph 3 as well as violated two other agreements used in international trade, namely GATT and Technical Barriers to Trade (TBT)10.
The opposing countries then brought the case to the World Trade Organization to seek for the solution under the Dispute Settlement Body (DSB) with the case number DS467 with Indonesia as the main complainant. Despite the aspect of the economic loss suffered by the tobacco industry in the country, Indonesia believes that the agreements on trade as the main source of the international law has a very crucial role in the practice of international trade and all countries participating in the agreement shall implement the provisions under all circumstances possible as regulated in the agreement.
On September 20, 2013, Indonesia through its representative submitted a request for consultation with the Government of Australia to the World Trade Organization concerning:11
1. Australia Tobacco Plain Packaging Act Number 148 Year 2011 concerning the discouragement of the use of the tobacco products and for related purposes. 2. Australia Tobacco Plain Packaging Regulation 2011 under the Legislative Instrument Number 263 Year 2011 as amended by the
10 World Trade Organization. (2017, October 3). Australia — Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging. Retrieved from https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds467_e.htm 11 Indonesia‘s Consultation Request to WTO Number WT/DS467/1, G/TBT/D/46 IP/D/34, G/L/1041, dated on 25 September 2013. 5
Australia Tobacco Plain Packaging Amendment Regulation Number 1 Year 2012 under the Legislative Instrument Number 29 Year 2012. 3. The Amendment of Trade Marks in the Tobacco Plain Packaging Act 2011 concerning the amendment to the Trade Mark Acts 1995, and for any related purposes. 4. All related measures implemented by Australian government to the law as referred to in the point 1, 2, and 3 including the amendment to replace and/or complement those regulations.
In the request submitted to the WTO, written also the main reason of Indonesia‘s objection regarding the Australia Plain Packaging Act 2011, as follow:12
a. Australia has failed to protect the trademarks registered outside Australia as it is without imposing any change in the trademark or even eliminating the trademarks as regulated in the TRIPS Agreement Article 2 paragraph 1. b. Australia has failed to provide the protection regarding the unfair competition as the plain packaging is believed to create confusion among the same tobacco products from other competitor industries as regulated in the TRIPS Agreement Article 2 paragraph 1. c. Australia has performed the less favorable actions towards other nationals‘ intellectual property rights than towards its own national intellectual property rights protection which should have treated equally the same as regulated in the TRIPS Agreement article 3 paragraph 1. d. Australia has created an obstacle to the registration of the trademarks of the nature of the goods to which the trademark should
12 Ibid. 6
be applied as regulated in the TRIPS Agreement article 15 paragraph 4. e. Australia, by implementing the Plain Packaging Act, has prevented the owner of the trademark to enjoy the rights conferred in the trademark as regulated in the TRIPS Agreement article 16 paragraph 1. f. Australia, by implementing the Plain Packaging Act, has prevented the owner of the trademark to enjoy the rights of being the ―well- known‖ producer of the tobacco products conferred in the trademark as regulated in the TRIPS Agreement article 16 paragraph 3. g. Australia has unjustifiably harm the trademark by imposing special requirements such as the uniformity of typeface, font, size, and color, as well as the placement of the brand name in the tobacco products which resulted in the inability of one trademark‘s capability to distinguish it‘s the tobacco products of one enterprise from the tobacco products of other enterprises as regulated in the TRIPS Agreement article 20. h. Australia has failed to provide the effective protection of the trademark from the unfair competition regarding the geographical indications as the plain packaging creates confusion of the origin of goods as regulated in the TRIPS Agreement article 22 paragraph 2b. i. Australia has diminished the level of protection toward the geographical indications as regulated in the TRIPS Agreement article 24 paragraph 3.
In the dispute settlement process, there have been other countries acting as the third parties which are Brazil, Canada, China, Cuba, European Union, Guatemala, Honduras, India, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Nicaragua, Norway, Oman, Philippines, Russian Federation, Chinese Taipei, Thailand, Turkey, Ukraine, United States, Uruguay, Zimbabwe,
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Dominican Republic, Peru, Singapore, Argentina, Chile, Malawi, Nigeria, and Ecuador.13
1.2 Problems Identified Prior to Australia, there has not been any participating countries of FCTC established a national law of plain packaging. There have been some countries who tried to issue the Plain Packaging Act, however in the negotiation and discussion process, some reasons have hindered the act to come in to force. In 1994, the Government of Canada tried to impose the plain packaging act; however this act failed to come in to force.14 The reason behind the failure of implementing plain packaging act of the Government of Canada was no other than the concern on the trademark protection as well as the obligation of Canada under the WTO and North American Free Trade Agreement (NAFTA).15 Short after the Canadian Government, the United Kingdom also tempted to introduce the plain packaging concerning the same issue, the trademark, as well as the treaty of treaty within the European Union, however, UK has imposed the regulation again in its national law today.16 Plain packaging act is like a deck of cards standing making line, once one card in the front falls, the other card will also falling down, a domino effect. If Australia wins the battle, many countries will have the tendency to impose the same act as Australia, a homogenous plain packaging on tobacco products. Different from some countries in the past, in the era after the winning of Australia – if the DSB decided to win Australia – , the implementation of plain packaging
13 World Trade Organization. (2017, October 3). Australia — Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging. Retrieved from https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds467_e.htm 14 Freeman, B., Chapman, S., & Rimmer, M. (2008). The Case for the Plain Packaging of Tobacco Products. doi:10.1111/add.2008.103.issue-10 15 Belluz, J. (2016, June 2). The US Hasn't Updated the Health Warnings on Cigarette Packs in 31 years. Retrieved from https://www.vox.com/2016/6/2/11818692/plain-packaging-policy-us- australia 16 Reuters. (2017, April 12). UK Supreme Court Denies Big Tobacco Appeal, Plain Packaging to Go Ahead. Retrieved from http://www.reuters.com/article/britain-smoking/uk-supreme-court- denies-big-tobacco-appeal-plain-packaging-to-go-ahead-idUSL8N1HK221 8
will be a lot easier and will have bigger possibility to become a national law within a country. Besides the tobacco product, there might be other health-harming products will be subjected to plain packaging, such as alcohol and unhealthy food. Once this condition occurs, there might be more conflicts in international trade. For example Indonesia, Indonesian tobacco products will encounter some difficulties in the Australian market as the plain packaging act has been imposed there. As the revenge, Indonesia will impose the same regulation of plain packaging; say for alcoholic beverages, which eventually will be affecting Australian wine. This condition is will lead to nothing but a worse trade relations between both countries. The most important aspect that will be at stake in such condition is the Intellectual Property Rights. Intellectual Property Rights was formed to protect the creation of intellectual thinking of human mind to ensure the creator will enjoy the privilege of his creation without ever worried that someone else will take advantage of it.17 The implementation of plain packaging act seems has destroyed the idea of the Intellectual Property Protection Law. The Plain Packaging Act 2011 of Australian Government has flawed the idea of Intellectual Rights Protection. As have been explained above, there are two sides of the story. One cannot say that the reason of Australia in imposing the plain is unjustifiable as it concerns on ensuring the health of its citizens, which becomes the goal of all the nations.18 Second, however the instrument of achieving the goal, in this case is the plain packaging act, still needs to be questioned.
17 World Intellectual Property Organization. (n.d.). What is Intellectual Property?. 18 World Health Organization. (2017). Healthier, Fairer, Safer: the Global Health Journey 2007- 2017. Retrieved from http://www.who.int/publications/10-year-review/healthier-fairer- safer/en/ 9
1.3 Statement of the Problem As have been elaborated in the previous paragraph, the topic and the problem encountered in this research are: Topic : This research is to analyze the case of international trade dispute settlement between Australia and Indonesia upon Australia's Tobacco Plain Packaging Act 2011 by World Trade Organization and the crosscutting issues therein. Question : 1. How did the implementation of Australia‘s Plain Packaging Act 2011 violate the Intellectual Property Rights Protection as regulated in TRIPS Agreement in its international trade relations with other countries, especially Indonesia? 2. How does The World Trade Organization Dispute Settlement Body oversee the trade dispute between Indonesia and Australia on Plain Packaging Act 2011 (2013-2017)?
1.4 Research Objectives The objectives of this research will mainly focus on providing of the explanation and understanding of the following issues: 1. The issue of plain packaging. 2. The Intellectual property rights. 3. The dispute between Indonesia and Australia on the Plain Packaging Issue as brought to World Trade Organization under its Dispute Settlement Body. 4. The analysis on the crosscutting issues in this case and how those issues relate to each other. How Australian Government step in solving the problem of the nation but created the new problem for other nations and how the WTO acts as the international patron of the international trade in settling the issue through the Dispute Settlement Body (DSB).
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1.5 Significance of the Study We are now living in the globalization era in which the international trade is one of its phenomena. Goods, service, labor going in and out crossing national borders will be our daily activity either we involve directly or indirectly. There are also numbers of dispute occurring in the international trade, one of which is the plain packaging issue which is believed to have violated the Intellectual Property Rights Protection. This research will provide insight on the process how the plain packaging act has violated the intellectual property rights and how the victim countries deal with it. By using some theories in international relations, this research will provide the analysis of the dispute between Indonesia and Australia on the Plain Packaging Act, whether the reason behind the implementation of the plain packaging is fair enough or it abandons one important aspect while keeping the other aspect. This is very significant with current issue as the plain packaging issue is still in the air and has been becoming a longstanding debate since decades ago.
1.6 Conceptual and Theoretical Framework The research will be based on several theories and key concepts in international relations. The theories and key concepts will be used to explain the case and to draw a pattern of analysis to figure out and elaborate the answer towards the research questions. The theories and key concepts that will be used are as follow:
1.6.1 Plain Packaging
Australian government announced that effective per December 1, 2012 all the tobacco products distributed in Australia shall be in a
11
homogenous plain packaging.19 The action of the Australian government was considered as a bold and brave action as many countries have tried to impose the same act but did not succeed. The concept of plain packaging has been introduced to the world previously by Toxic Substance Board of New Zealand. In the September 1989, the Toxic Substance Board of New Zealand submitted a recommendation to the Ministry of Health of New Zealand that all tobacco products to be distributed in a single plain packaging.20 The concept of plain packaging at that time was the white packaging of tobacco products with black printed certain standardized information to which neither logo nor symbol in any kind of the products were allowed to be attached.21 However, the government of New Zealand did not take any further step to implement the plain packaging act. The Government of Canada has also tried to introduce the concept of plain packaging in 1994.22However, unlike the Australia, the Government of Canada failed to impose a national law on plain packaging concerning the issue of trademark and the obligations that Canada shall fulfill under the WTO and NAFTA.23 Short after Canada, the Government of the United Kingdom tried to introduce the concept of plain packaging to the national law. However, the government then decided not to further implement the Plain Packaging Act as it was seemed to violate the law of trademarks as well as the provisions set under the European Union Treaty on the Functioning of the European Union article 34. Lithuania has also tempted to impose the same act which
19 Freeman, B., Chapman, S., & Rimmer, M. (2008). The Case for the Plain Packaging of Tobacco Products. doi:10.1111/add.2008.103.issue-10 20 Ibid. 21 Cancer Council Victoria. (2011, May). Plain Packaging of Tobacco Products: a Review of the Evidence. Retrieved from http://tobacco.cleartheair.org.hk/wp- content/uploads/2012/06/tcuccvbkgrndresrchplainpak190511reend_final2.pdf 22 Ibid. 23 Ibid. 12
was failed because the parliament did not approve the regulation to come into force.24 In 2009, Uruguay introduced 3 regulations concerning on the limitation of the usage of logo in the packaging of tobacco products yet not eliminating it. 25 Responding to this, the Philip Morris International Inc. along with its subsidiary company, Philip Morris Product S.A. in Switzerland, requested for arbitration with the Government of Uruguay concerning the newly imposed regulations in to the International Centre for Settlement of Investment Dispute (ISCSID). 26 Plain packaging has become one of the major threats for the future of tobacco industry. Tobacco plain packaging is defined as the standardized appearance of any product made from tobacco, especially cigarettes, by prohibiting the attachment of all brand imagery, including the company‘s logo and other trademarks.27 The packages should be displayed in a standard background color and the manufacturer companies are allowed to print the brand name and the variant of the product only in a deigned size, font, color, and position. Other governmental campaign, especially on health should remain in the packages. Below is the example of plain packaging adopted by the government of Australia.
24 Claro, F., & Matheson, S. (2015, March 28). The Effect of Non-IP Laws on IP Rights Focus on Recent Laws on Plain Packaging for the Tobacco and Alcohol Industry and Exhaustion of IP Rights. Retrieved from http://www.aseanipa.org/attachments/article/652/Felipe%20Claro%20and%20Sarah%20Mathes on-ASEAN%20IPA%20plain%20packaging%20presentation.pdf 25 International Tobacco Control. (2014, August 20). Uruguay‘s Tobacco Control Policies Reducing Smoking Rates, Encouraging Quitting, Finds Six-Year Survey. Retrieved from http://www.itcproject.org/node/119 26 World Health Organization. (2017, July 18). International Tribunal Orders Tobacco Company to Pay Australia's Costs of the Arbitration over Tobacco Plain Packaging. Retrieved from http://www.who.int/tobacco/communications/highlights/international-tribunal-plain- packaging/en/ 27 Freeman, B., Chapman, S., & Rimmer, M. (2008). The Case for the Plain Packaging of Tobacco Products. doi:10.1111/add.2008.103.issue-10 13
Figure 1-2: Before the implementation of plain packaging act and after the implementation of plain packaging act in Australia, Tobacco Labeling Resource Center 2013 .28
1.6.2 Intellectual Property Rights
Intellectual property is the creation resulted from human mind such as the invention, literary, manuscript, artistic works, images and names used in commercial activity. 29 World Intellectual Property Organization (WIPO) categorizes intellectual property into two types which are industrial property and copyright. Industrial property refers to the patents for the inventions, industrial designs, and geographical indications. While copyright refers to the patent covering the literary works, films, music, other artistic works, and architectural designs.
Intellectual property rights are the rights granted legally to the creators and owners of patents, trademarks, and other copyrighted works at a certain period of time.30 The rights can be either in form of economic beneficial or any other privileges enjoyed by the creator as the result of
28 http://www.tobaccolabels.ca/wp/wp-content/uploads/2016/07/2012vs2014_Kent1.jpg 29 World Intellectual Property Organization. (n.d.). What is Intellectual Property?. 30 Ibid. 14
their creations. 31 The intellectual property rights are included in the Universal Declaration of Human Rights Article 27 stating that the IPR is the rights that provide the benefits in either moral or material form as the result of the ownership of any patents, trademarks, literary authorship, artistic production, or any other inventions.
The history of intellectual property rights has begun a long time ago especially in the field of trade. Symbol and words have been used to distinguish differences of one product from other products. In some parts of the word, such as China, India, Persia, and Greece, the name of the artist had been used as the brand of the products since around 4,000 years ago.32 Besides distinguishing one product from other products, the mark, either in form of symbols, name, and words, was also used as to identify the geographical origin of the products.
The first world convention on intellectual property right issue was in Diplomatic Conference 1883 in Paris which resulted in the formation of the agreement of The Protection on Industrial Property – Paris Convention.33 The years later in Bern, another convention on intellectual property rights was conducted which resulted in the formation of The Protection of Literary and Artistic Work. Later revisions for both conventions were performed in 1967 for Paris Convention and 1971 for Bern Convention. Since then, the protection toward intellectual property rights has showed a significant growth especially in the era of globalization. Under GATT, later WTO, all the member countries have agreed on a mutual agreement to protect the intellectual property rights, namely the Trade – Related Aspects of Intellectual Property Rights (TRIPs) Agreement which came in to force on January 1, 1995.
31 Ibid. 32 Idris, K. (2003). Intellectual property: A power tool for economic growth. Geneva: WIPO. 33 Ibid. 15
In Indonesia, Intellectual Property Rights have been put in to consideration since the colonial era. In 1885, the colonial government has enforced trademark law which was followed by the enforcement of patent law in 1910. In 1912, the colonial government enforced copyrights law, Auteurs Wet 1912. To gain a more comprehensive regulation on the issue, the colonial government in Indonesia decided to participate in both Paris and Bern convention in 1888 and 1914. Post to the colonialism era, the regulations were still adopted in the practice of government even until the independence of Indonesia in 1945 except the patent law.34 The patent law was removed from national regulation at that time because Indonesian government realized that it was contradictory with Indonesian sovereignty and beside, Indonesia was in a huge need of technology to develop the nation‘s economy. 35 Nowadays there are 7 national laws concerning the intellectual property rights protection in Indonesia namely:
1. Law Number 19 Year 2002 concerning Copyrights 2. Law Number 14 Year 2001 concerning Patent 3. Law Number 15 Year 2001 concerning Trademark 4. Law Number 29 Year 2000 concerning the Protection of New Variety of Plantations 5. Law Number 30 Year 2000 concerning Trade Secrets 6. Law Number 31 Year 2000 concerning Industrial Design 7. Law Number 32 Year 2000 concerning Integrated Circuit Layout Design
Besides ratifying the TRIPs agreement in 1994 through the Presidential Decree Number 15 Year 1997, Indonesia also ratified some other international treaties as follow:
34 Kusumadara, A. (n.d.). Problems of Enforcing Intellectual Property Laws in Indonesia. Faculty of Law Brawijaya University. 35 Ibid. 16
1. Patent Cooperation Treaty which was ratified though Presidential Decree Number 16 Year 1997 2. Trade Mark Law Treaty which was ratified though Presidential Decree Number 17 Year 1997 3. Bern Convention which was ratified though Presidential Decree Number 18 Year 1997 4. World Intellectual Property Organization (WIPO) Treaty which was ratified though Presidential Decree Number 19 Year 1997.
Intellectual Property Rights together with plain packaging have become the main concern in this research. Since the FCTC encouraged its member countries to adopt the plain packaging to control the tobacco consumption, many countries in which tobacco industries are located were threatened. Many countries and the industries used this Intellectual Property Rights as the shield in countering the implementation of plain packaging.
Indonesia as the complainant country believes that Australia through its Tobacco Plain Packaging Act has violated some of the rights covered in the TRIPs which are trademarks and geographical indication.
a. Trademark
Trademark refers to the image, color, logo, design, and name used in a product to a product to represent the product and to distinguish from other products.36 The name, image, color, logo, and other designs have to be registered in the national law where the corporation was coming from.
This has become one of the main points urged by Indonesia in its battle fighting Australia with its Tobacco Plain Packaging Act in the WTO DSB. The implementation of Tobacco Plain Packaging Act
36 World Intellectual Property Organization. (n.d.). What is Intellectual Property?. 17
has prohibited the producer companies of the tobacco product to attach the logo designs, color, and any image of the product which have been legally registered.37 The Act only approves the attachment of name of the company with its variant in a homogenous mandated font and size which are different from the original font and size of the brand name and variant from the companies.38 This is a clear violation of TRIPs agreement based on the provisions stated therein.
b. Geographical Indication
Geographical Indication (GI) refers to any kind of sign attached in the product‘s package to specify certain geographical origin to which the product will then be known possess certain reputation and quality which are unique and different from other geographical location.39 Again, the enforcement of the plain packaging has violated these rights because no geographical indication is allowed to be attached in the plain packaging as it is considered as the product‘s marketing materials.40
1.6.3 The Law and the Basic Principles of World Trade Organization
Established in January 1, 1995, the World Trade Organization (WTO) is one of the youngest yet most influential inter-governmental organization especially in the era of globalization and international economic integration. Some scholars also believe that WTO is one of the most potential
37 Freeman, B., Chapman, S., & Rimmer, M. (2008). The Case for the Plain Packaging of Tobacco Products. doi:10.1111/add.2008.103.issue-10 38 Ibid. 39 Ibid. 40 Ibid. 18
international organizations to become the base of global governance considering the world‘s connectedness in the field of trade.41
Prior to WTO, the organization was named as General Agreement on Tariffs and Trade (GATT) which was established in December 1945. The United States invited all its allies to negotiate and formulate a multilateral agreement concerning the tariffs reduction in the mutual trade relation which later become the very initial of GATT establishment.42 Responding to the initiative taken by the US, the Social and Economic Department of United Nations recommended a resolution in February 1946 to encourage the establishment of International Trade Organization (ITO). Previously, the idea of ITO establishment has been discussed in the Bretton Woods convention which is also known as the United Nations Monetary and Financial Conference with the agenda of designing the world monetary system after the defeat of Germany and Japan.
GATT was previously to be attached as provisions in the ITO, however due to the longstanding discussion of ITO establishment, many parties require the enforcement of GATT separately from ITO as it was considered as an urgent matter at the moment.43 Responding to the issue, 8 out of 23 countries involved in the discussion agreed to sign Protocol of Provisional Application of GATT to enforce the GATT provisions in the meantime of the ITO establishment on October 30, 1947.44 Therefore, the GATT came in to force in January 1, 1948.
In March 1948, the negotiation of ITO establishment has come into a final negotiation. However, the United States congress has several times rejected the charter of ITO establishment and finally withdrew itself from
41 VanGrasstek, C., & World Trade Organization. (2013). The history and future of the World Trade Organization. 42 Ibid. 43 Ibid. 44 Ibid. 19
the ITO participation.45 Since the United States decided not to become the member of ITO, the organization was failed to be established, as the US economy was one of the strongest and most influential economies at the time.46
The failure of ITO establishment as an international regulating body on trade left GATT as the only regulations concerning the international trade. GATT was not an organization, but it was just a set of multilateral agreement to reduce the trade barriers, especially tariffs. However, in its development, GATT acted as a de facto organization even though the institutional provisions were very limited in the agreement. Even though GATT was not a formal trade organization, it succeeded reducing the tariffs in the international trade especially the foods coming from developed countries.47
The success of GATT in regulating the tariffs barriers in the trade has not made all the problems in the international trade solved. With the more interconnected market, the new challenges appeared in the international trade one of which is the non-tariff barriers. The negotiation in the reduction and eliminating of non-tariff barriers seemed to be more complicated than the negotiation on the tariffs barriers, and hence a formal institution was needed to be established to accommodate this challenge and future challenges that might appear in the international trade as the countries around the world become more interdependent.
Responding to the situation, the minister of economic of Italy, Reanto Ruggiero, in February 1990 suggested the establishment of an international
45 Ibid. 46 Ibid. 47 Ahmed, E., Islam, S., & Dona, P. D. (2015). The Effectiveness of The GATT Through Its Major Achievements and Failures as well as The Performance of the Creation of WTO. International Journal of Economics, Commerce and Management, 3(5). Retrieved from http://ijecm.co.uk/wp- content/uploads/2015/05/3586.pdf 20
organization on trade. 48 Months later, Canada recommended the establishment of the world trade organization with the name of ―World Trade Organization‖ as the organization to accommodate and regulate the world trade including all the matters related to it. The agreement of WTO establishment was then signed in April 1994 and came in to force on January 1, 1995. WTO has the function of increasing the life standard, the increasing of the work opportunity, income growth and effective demand, expansion of production, and the trade of goods and service. 49 The establishment of WTO was then considered as one of the biggest achievement in the world global economy cooperation at that time.50
Since the WTO came in to force in January 1, 1995, the WTO has been becoming the regulating body of the world trade, which means all the member countries will have to obey certain rules and regulations enforced by the WTO as well as fulfill their obligations. There are three classifications of the obligations that the member countries must fulfill which are:
1. A set of obligation that is binding the whole member of WTO without exception. This obligation is also known as the multilateral agreement. 2. A set of obligation that is binding certain member countries that has chosen to ratify certain agreement. This obligation is also known as the plurilateral agreement in which the participation is optional based on the national interest of the member countries.
48 Van B., & Zdouc, W. (2017). The law and policy of the World Trade Organization: Text, cases and materials. Cambridge, United Kingdom: Cambridge University Press. 49 VanGrasstek, C., & World Trade Organization. (2013). The history and future of the World Trade Organization. 50 Ibid. 21
3. A set of obligation that is binding certain member countries that has a special relation with other incumbent WTO member countries. This obligation is also known as sui generis obligation.
The law of the WTO is a set of specified complex regulations. The matters covered in the law of WTO are the matters of tariffs, import quota and tax, intellectual property, food safety, and national security. In achieving those purposes, there are 6 basic classifications of the WTO principle law which are:51
1. Non-discrimination principle 2. The rules on market access including the transparency of the market access 3. The rules on the unfair trade 4. The rules on conflicts between trade liberalization and other societal values and interest 5. The rules on special and differential treatment for developing countries 6. The rules on the institutional technicalities and the decision making in dispute settlement
The basic principle of the WTO Law that will be used in the analysis of this research is the non-discrimination principle. The non-discrimination principle is adopting two main concepts which are the most favored nations (MFN) and the National Treatment Principle.52 The MFN concept is the concept of treating all WTO member countries equally, while the national treatment principle refers to the equal treatment towards the foreigners and locals products.53 Those concepts are applied in the trade relations between
51 Ibid. 52 Ibid. 53 World Trade Organization, 2012. 22
member countries of WTO both in goods and service trade, as well as applied to the trade-related aspects of intellectual property rights.
The concept of Most Favored Nations (MFN) is the principle to ensure the non-discrimination between trading partners among the WTO member states.54 The MFN regulates that if one member country give A treatment toward another member country, then the rest member countries should get the A treatment as well. The most favored nation principle is classified into three categories which are MFN under GATT, MFN under GATS, and MFN under TRIPs.
1. Most Favored Nations (MFN) Principle under General Agreement on Tariffs and Trade (GATT)
Member countries of WTO can be assumed as members of a certain club that regulates all the members in the club to treat other members equally in the best way they could.55 Therefore, it can be guaranteed that all members of the club will experience the best treatment from fellow members. Under the GATT, the members are required to impose the regulations for either export or import no less favorable than it imposes toward the one particular member it considers as the best trading partner. The base of MFN in the GATT is stated on Article I paragraph 1
With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III, any advantage, favor, privilege or immunity granted by any
54 World Trade Organization. (2012). Online Course of Introduction to WTP. Retrieved from https://ecampus.wto.org/admin/files/Course_588/CourseContents/N-INTRO-E-Print.pdf 55 Ibid. 23
Member to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other Members.56
Based on the Article I:1 GATT above, all the WTO members should treat their fellow members equally in the field as below:57
a. Custom duties b. Any forms of charges implied to the activity of export and import c. Any form of charger implied to the international payment transfer resulted from export and import activity d. The method of imposing certain contribution such as the duties and charges e. The rules and other formal regulations applied in the activity of export and import f. National taxes and other national charges g. National laws, regulations, and other national requirements that might affect the sale, distribution, and use of particular product.
Referring to the MFN principle, once one particular country of WTO‘s member opens the market access for another WTO member country, the rest of the member countries will automatically have the same access toward the market without any further negotiations needed. This MFN principle of WTO is also applied to the similar product after certain process of assessment considering the physical appearance and characteristic of the products, the end use of the products, the preferences of the customers, and the classification of the product in the tariffs law.
56 GATT Agreement Article 1 Paragraph 1, from www.wto.org accessed on 20 November 2017. 57 Ibid. 24
2. Most Favored Nation (MFN) under the General Agreement on Tariffs and Service (GATS)
Very much alike the MFN under GATT, the MFN under GATS obliges the member countries to receive the services from all the member countries once it opens the market access towards one particular member country.58 The base of the MFN under GATS is written in the article II:1 GATS
With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favorable than that it accords to like services and service suppliers of any other country.59
3. Most Favored Nation (MFN) under the Trade Related Aspects of Intellectual Property (TRIPS Agreement)
The principle of MFN in under the TRIPS agreement has a bit difference from the MFN under GATT and GATS. The subject of the MFN in the GATT is the goods products, under the GATS the subject is service, while under the TRIPS the subject of the MFN treatment will be nationals. The term of national can refer to the individual that owns an industrial or commercial activity established in a particular country. The MFN principle under the TRIPS agreement shall oblige the WTO member countries to grant the same rights as the individual obtained in its origin country even though the origin country is not a member of WTO. The base of the MFN Principle under the TRIPS agreement is the Article 4 of the agreement.
“…With regard to the protection of intellectual property, any advantage, favor, privilege or immunity granted by a Member to the nationals of any other country shall be accorded
58 GATS Agreement Article II Paragraph 1, from www.wto.org accessed on 20 November 2017. 59 Ibid. 25
immediately and unconditionally to the nationals of all other Members.”60
Further explained in the article that the particular person can obtain the rights or the privilege concerning the intellectual property through several ways namely:
a. From international agreements of intellectual property b. Granted based upon the consideration of the provisions in the Bern Convention 1971 c. Rights that are not regulated under this regulation d. Other international agreement related to intellectual property rights protection that came into force before the enforcement of WTO Agreement that is justifiable and indiscriminative towards other members The MFN Principle under the TRIPS Agreement will help the author to figure out the answer toward the research question. The intellectual property rights, the one that is believed to be abandoned in the decision of WTO, is supposed to be defended based on the MFN principle under the TRIPS.
1.6.4. National Interest
The term of national interest refers to the self-interest of each nation state.61 It refers to how the countries around the globe envision the defense and security of the countries as well as exercising their power beyond their national boundaries.62 National interest in the traditional approach is related to the primary interest of high politic, the geographical politic, the military power, and all matters related to the hard power of the countries in order to
60 TRIPS Agreement Article 4, from www.wto.org accessed on 20 November 2017 61 Coicaud, J.-M, & Wheeler, N. J. (2008). National interest and international solidarity: Particular and universal ethics in international life. New York: United Nations University Press. 62 Ibid. 26
secure the sovereignty of the state. 63 While in the modern approach, national interest also priors the secondary needs of the countries, such as the economic prosperity and other low politics, in the interaction of countries.64 The concept of the national interest derives from the big theory of realism in which defined that the countries are interacting each other aiming nothing but the struggle of power and to expand influence in order for the countries to survive. 65 Hans J Morgenthau is one of the figures in the realism theory and national interest concept. Morgenthau argues that the national interest, the needs of the countries, shall be in the heart of the politics of the nation in the international interaction with other countries. Morgenthau in his writing of In Defense of the National Interest to examine the United States of America‘s national interest wrote:
Forget the sentimental notion that foreign policy is a struggle between virtue and vice, with virtue bound to win. Forget the utopian notion that a brave new world without power politics will follow the unconditional surrender of wicked nations. Forget the crusading notion that any nation, however virtuous and powerful, can have the mission to make the world over in its own image. Remember that the golden age of isolated normalcy is gone forever and that no effort, however great, and no action, however radical, will bring it back. Remember that diplomacy without power is feeble, and power without diplomacy is destructive and blind. Remember that no nation’s power is without limits, and hence that its policies must respect the power and interests of others. And, above all, remember always that it is not only a political necessity, but also a moral duty for a nation to always follow in its dealings with other nations but one guiding star, one standard for thought, one rule for action: The National Interest66
From the writing of the Morgenthau above, it is very clear to see that the interaction of countries in the arena of international politic should be
63 Ibid. 64 Ibid. 65 Griffiths, M. (1992). Realism, idealism, and international politics: A reinterpretation. London: Routledge. 66 Pham, J. P. (2008). What Is in the National Interest? Hans Morgenthau's Realist Vision and American Foreign Policy. American Foreign Policy Interests, 30(5), 256-265. doi:10.1080/10803920802435245 27
based on nothing but the national interest. To achieve the national interest, the practice of diplomacy and the foreign policy shall than be based on nine principles as mentioned by Morgenthau in its book, Politics among Nations.67
1. The diplomacy shall be practiced in the highest spirit, should be practiced in the spirit of war, in which everyone would fight to defend the sovereignty of the country. 2. The foreign policy formulation must be referred to the national interest of the countries and it has to be supported with adequate power. 3. The diplomacy should also look from the perspective of other countries. 4. The countries, however, must be opened to compromise in the issues that are not very vital to their national interest, to gain ―friends‖ in the arena. 5. The countries should be willing to give up the shadow rights to achieve that the real advantage in the interaction with other countries in the international politics. 6. The countries should never put their self in the international politics in the position from which the countries should back off without losing the ―face‖ or from which that counties cannot move forward without facing great risks. 7. The countries should never let the weak ally to make any kind of decision for the countries. 8. The military power is one of the important aspects in the foreign policy, it shall be used as the instrument to achieve the national interest, not the master, or the ultimate goal of the national interest.
67 Ibid. 28
9. The government of the countries should be able to act as the leader of the public opinion, the one who shapes the public opinion in the form of what it desires to be, not the slave of the public opinion.
The concept of national interest will be used in this research to analyze the motives behind each party in their interaction in the case. It will help to explain the motives of Australia in imposing the Tobacco Plain Packaging Act and the motive of Indonesia on complaining the regulation on behalf of the intellectual property rights protection.
1.6.5. Diplomacy and Intellectual Property Rights
Diplomacy is simply explained as the way the states interact with other states in the conduct of international relations. 68 Diplomacy is used to cooperate between allies as well as to resolve conflict without using force. One country practices its diplomacy by communicating, bargaining, and spreading influence, to win the heart of the targeted countries and to set their opinion to like the particular one country. In its practice, there are three main functions of diplomacy which are to gather intelligent information, to manage the image of one country abroad, and to extend the practice of foreign policy.69 The intelligent information will be used as the main consideration to adapt the national interest and policy toward the situation globally and the changes. The representatives of the government abroad are the eyes and the ears of the national government that gather information abroad. The image of a country abroad also depends much on the diplomacy. Image of a country is very crucial in its relations with other countries to gain the national interest. The foreign diplomatic representatives will be assigned to supply the local media with the one‘s
68 Griffiths, M., O'Callaghan, T., & Roach, S. C. (2002). International Relations The Key Concept Second Ediction (2nd ed.). 69 Griffiths, M., O'Callaghan, T., & Roach, S. C. (2002). International Relations The Key Concept Second Ediction (2nd ed.). 29
news and avoid any negative publication about it. The diplomatic representatives also negotiate with other countries regarding the national interest such as the military, problem solving, and any other issues. As the world becomes more borderless in the globalization era, the practice of diplomacy is increasing as well. Countries are coming to build more cooperation by lessening the boundaries and barriers between states. The globalization era is also marked with the increasing of more advanced technologies which is actually the booster of the globalization itself. The emergence of those advanced technologies has also required the continuous development in the Intellectual Property Rights protection. As the technologies cross the borders from the origin country, the inventors need the assurance that their invention is safe from any infringement and the assurance that they will receive the incentives70. The process of diplomacy can be seen in the practice of the transfer of technology. For the origin countries, which mostly are the developed countries, the innovation on advanced technology has constituted the rising in the share of income derived from the presence of their technologies in the foreign market. Hence, they will use the presence of their technologies in the practice of diplomacy in political economy as a key of negotiating in the discussions and negotiations related to international trade. While for the developing countries who are mostly the users of the technologies have to find best practice of diplomacy to negotiate with the inventing countries so that they would be able to afford the use of the technology71. The diplomacy is much related with this case. The intellectual property rights agreement is a product of diplomacy in which countries gathered to voice their national interest of protecting the invention of their nationals. The international institutions were then formed to manage and control those
70 Salim, Z. (2016, May). Diplomacy of Sovereign State and Intellectual Property Rights [PDF Document]. Retrieved from https://www.welfaredot.com/uploads/1/0/6/9/10694452/1_- _diplomacy_of_sovereign_state_and_ipr.pdf 71 Ibid. 30
activities. The agreement was then formed as the main guideline for countries to conduct the relations in the field. Same as the TRIPS agreement, the diplomacy also resulted in the formation of The World Trade Organization as the organization to manage the trade relations between the member countries. In the case of conflict, like this case, the diplomacy is also used in the process of problem solving. The diplomacy can be seen in the action of Indonesia in requesting for consultation with Australia facilitated by the WTO to discuss the best possible solution for the problem. Both countries then sent their representatives to discuss the solution representing each national interest. The practice of diplomacy will be clearly exposed in the discussion of this case.
1.7 Scope and Limitation of Study This research will focus on the analysis at the international level as it will try to analyze the interaction between the crosscutting issues of Indonesia and Australia. This research will analyze how the Australia‘s Plain Packaging Act has violated the IPR protection and the provisions of the agreements set under the WTO from 2013 to 2017 well as analyze the role of WTO to oversee the case. To answer the research question, this research will also strictly use the concept of non-discrimination in the WTO principle in which the Most Favored Nation (MFN) is explained. This research will also focus on using the TRIPS Agreement and the provisions therein to answer the research question.
1.8 Research Methodology
The research will be conducted in qualitative method through literature review and the interview towards some key persons in this case namely:
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1. One of the lawyers representing Indonesia in the battle of this case in WTO DSB, Mr. Duane Layton, to gain a more comprehensive understanding regarding the case development in the WTO. 2. Director of PT. HM Sampoerna as subsidiary company of Philip Morris International, Mr. Yos Adiguna Ginting or any related department, to better understand the interest of Indonesia which behind the appraisal of the IPR protection issue in the claim against Australia.
The research will also rely on the data and documents released by WTO, Indonesia, and Australia, as well as using related books, research papers, journals, and any other supporting documents.
The author of this research would like to determine the variables to help better analyzing the case. The dependent variable of this research will be the interest of Indonesia on the case representing the tobacco industry in the country, while the independent variable would be the Australia‘s Plain Packaging Act 2011.
1.9 Literatures Review 1. Frankel, S., & Gervais, D. (2013). Plain Packaging and the Interpretation of the TRIPS Agreement. Vanderbilt Journal of Transnational Law, 46(5). Retrieved from https://www.vanderbilt.edu/wp- content/uploads/sites/78/Gervais-Final-Review.pdf
This journal provides the insight of how the plain packaging is used to reduce the tobacco consumption as well as the relation to the health and cost issues. Australia‘s Plain Packaging Act 2011 is picked as the example in this journal by explaining the strictness of the Act towards any trademarks coverage in the tobacco products‘ packaging. The basis for the discussion is the Trade – Related Aspects of Intellectual Property Rights
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(TRIPS) Agreement of World Trade Organization (WTO). It is believed that the promotion of the public health in a country is supposed to be supported. However, the promotion of the public health itself should comply with any applicable law and regulations binding the countries. Other than the TRIPS Agreement, the authors of the journal also use the Vienna Convention on the Law of Treaties (VCLT). Regarding the TRIPS Agreement, the authors picked article 20 to be used in the discussion. The authors believe that the dispute between Australia and the developing countries on the Australia‘s Palin Packaging 2011 can be seen as the debate about the protection of the trademarks whether or not the rights of the owner of the trademarks are protected in other countries based on the TRISP Agreement. At the end of the discussion, the article concludes that the TRIPS Agreement should provide a clearer interpretation to meet its objectives and purposes. This article is very helpful in the writing of this thesis as it provides a perspective of the relations between the Plain Packaging Act 2011 imposed by Australian Government and the TRIPS Agreement under the World Trade Organization which has become one of the main focuses in this thesis. This journal also helps in providing the perspective on how the TRIPS Agreement should be interpreted in this case.
2. Chinmaye, A., & Dama, S. (2016). Plain packaging: TRIPping on trade marks? Journal of Intellectual Property Law & Practice, 11(12), 910-918. doi:10.1093/jiplp/jpv202
This journal, especially the in the article, discussed how the Plain Packaging issue to reduce the tobacco consumption has provoked number of debates. Same as the previous journal, this journal also picked the Australia‘s Plain Packaging Act 2011 which came into force at the end of 2012 as the example in the discussion. It is stated in the discussion that the
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Panel set by the WTO Dispute Settlement Body (DSB) is still composing the final report. While waiting for the final report to be issued, which can also be the final saying of WTO regarding this case if there is no appeal, many European countries have tried to design similar law with the same purpose, to promote public health. However, none can throw the judgment towards any country at the moment. One cannot blame Australia for imposing the regulation as the objective is to promote the health of its citizen. However, it is also understood that the Plain Packaging Act imposed by the Australian Government is not in line with the WTO regulations and provisions and hence resulted in the protest of Indonesia and other tobacco producing countries. The legal obligation of WTO members under the TRIPS Agreement and the Doha Declaration (2000) is used as the guideline in this discussion. Those agreements are used to analyze whether or not the implementation of Plain Packaging Act 2011 has been in line with the obligations of the member countries. At the end of the discussion, by referring to the Articles 16 and 20 of TRIPS Agreement, the authors then concluded that the Australia‘s Plain Packaging Act 2011 imposed by Australian Government is neither desirable nor justifiable under the Agreement. The authors also believed that the purpose should be supported however; there are many other ways that can be done to achieve such goal. For example, the authors believe that the public smoking ban and the increased cigarettes price has shown positive impacts to reduce the smoking. These policies are acceptable and justifiable and should be more embraced instead of creating new policy that is not in line with the applicable agreements, rules, and regulations binding the countries. This journal is very helpful in writing this thesis as this journal provide other perspective on the Plain Packaging Act. This journal will help the writer in analyzing the case and drawing a conclusion on the case between Australia and Indonesia on the Plain Packaging. This journal also helps
34
strengthening the argument of the writer that says Australia has violated the TRIPS Agreement by implementing the Plain Packaging Act 2011.
3. Horn, H., & Mavroidis, P. C. (2001). Economic and legal aspects of the Most-Favored-Nation clause. European Journal of Political Economy, 17(2), 233-279. doi:10.1016/s0176-2680(01)00028-3
This journal provides the clear explanation of the Most Favored Nations (MFN) that forbids the member countries to conduct any discriminative behavior toward any member countries. This journal provides the insight that the MFN principle is broadly used in the multilateral trading between countries. This journal stated that many policy makers believe that the MFN is very acceptable in the conduct of the trade relation and therefore, as it has been constituted by WTO as one of its principles. The MFN principle also appears in many WTO Agreements to show that this has always become the guideline of the WTO member countries in conducting trade relation. The Article 1 of the General Agreement on Tariffs and Trade (GATT) is the main principle in this discussion. Concluding the discussion the authors believe that the MFN principle is very ideal for the trade relation among countries to prevent ant trade dispute due to discriminative behavior. It is therefore all the member countries under the World Trade Organization (WTO) are encouraged to comply with this provision. This journal also provides the application of the MFN in the trade relation between countries of how it is supposed to be used. The explanation of MFN is very helpful for the writer to finish the thesis. Using the MFN as one of the main theories in the discussion, the example of the MFN application is very helpful in understanding the concept. This journal also helps the writer to draw the relation between the MFN and the Plain Packaging Act 2011 to eventually draw a conclusion on how the
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Plain Packaging Act 2011 has violated the MFN principle of WTO of which all the member countries shall comply.
4. Griffiths, M., O'Callaghan, T., & Roach, S. C. (2002). International Relations The Key Concept Second Ediction (2nd ed.).
This book provides the short introductory essays of international relations key concepts. There are four areas of concepts that are covered in this books which are the developing world, international law, Human Rights, and strategic studies. The increasing of the interactions between actors in International Relation has become the main motives of this second edition book by adding 21 new concepts from previous edition. It is believed that to understand the dynamics of the International Relations in nowadays world, we must first understand the theory and that is why the book was published. The theories then can help us to understand the events in the international world better. Starting from the interaction between actors, the roles of the international institution in the interactions, such as the United Nations, World Trade Organization, and International Criminal Court. The theories also help us to better understand the issues in social, economies, humanitarian, and other cross border issues. This book is very helpful for the writer to finish the thesis. National interest and diplomacy are two of the concepts used in the thesis. This book provides the understanding in brief explanation of both concept. Also this book provides the insight of the World Trade Organization as the international organization and its role in the interaction of countries and also in the time of conflict, like the topic of the thesis the conflict between Indonesia and Australia upon the enforcement of Australia‘s Plain Packaging Act 2011.
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1.10 Structure of Thesis
1.10.1 Chapter 1 – Introduction
The introduction part of this research will provide the background of the case, the reason behind the implementation of the Plain Packaging Act for tobacco products by Australia and the reason why Indonesia then complained the regulation. This chapter will also be the part to which the basic information of this case will be attached such as the problem identification, statement of problem, research objective, significance of the study, theoretical framework, scope of limitations, research methodology, and the structure of the research.
1.10.2 Chapter II – The Development of Australia’s Control on Tobacco Products Consumption: A ‘Tug of War” Game
The content of this chapter will cover the interest of Australia as the independent variable of the thesis. It also will explain the urgency of health issue that eventually implement the plain packaging regulation in the national law and how the tobacco industries keep fighting every single step of Australian Government.
1.10.3 Chapter III – The Development of Tobacco Industry in Indonesia (2011-2016)
This chapter will discuss the interest of Indonesia in the case as the dependent variable. This chapter will discuss how much the tobacco industry matters to Indonesia and how much the Australia‘s plain packaging could jeopardize the Indonesia‘s national interest in the tobacco industry.
1.10.4. Chapter IV – The Australia’s Plain Packaging Act 2011: Problem Solving Leading to New Problem
This chapter will provide the analysis how the Australia‘s Plain Packaging Act 2011 has abandoned the IPR in the international trade and whether or not it
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can be considered as the green light for other nations to follow. This analysis will be based on the WTO agreement on TRIPS and the Most Favored Nation (MFN) concept as explained in the non-discrimination principle in the WTO.
1.10.5 Chapter V – Conclusion
This chapter would be the end of the discussion and provide the summary of the discussion.
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CHAPTER II THE DEVELOPMENT OF AUSTRALIA’S CONTROL ON TOBACCO PRODUCTS CONSUMPTION: A ‘TUG OF WAR” GAME
II.1 Overview of Smoking in Australia
The relation between Indonesia and Australia in the tobacco industry has started since long time ago. The smoking of tobacco was firstly introduced to Australia through the northern-dwelling indigenous communities after visiting Indonesian fishermen around the early of 1700s. 72 The British culture of consuming tobacco was then introduced to Australia during 1788 by the colonials and spread widely around the area, including the indigenous community.73 During the early of the colonial era, tobacco was one of the rare commodities to be found in Australia. It was even restricted at first time. However, in the 1819, a contemporary study showed that the around 80% to 90% of the male workers are smoking the tobacco.74 The trend of smoking in Australia kept increasing until in the middle of 20th century. Around three out of four men and one out of four women were regular smokers at that time.75 This increasing number of smoker in Australia was mostly influenced by the introduction of the tobacco commercials on the television showing the image of tobacco and the sophistication of the European countries, the lifestyle of the American, and the best way enjoying the sunshine in Australia
72 New South Wales Cancer Council. (2011, December 20). A Brief History of Smoking. Retrieved from https://www.cancercouncil.com.au/31899/uncategorized/a-brief-history-of- smoking/ 73 Ibid. 74 Ibid. 75 Australian Bureau of statistic. (2000, July 4). Australian Social Trends, 2000. Retrieved from http://www.abs.gov.au/AUSSTATS/[email protected]/2f762f95845417aeca25706c00834efa/738d23457b 86defbca2570ec000e2f5c!OpenDocument 39
with tobacco.76 The tobacco smoking trend also increased among the women smokers during the sexual and gender revolution of late 1960s and the beginning of 1970s. The women at that time perceived smoking as the expression of independence and gender equality and put aside the issue of cancer, healthy lifestyle, and financial security.77 At the same moment, the premature death and diseases caused by smoking were increased that made many people gave up smoking.78 Concerning the situation above, Australian Government takes several steps to reduce the smoking prevalence in the country. Some of the efforts of controlling the tobacco consumption were by negotiating with the tobacco industries to reduce tar in the cigarettes and encouraging the doctors to promote the healthy lifestyle by giving up and avoiding smoking especially to the youth.79 Brochures on the dangers of tobacco smoking were continuously published and distributed. Seminars and courses on the dangers of tobacco were also continuously organized by the Cancer Council and the Seventh Day Adventist Church in Australia. However, these efforts showed only moderate success. Quitting tobacco smoking was not an easy thing to do during that day – actually up until today – it was similar to becoming a vegan for people that have been eating meat ever since they were born. It is an addiction and requires extra efforts to quit. The medical authorities and groups then raised the suggestion to the government to restrict any tobacco commercials that appealed to attract the Australian to smoke tobacco as well as restricting the use of tobacco in a wider scale. As the result, a campaign on the health issue was put on the cigarettes‘ packaging. There was gold-lettered warning written in the packaging warning that
76 Ibid. 77 Ibid. 78 Scollo, M., Winstanley, M., & Cancer Council Victoria. (2008). Trends in the Prevalence of smoking. In Tobacco in Australia: Facts & issues : a comprehensive online resource. Carlton: Cancer Council Victoria. 79 Australian Institute of Health and Welfare. (2014). National Drug Strategy Household Survey detailed report 2013. Canberra, ACT: Author. 40
smoking is a threat to health during 1973. 80 Direct tobacco commercials on television were also restricted by the government.81 Any tobacco industry would like to put their commercials on television should think of a way so that it is not directly showing tobacco on the commercials. Since direct commercials on TV were prohibited, many tobacco industries then shifted their budget for commercials become sponsors to many sport activities. 82 However, Most of the sport activities were aired on TV and the tobacco commercials were there, so this action did not reached the objective of reducing smokers yet it increased number of smokers among the Australian. The advertisement of tobacco was also forced to be moved from TV to the printed media such as the newspaper and magazine. This action also benefited the tobacco industry as such advertisement brought more people of certain segment of readers to the smoking habit especially the young women. Furthermore, the tobacco commercials on the billboard were not prohibited. So even though the tobacco commercials are hidden away from people in the TV, the people can still easily find the commercials on their daily activity on the billboards all over the nation. To sum up, the medical authorities and groups along with the government have not been succeeded to reduce the smoking prevalence up to their target. The number showed decreased but in a very slow pace Responding to this situation the Cancer Council tried to embrace the sport players to do the campaign to quit smoking on TV advertisement. 83 However that action did not turn into good result as it was complained by tobacco industry and the advertisement was quickly then taken off from the TV.84 In the early of 1980, the health authorities and the Australian government than began to seriously challenge the power of the tobacco industry by taking extra miles to encourage the smokers to quit by using the mass media.85 The government put
80 Ibid. 81 Ibid. 82 Ibid. 83 Ibid. 84 Ibid. 85 Ibid. 41
more effort and budget to succeed the action. The TV campaign was put on the prime time instead of on any other time. Radio programs were also created. This action succeeded to gain public support as well as the international health agencies that eventually resulted in the regulation to ban all forms of tobacco products promotion and the obligation to put a visible health warning on the packaging. Further, the tax for tobacco products was also increased to make tobacco become less affordable for the people.86 The efforts taken by the government and the health authorities gained momentum during the late 1980s and the early 1990s. There was a significant progress of smoking restriction as well as smoking reduction.87 The significant decrease of smokers happened in the middle of 1990s. Taxes on tobacco products were increased significantly during the 1999 which then more comprehensively regulated in the Australia‘s Taxes on Goods and Services formed between June 2000 and February 2001. At that moment, the smoking of tobacco was just not seen through the health issues. Many people believed that the consumers of the tobacco products have the rights to be well-informed about the containment of the cigarettes and the dangers that might occur by consuming the tobacco products.88 The tobacco companies were then considered failed to provide sufficient warning and such information to the consumers. Therefore, the unfulfilled rights of the consumers were then translated into several legal actions to against the tobacco companies as have been mentioned previously. The lack of the information and warning from the tobacco companies also made many group of people against the tobacco
86 Australian Government Department of Health. (2017, October 23). Tobacco Taxation. Retrieved from http://www.health.gov.au/internet/main/publishing.nsf/content/tobacco-tax 87 World Health Organization, & Risseley, K. (n.d.). Report on Smoke-Free Policies in Australia. Retrieved from http://www.who.int/tobacco/training/success_stories/en/best_practices_australia_smokefree_polici es.pdf 88 Australian Government Department of Health. (2009). Australia: the Healthiest Country by 2020. Retrieved from http://www.health.gov.au/internet/preventativehealth/publishing.nsf/Content/96CAC56D5328E3D 0CA2574DD0081E5C0/$File/tobacco-jul09.pdf 42
company perceived that tobacco products were created more harmful than they needed to be.89 The protest against the tobacco products were not only raised by the health authorities and the government but also by some of the private sector companies. 90 The companies concerned that the health of the employees dramatically decreased which the followed by increasing the sick leave as well as sick compensation. 91 This indeed strengthened the court to enforce stronger regulations to restrict and control the use of tobacco products. The courts not only enforced numbers of regulation but also secured huge amount of funding to support the campaign to quit smoking. As the time goes by, the people started to realize that the consumption of tobacco products especially smoking has also created some other issues cost especially the financial issue. Australian Institute of Health and Welfare (AIHW) has conducted research on the cost burdened from the smoking diseases and injury in 2003. The measurement of the study used the concept of disability- adjusted-life-year (DALY). DALY can be defined as the time wasted and lost as the result of premature death and disability, which in this case because of the smoking of tobacco products. 92 Surprisingly, in 2003, around 2.63 million DALYs were wasted as the result of disease and injury in Australia 7.8% of them caused by tobacco products. 93 The tobacco products consumption, especially smokes, killed around 15,551 people and was responsible of 204,778 DALYs lost. The tobacco products consumption was also responsible of 20,1% cancer diseases and 9.7% cardiovascular diseases.94
89 Ibid. 90 Nambi, I. V. (2009, December 13). Tobacco Company Dismisses Workers‘ Health Complaints. Retrieved from www.newtimes.co.rw/section/read/14543/ 91 Ibid. 92 Australian Government Institute of Health and Welfare. (2016, May 10). Australian Burden of Disease Study: Impact and Causes of Illness and Death in Australia 2011. Retrieved from https://www.aihw.gov.au/reports/burden-of-disease/australian-burden-of-disease-study-impact- and-causes-of-illness-and-death-in-australia-2011/contents/highlights 93 Ibid. 94 Ibid. 43
Collins and Lapsley in the report submitted to the Australia‘s Department of Health and Ageing stated that the total loss cost due to smoking in Australia was $31.5 billion between 2004 until 2005. 95 Compared to total loss cost due to smoking in 1998 until 1999, the number showed an increase of 23.5%. The total cost included the tangible and intangible costs.96 The tangible cost consists of the decreasing of productivity, premature death, tobacco-related illness, and healthcare costs. Meanwhile, intangible cost consists of psychological effect experienced by the family members of the premature death smokers and the loss of life enjoyment due to tobacco smoking related illness. In the period of 1998 – 1999, the tangible cost reached the amount of $ 9,184.8 million and the intangible cost reached $ 16,315.2 million.97 In 2004 – 2005, the tangible cost reached $ 12,026.2 million and the intangible cost reached $ 19,459.7 million. 98 This number kept increasing every year and has become one of the push factors for the government to seriously control the tobacco consumption in the country. The smoking is not only affecting the economic and financial condition of the citizen but also the social equality. Study has revealed that most smokers come from the less educated and less wealthy communities.99 The smoking habit has become one of the main issues hindering the development of such communities. Therefore, the government is prioritizing this segment of the society to quit smoking to achieve the equality.100
95 Collins DJ and Lapsley HM. The social costs of drug abuse in Australia in 1988 and 1992. National Drug Strategy Monograph Series No. 30. Canberra, 1996. Retrieved from: from: http://www.health.gov.au/internet/main/publishing.nsf/Content/6DC5B92CE2170EA3CA2 56F190004483D/$File/mono30.pdf 96 Ibid. 97 Ibid. 98 Ibid. 99 Pampel, F. (2008). Poverty and Smoking. In National Income, Inequality and Global Patterns of Cigarette Use. Retrieved from http://siteresources.worldbank.org/INTETC/Resources/375990- 1089904539172/041TO062.PDF 100 Ibid. 44
II.2 Australia’s Control on Tobacco Consumption prior to the Plain Packaging Act 2011 The control on tobacco products consumption has become a game of tug of war between Australian Government along with its supporting groups and the tobacco industry as has been mentioned above. Below is the further elaboration of the efforts that have been done by the government to control the tobacco products consumption in the country. a. Smoking Prevention through the education and the regulation to restrict tobacco products especially cigarettes to under legal age. Australian government believes that the smoking prevention should be done since the early age. A study shows that most adult smokers started the smoking habit since the early of their teenage years. 101 16,500 Australian school children become permanent smoker once they turned adult as the result of ―smoking experiment‖ during their teenage years.102 Therefore putting the smoking prevention education in the school is believed to be one of the most effective ways as students spend most of their activities in the school and the school is believed to play a crucial role in forming and developing the students‘ behavior. There are several programs developed by Australian government to prevent smoking behavior in the school, as below103: 1. The Critic‘s Choice This program encourages students in the school to learn and raise critiques towards 12 anti-smoking campaigns around the world. The
101 US Department of Health and Human Services. Preventing tobacco use among young people: A report of the Surgeon General. Atlanta, GA: US Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and Health, 2012. 102 White V and Smith G. Tobacco use among Australian secondary students. Australian secondary school students' use of tobacco, alcohol, and over-the-counter and illicit substances in 2008. Canberra: Drug Strategy Branch Australian Government Department of Health and Ageing, 2009. 103 M.M. Scollo, & M.H. Winstanley [Editors]. Tobacco in Australia: Facts and Issues. Melbourne: Cancer Council Victoria; 2015. Retrieved from: http://www.tobaccoinaustralia.org.au/chapter-14-prevalence 45
critiques will then be discussed in the classroom. This program targets the upper primary school students and early of secondary school students in Australia. 2. Tobacco – The truth is out there This program encourages the curriculum standard in southern part of Australia to include the prevention activities for he middle school students. 3. Drug education K-12 teacher support package This program encourages the teachers to be actively including the tobacco issues in the student activities. The example of the issues can be vary such as the passive smoking issues, the health effect of smoking, smoking coping strategies, and many more. The target of this program is the Prep-12 students. 4. School drug education and road aware This program provide the supports for the school – teachers and students –, parents, and the surrounding community involved in the drug and smoking prevention programs. The support includes the comprehensive information on the drugs and smoking and other supports that are needed to implement the schools‘ policies on the issue. This program targets all levels of school education 5. Cigarette Smoke is ‗poison‘ This program will provides set of strategies and tools that are needed to prevent the increasing of smoking prevalence as well as encouraging schools to provide decent environment for the students who have smoked before and wish to quit. This program targets the primary and secondary schools. 6. Healing time stages 2 and 3 of drug education for aboriginal students. This program targets the aboriginal students by encouraging the drug and tobacco education to the students. Stage 2 focuses on the passive
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smoking and stage 3 focuses on the reason not to smoke and advocacy skills. 7. Smoke free schools This program targets the middle school by encouraging the free-smoke schools as well as the guidelines to prevent the tobacco smoking. 8. Smokescreen Smoking prevention program targets 7-10 years students. 9. Keep left youth smoking cessation guides for school nurse, a program for the school staffs, especially the nurses, to provide the assistance of smoking prevention. 10. Smart school grants that encourage schools to apply for up to $3,000 to support their smoking prevention innovation program. b. Providing Advice and Treatment to Quit Smoking Most people with smoking habit must have one moment in their life in which they regret smoking and attempt to quit, so do the Australians.104 However, to quit smoking is not as easy as it seems to be. Therefore, to support the regret and the willingness of the people to wait smoking, Australian Government believes that with the behavioral support and drug treatment and keeps informing the smokers to quit might help the smokers to eventually quit. There are several programs pioneered by the Australian government to provide the advice and the treatment for the smokers to quit, such as105: 1. Increasing the capacity, ability, and the range of the smoking cessation services, such as the Quitline106especially for the communities with high smoking prevalence and also the specialist treatment for certain people suffering from chronic diseases due to tobacco smoking.
104 Ibid. 105 Ibid. 106 A contact service provided by the government to support those who tempt to stop smoking (http://www.quitnow.gov.au/) 47
2. Enhance the capacity and the quality of the service, especially the quitline, for the pregnant women in the country. 3. Enhance the quality of the service, especially the quitline, for the aboriginal and Torres Strait Islander People. This also includes the cultural training for the tele-counselors for them to understand the best way to approach the communities in the area and to create partnership with the local community to quit the smoking. 4. To continue promoting the Quitline services for the smokers through any possible medias 5. To increase the coverage area of web-based communication programs to encourage the smokers quitting the smoking habit as well as providing most updated information regarding the dangers of smoking. 6. To support and improve the integration between Quitline and any other institutional programs as well as non-governmental organizations‘ programs in order to succeed the declining of smoking prevalence. 7. To create a system that eases the interaction between doctors, specialists, and the patients in order for the doctor to monitor the development of the patients in quitting smoking. Through this system, the doctor and the patient can also do consultations to make the quitting easier. 8. To create policy for the social service organizations and the training guideline on how to support the smokers to quit, especially the organizations in the area of high smoking prevalence communities. 9. Increase the awareness of the citizens, related institutions, and organizations to support and succeed the government‘s program. 10. Develop the appropriate and effective pharmacotherapies for the high smoking prevalence communities. As the member of FCTC, Australia is also responsible of some obligations to succeed the mission of the organization to reduce the
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smoking prevalence all over the world as discussed in the Fourth Conference of Parties (COP4), including107: 1. To design and implement an effective programs to promote the campaign of the dangers of tobacco smoking in any possible places such as the educational institutions, public areas, healthcare facilities, work environments and sport facilities. 2. To provide the diagnosis and treatment for tobacco addiction and the counseling service for the both smokers who attempt to quit smoking and for the communities to prevent smoking. 3. To build healthcare facilities and rehabilitation center in order to diagnose, give counseling, prevent, and give treatment toward the tobacco addictions 4. To provide the accessible and affordable tobacco treatment and related pharmaceuticals products.
c. Restriction of tobacco products‘ advertising Compared to other English speaking commonwealth countries, Australia is left behind in introducing the restriction on tobacco advertisement on television and radio.108 In the early of 1960s, the founder Australian Council on Smoking and Health, Dr. Nigel Grey along with tobacco control advocates, Dr. Cotter Harvey, tried to bring the restriction of tobacco products advertisement to the political agenda.109 However, the agenda did not succeed for a long time that in 1971, the Cancer Council
107 World Health Organization. (n.d.). Fourth Session of the Conference of the Parties to the WHO FCTC. Retrieved from http://www.who.int/fctc/cop/sessions/fourth_session_cop/en/ 108 M.M. Scollo, & M.H. Winstanley [Editors]. Tobacco in Australia: Facts and Issues. Melbourne: Cancer Council Victoria; 2015. Retrieved from: http://www.tobaccoinaustralia.org.au/chapter-14-prevalence 109 The Cancer Council Western Australia. The progress of tobacco control in Western Australia: achievements, challenges and hopes for the future. Perth: The Cancer Council Western Australia, 2008. Retrieved from: http://www.cancerwa.asn.au/resources/2010-07-07-Tobacco-Control- Monograph.pdf 49
put a parody of tobacco commercial on TV.110 In 1973, the restriction of the tobacco products advertisement on TV and radio was then finally enforced.111 In 1988, the Minister for Health expressed his support for the action to ban the tobacco advertisement on the magazine and newspapers. 112 This also gained the support from the government by enforcing the Advertisement Act for Tobacco Products on December 28, 1989. The committee discussing this regulation actually brought the idea of banning the tobacco products advertisement on the printed media, cinemas, billboard, and illegalize all forms of sponsorship given by tobacco industries to certain activities or in other words, to completely ban the tobacco advisement on any possible media ion the country. 113 However, the government refused to put those ideas and hence, the advertisement of the tobacco products on cinemas, billboards, and the sponsorship activities were still allowed. After the enforcement of the advertisement prohibition act, there was a new legislation tried to be formulated in Victoria around 1987 to 1990 to restrict the tobacco advertising on the sport and art activities.114 However, the accidental or incidental advertisement of tobacco products has never been restricted in Australia. So, if the tobacco industry provided sponsorship for any activities and got the promotional spot, then the activities are aired on TV along with the promotional sport – the tobacco companies –, it was allowed in Australia. This condition indeed still
110 Ibid. 111 Ibid. 112 World Health Organization, & Risseley, K. (n.d.). Report on Smoke-Free Policies in Australia. Retrieved from http://www.who.int/tobacco/training/success_stories/en/best_practices_australia_smokefree_ policies.pdf 113 Ibid. 114 Grace, C. 11.3 Commonwealth (national) legislation. In Scollo, MM and Winstanley, MH [editors]. Tobacco in Australia: Facts and issues. Melbourne: Cancer Council Victoria; 2016. Retrieved from: http://www.tobaccoinaustralia.org.au/chapter-11-advertising/11-3- commonwealth-legislation 50
benefited the tobacco companies as the advertisements were still obviously readable in the ―accidental or incidental‖ advertisement. Therefore, the tobacco companies used to provide sponsorship for almost all the important events of Australia, such as the football match, Australia open, tennis, motor racing, and many more. 115 Ever since, the health authorities and many organizations are targeting the sport and art activities for the next restriction of tobacco products advertising.116 In December 1992, a new law was enforced concerning the Tobacco Advertising Prohibition, which outlawed most of the tobacco sponsorship forms.117 The tobacco companies are only allowed to provide sponsorship for international events. Further, the advertisement on the billboard was no longer allowed either. However, the ‗accidental or incidental‘ advertisement was still allowed if the TV station received nothing in return from the advertisement.118 The tobacco companies did not easily give up on the governmental regulation. Instead, the tobacco industry focused on the non-traditional way of marketing, internet is one of which. 119 The industry also introduced the creative and attractive packaging. The government, as the one who holds authority over the country, then issued the new regulation to manage the display of the tobacco products in retail store as well tried to review the internet and other electronic media of campaign for tobacco products in order to make them in line with the advertisement prohibition act. As the side effect, Australia was known as one of the ‗darkest market‘ for tobacco product just after Canada, in which illegal distribution of tobacco products were anywhere to be found.
115 Ibid. 116 Ibid. 117 Tobacco Advertising Prohibition Act Number 218 year 1992, from www.legislation.gov.au accessed on 20 November 2017. 118 Ibid. 119 Australian Government Department of Health. (2017, June 23). Tobacco Advertising Prohibition Act 1992. Retrieved from http://www.health.gov.au/internet/main/publishing.nsf/Content/tobacco-advert 51
d. Providing sufficient health-dangers information for consumer of the tobacco products As mentioned before, many people during the time of protest perceived that the tobacco industries have violated the consumer rights as the have failed to provide the consumers with detailed and comprehensive information regarding the tobacco products, especially contains and the dangers of them. Therefore the government of Australia then mandated the tobacco industries to attach the health warning on the tobacco products‘ packaging.120 The warning aimed to provide the smokers the information of the danger they will suffer if they decided to smoke the cigarettes. The warning should also be put in the picture format in order to help better understanding of the danger instead of plain text.121 The health warning was begun in the 1969, introduced by the Australian legislation. However, the legislation was not directly implemented by the tobacco industry right away. The tobacco industry firstly implemented the health warning on the packaging of tobacco products in 1973 with simple writing saying, ―Warning – Smoking is a health hazard.‖ The warning was then developed to other sayings like ―smoking kills‖, ―smoking is addictive‖, ―smoking causes lung cancer and heart diseases‖, and etc.122 The warning must take 20% of the front and back of the packaging in the form of white text on black background. However, the tobacco industries tried to put pressure on the government regarding the regulation as that was considered as loss for the
120 Chapman S, and Carter SM. 'Avoid health warnings on all tobacco products for just as long as we can': a history of Australian tobacco industry efforts to avoid, delay and dilute health warnings on cigarettes. Tobacco Control. 2003;12(suppl. 3):iii13–22. Retrieved from: http://tc.bmjjournals.com/cgi/content/abstract/12/suppl_3/iii13 121 Ibid. 122 Ibid. 52
industries123. The protest was taken into account that the legislation to put warning on tobacco products‘ packaging was delayed until 1987. The warning on tobacco products‘ packaging was then developed based on the recommendation of the research conducted by Centre for Behavioral Research in Cancer (CBRC). The recommendation stated that the warnings should be put in 12 forms of sentence to be rotated in the tobacco products‘ packaging which agreed by the Ministerial Council on Drug Strategy in April 1992, including:124 1. Smoking causes lung cancer 2. Smoking causes heart disease 3. Smoking causes emphysema 4. Smoking is a major cause of stroke 5. Smoking causes peripheral vascular disease 6. Smoking reduces your fitness 7. Smoking kills 8. Most smokers develop permanent lung damage 9. Your smoking can harm others 10. Smoking is addictive 11. Stopping smoking reduces your risk of serious disease 12. Smoking in pregnancy can harm the unborn child
The size of the writing was increased from 20% of the total packaging into 25% of the total packaging and should be put on the ‗flip- top‘ of the packaging. 125 Furthermore, the whole back side of the packaging should provide detailed information on the health dangers smoking can cause.126
123 Ibid. 124 Ibid. 125 Tobacco Institute of Australia. (07 June) The tobacco industry's position on proposed new rotating health warnings on tobacco products and advertising. Sydney: TIA, 1985. Retrieved from: http://legacy.library.ucsf.edu/tid/isi42e00/pdf 126 Ibid. 53
This recommendation gained the support from public. However, for once again, the tobacco industry resisted such recommendation to be adopted in the national law. The law was then failed to be adopted into national law. Only Western Australian Government enforced the law, while Victorian and other part of the nation decided not to put the recommendation into legal regulations. In 1993, the recommendation was then renegotiated as it considered being the most effective way to provide the sufficient information for the consumers and to reduce the consumption of tobacco products especially cigarettes. As the result of the negotiation, Australian Government then agreed to make a unformed regulation and standard for the consumer health warning on the packaging which was put into the Gazette of Trade Practices Act 1974 on March 19, 1994. The regulation states that per January 1, 1995 the tobacco products‘ packaging, especially the cigarettes have to carry the warnings as well as the detail explanation of the warning on the backside of the packaging127. The warnings and the detailed explanatories are:
1. Smoking causes lung cancer “Tobacco smoke contains many cancer-causing chemicals including tar. When you breathe the smoke in, these chemicals can damage the lungs, and can cause cancer. Lung cancer is the most common cancer caused by smoking. Lung cancer can grow and spread before it is noticed. It can kill rapidly. For more information, call 13 2130.”128 2. Smoking is addictive “Nicotine, a drug in tobacco, makes smokers feel they need to smoke. The more you smoke, the more your body will depend on getting nicotine and you may find yourself hooked. It may be
127 Ibid. 128 M.M. Scollo, & M.H. Winstanley [Editors]. Tobacco in Australia: Facts and Issues. Melbourne: Cancer Council Victoria; 2015. Retrieved from: http://www.tobaccoinaustralia.org.au/chapter-14-prevalence 54
difficult to give up smoking once you are hooked on nicotine. For more information, call 13 2130.”129 3. Smoking kills “In Australia, tobacco smoking causes more illness and early death than using any other drug. Tobacco smoking causes more than four times the number of deaths caused by car accidents. For more information, call 13 2130.”130 4. Smoking causes heart disease “Tobacco smoking is a major cause of heart disease. It can cause blockages in the body's arteries. These blockages can lead to chest pain and heart attacks. Heart attack is the most common cause of death in Australia. Smokers run a far greater risk of having a heart attack than people who don't smoke. For more information, call 13 2130.”131 5. Smoking when pregnant harms your baby “Poisons in tobacco smoke reach your baby through the bloodstream. If you smoke when you are pregnant, you greatly increase the chance of having a baby of low birthweight. Smoking may lead to serious complications which could harm your baby. For more information, call 13 2130.”132 6. Your smoking can harm others “Tobacco smoke causes cancer and poisons people. People who breathe in your tobacco smoke can be seriously harmed. Your smoking can increase their risk of lung cancer and heart disease. Children who breathe your smoke may suffer asthma attacks and chest illnesses. For more information, call 13 2130.”133
That was not the end of the health warning for the consumer on the tobacco products‘ packaging. The government, after the evaluation of previous law, believed that there has to be more intensive warning on the packaging, which then the idea of putting pictorial warnings appeared.134 Australian Parliamentary to the Minister for Health and Ageing, on September 1, 2003, stated that Australian Government was intending to
129 Ibid. 130 Ibid. 131 Ibid. 132 Ibid. 133 Ibid, 134 Ibid. 55
introduce 14 new graphic warnings on the cigarettes packaging that would cover 50% of the front packaging and 50% of the back packaging by July of the same year. The tobacco industry, as usual, denied the government‘s action with numbers of objections.135 The tobacco industry believed that the time range of the regulation to change was too rapid. The industry also believed that with such regulation being implemented would hinder the industry to communicate their brand marks to the consumers as most of the packaging has been used for health warnings. Further, such implementation would also trigger the black market in the country and such regulation has not been proven to be effective to reduce the smoking prevalence. The objection of the tobacco industry was then considered by the government. Yet, the government was willing to negotiate with the tobacco industry by reducing the coverage of the front packaging into 30% but adding coverage on the back of the packaging into 90%. The new regulation then came into force in 2004. On April 29, 2010, Australian Government once again announced that the government would expand the health warning graphics as the effort of the government to show its consistency to fulfill its obligation as the member of World Health Organization (WHO), especially the Framework Convention on Tobacco Control (FCTC). The new regulation on the health warning shall be in line with the Article 11 of the FCTC, stating that the health warning on tobacco products‘ packaging shall be136: a. Covering as much as possible of the main display of the packaging b. Attached both on the front and back side of the packaging by understanding that the front part is the most visible part and hence the warning will be put more in the front side
135 Ibid. 136 FCTC Article 11, on www.who.int accessed on 20 November 2017. 56
c. Attached at the top of the packaging instead of the bottom part as the top part is considered as more visible part than the bottom part d. Put both in text and picture format as it was proven to be more effective than just putting the warning in the form of text e. Put in several topics as different warnings different target f. Rotated as massage and the changes in the layout and design will be important and helpful to increase the effectiveness of the warning. e. Encouraging public education and social marketing on the tobacco products Social marketing is the activity to influence the knowledge, attitude, and behavior of certain individuals, group, and society concerning particular issue. 137 Unlike the commercial marketing which will benefit the marketer, the social marketing is aimed to benefit the recipient of the marketing materials. Australian Government perceived that social marketing can be one of the ways to reduce the smoking prevalence in the country. The campaign on mass media to avoid smoking in Australia has been started since 1970. However, it did not significantly reduce the smoking prevalence until 1983 in which the commercial campaigns to quit smoking succeeded to reduce 1% smoking prevalence in Sydney.138 The mass media campaign to avoid smoking was conducted separately by the part of the country and some organizations until 1997, in which the first official national campaign to avoid smoking was launched after several experiments as well. However, the government has started to initiate the anti-smoking campaign at national level during 1972 – 1975 at a very high cost of $500,000 annually by using posters and slogans.139 The National Government, State and Territory Government, and several organizations
137 M.M. Scollo, & M.H. Winstanley [Editors]. Tobacco in Australia: Facts and Issues. Melbourne: Cancer Council Victoria; 2015. Retrieved from: http://www.tobaccoinaustralia.org.au/chapter-14-prevalence 138 Ibid. 139 Ibid. 57
kept increasing the campaign to quit and avoid smoking by increasing the budget to $7 million between 1997 until 1999 targeting the age range between 18 – 40 years old.140 Below is the table list of the mass media social campaign development in Australia to quit and avoid smoking. f. Increasing tax on tobacco products Tobacco seemed to be the number one enemy in the society in the country that the government would do anything to save its citizen from the dangers the tobacco products might cause. Tax increase to make the tobacco products less affordable for Australian citizens has also been adopted by the government to reduce the smoking prevalence.141 It is also believed as one of the most effective way because as the price goes up, the lower segment of the citizen would not be able to afford the tobacco products and hence they would eventually quit smoking. There are two types of taxes imposed on tobacco products in Australia by the government in order to reduce the smoking prevalence in the country, as below: 1. Federal excise and custom duty Table 2.1 The Development of Tax Increase on Tobacco Products especially cigarette and cigar in Australia from 2007 to 2017, Scollo, M, Bayly, M 2017142 Per kilogram of Per cigarette or cigar cigarette or cigar Year weighing less than weighing more than 0.8 gram 0.8 gram
140 Ibid, 141 Scollo, M, Bayly, M. 13.2 Tobacco taxes in Australia. In Scollo, MM and Winstanley, MH [editors]. Tobacco in Australia: Facts and issues. Melbourne: Cancer Council Victoria; 2016. Retrieved from http://www.tobaccoinaustralia.org.au/chapter-13-taxation/13-2-tobacco-taxes-in- australia 142 Scollo, M, Bayly, M. Tobacco taxes in Australia. In Scollo, MM and Winstanley, MH [editors]. Tobacco in Australia: Facts and issues. Melbourne: Cancer Council Victoria; 2016. Retrieved from http://www.tobaccoinaustralia.org.au/chapter-13-taxation/13-2-tobacco-taxes-in- australia 58
2007 0.24343 304.3
2008 0.2545 318.14
2009 0.25833 322.93
2010 0.33267 415.86
2011 0.34474 430.94
2012 0.34889 436.13
2013 0.40197 502.48
2014 0.46268 578.37
2015 0.53096 663.7
2016 0.61054 763.2 2017 0.69858 901.39
Figure 2.1 The Development of Australia‘s Taxation on Cigarettes Less than 0.8 gram 2013-2017, Scollo, M, Bayly, M 2017.
Tax per cigarette/cigar less than 0.8 gram 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2013 2014 2015 2016 2017
59
Figure 2.2 The Development of Australia‘s Taxation on Cigarettes More than 0.8 gram 2013-2017, Scollo, M, Bayly, M 2017.
Tax per kilogram of cigarette/cigar more than 0.8 gram 1000 800 600 400 200 0 2013 2014 2015 2016 2017
If we take a look at the table of the development of tax increase on tobacco products especially cigarettes and cigars, there is significant increase of tax every year. The graphic also shows that in the last 5 years, the increase on the tobacco products tax is very significant. This shows that the Australian government is very serious in increasing the tax on tobacco products to reduce the smoking prevalence and to minimize the effect of smoking in the country. 2. Tobacco retail license fees The companies in Australia products must have license if they want to do trading in tobacco. 143 To attain the license, there will be fees charged for the companies. The fees for the license were firstly implemented by the Victorian government in 1974. The fees than become various from one state to other state in the nation. This action was taken by Australian government to limit the merchants selling the tobacco products to make the tobacco products harder to be found. g. Smoke-free environment policies
143 Scollo, M, Bayly, M. Tobacco taxes in Australia. In Scollo, MM and Winstanley, MH [editors]. Tobacco in Australia: Facts and issues. Melbourne: Cancer Council Victoria; 2016. Retrieved from http://www.tobaccoinaustralia.org.au/chapter-13-taxation/13-2-tobacco-taxes-in- australia 60
Other than implementing the policies as explained below, the government also imposes the regulation to create smoke-free environment especially in the public place. This regulation has been adopted by all Australian states. There are some areas set in the regulations in which smoking is highly prohibited, such as:144 1. Hospitality venues a. Sleeping accommodation, including hotels, to be required as 100% smoke-free environment per January 2017 b. Cafes and restaurants c. Al fresco dining areas d. Pubs and clubs e. Casinos and poker machines venues 2. Parliaments and government buildings 3. Hospitals and health facilities a. Mental health facilities b. Prisons c. Immigration and detention centers d. Nursing homes This regulation on creating smoke-free environment is oftentimes resulting in the controversial and is considered as one of the hardest policies to be implemented.
II.3 Australia’s Control on Tobacco Consumption in the era of Plain Packaging Act 2011 After implementing numbers of regulations and programs to control the tobacco consumption in the country, Australian Government imposed a more
144 Grace C and Tumini V. Ch 15. Smokefree environments. 15.4 Smoking bans in key public areas and environments. In Scollo, MM and Winstanley, MH [editors]. Tobacco in Australia: Facts and issues. Melbourne: Cancer Council Victoria; 2017. Retrieved from http://www.tobaccoinaustralia.org.au/chapter-15-smokefree-environment/15-4-overview-of-key- public-areas-and-environments 61
comprehensive and stricter regulation on tobacco products, which is known as Plain Packaging Act. The Plain Packaging Act was approved by the Royal on December 1, 2011. By implementing the act, Australia is known as the bravest and the strictest country on the tobacco product.145 The Act regulates that all tobacco products, especially the cigarettes, sold in Australia has to be put in a standardized packaging regardless the origin and the producer of the tobacco products. The Act aimed to reduce the appeal of tobacco products for the citizens as well as to increase the effectiveness of the health warning on the packaging.146 The main objects regulated in the Act are the retail packaging of tobacco products, cigarette packs, and cigarettes cartoons.147 Retail packaging of the tobacco products refers to any container and/or smaller containers in it for the sale in retail stores in which the tobacco products are directly placed. It also refers to any plastic packaging or wrappers covering the retail packaging or even becoming the part of the tobacco products itself. While the tobacco products refers to any manufactured tobacco that can be consumed by smoking, sucking, chewing, and snuffing that are not registered in the Australian Register of Therapeutic Goods as regulated in Therapeutic Goods Act 1989. The cigarette pack term in the Act refers to the container of the cigarettes; cigarette carton is the container of the smaller containers of cigarettes. While the container itself as stated in the Act refers to any pack, carton, box, tin, bag, pouch, packet, tube, or any other containers. Below are the restrictions stated in the Plain Packaging Act 2011148: 1. The restriction on physical feature Below are the restrictions of the physical features on the retail packaging of cigarettes:
145 McDermott, S. (2017, January 30). How Australia Is Stubbing Out Smoking. Retrieved from http://www.bbc.com/news/magazine-38733502 146 Tobacco Plain Packaging Act Number 148 Year 2011 on www.legislation.gov.au accessed on 20 November 2017 147 Ibid. 148 Ibid. 62
a. The inner and outer surface of the packaging must not include any decorative ridges, embossing, bulges, or any other abnormalities of the packaging shape, texture, and accessories other than permitted by the Regulations. All glues and adhesives used in the tobacco products packaging must be transparent and colorless. b. The packaging of the cigarettes and the cartons must be made from rigid cardboard only and have to be in rectangular shape with straight edges. The other shape such as round shape, shaping the edges to other than straight rectangular, and adding accessories in the packaging are strictly prohibited. The cartons of the cigarettes products are allowed to have perforated strip to open the cartoon and leaves grooves after the cartons are opened. c. For the cigarettes packs, there are dimensions as described by the Regulations and have to be opened with flip top lid that hang at the back top of the packs once it is opened. Should there be any lining inside the pack must be made of foil backed by paper. The lining is allowed to be printed in embossed dots or squares in a uniform size but is not allowed to form any symbols, image, or any tobacco promotion tools. 2. The restriction on the coloring and surface a. The finish of the surface must be matt finish b. The name of company and/or variant name of the tobacco products must be written in Pantone 448C. The inner surface of the tobacco packs must be white and the lining must be in silver color with white back. c. Color calibration marks are allowed to be shown in the packaging of tobacco products. d. The wrapper or plastics covering the tobacco products must also be transparent and uncolored neither textured nor embellished.
63
e. For the cigarettes, they must be put in white as well as the filter must be put in white too. Figure 2.3 The example of surface and color appearance on tobacco packaging based on the Act, Pizzeys Patent and Trademark Attorney accessed in 2017.
3. The restriction of trademark The trademarks of the tobacco products are also restricted based on the regulation. The only trademarks allowed appearing on the packaging are the brand, the name of company, and the variant name of the tobacco products in a standardized writings as have ben explained previously.149 The variant name is allowed to appear on the packaging in order to distinguish from other variant as they are all packed similarly. The trademarks that are allowed appearing on the packaging are only allowed to be printed on the front, top and bottom surfaces of the cigarette packs, or in the front, or end surfaces of cigarette cartons.150 The covers and wrappers of the tobacco packaging are not allowed to contain any trademarks. The name of the brand, company, and variant must be written Lucida Sans in 14 points size and 10 points size for the variant name.
149 Ibid. 150 Ibid. 64
Bolding or weighting the writing is strictly prohibited neither capitalizing all words other than the first letter of each word. The color of the writing must be Pantone Cool Gray 2C. The origin mark of the tobacco is allowed to be printed on the bottom side of the pack and must not be visible to eyes, but not related to: 1. Tobacco advertising or promotion, such as the websites 2. The quality of the cigarettes, such as the tar yield 3. Deceiving and misleading the cigarette‘s health effects 4. Representing the brand name or the variant name of the cigarette products The Act also prohibits the tobacco companies to put any special noise of scent in the packaging to stand the brand out from other brands. Figure 2.4 The example of writings on tobacco packaging based on the Act, Pizzeys Patent and Trademark Attorney accessed in 2017.
Any violation towards the provisions set under the Act shall be subjected to penalties. The violations that are subjected to penalties are: 1. The entities that sell, or offer for sale, or supply the tobacco products that have been packaged in the retail packaging but does not comply the Act requirements 2. Purchase the cigarettes products that does not comply the requirements of Plain packaging Act 3. Producers that package the tobacco products in a non-compliant packaging 4. Manufacturer any parts of the packaging that are not in line with the requirements stated in the Act 5. Manufacturer to the tobacco products that appoint other entities to do the packaging in non-compliant packaging 65
6. Retailers or stores that sell the tobacco products without packaging and do not possess the contract with the purchasers. The penalty for the violation is equal to A$ 220,000.151 The implementation of this law has attracted numbers of critics from various groups, mainly the tobacco industry. The tobacco companies have even launched proceedings in the High Court to challenge the government regarding the regulations. The companies claim that the legislation has violated the intellectual property rights protection of the tobacco products and hence have created huge loss to the companies. The companies believe that plain packaging is not even close to effective in order to control the tobacco consumption and decrease the smoking prevalence.
151 Mackie, J. A. (n.d.). Australia: Tobacco Plain Packaging Act 2011 A Summary of The Provisions. Retrieved from http://www.pizzeys.com.au/Articles/Tobacco%20Plain%20Packaging%20Act%202011%20A%20S ummary%20of%20the%20Provisions.pdf 66
CHAPTER III
THE DEVELOPMENT OF TOBACCO INDUSTRY IN INDONESIA
III.1 The History of Tobacco In Indonesia
Tobacco has been long found in Indonesia. The beginning of tobacco plantation in Indonesia is predicted to be during the colonialization. Was firstly found in North and South America, Tobacco was brought to Indonesia in 1883 by Van Den Bosch through the “Cultuurstelsel” program around Central Java and Semarang.152 However, the first attempt to plant tobacco in Indonesia did not succeed. In 1856, the colonial then attempted to plant the tobacco again around the East Java, Besuki area. This time, the plantation of tobacco was equipped with the research center, called Besokisch Proefstation 153 . The existence of the research center helped to analyze the cause of the failure of tobacco plantation in the first attempt by figuring out the best media, fertilizers, as well as the best treatment for the tobacco plantation, which then brought the tobacco plantation in to a success. The plantation was then expanded to the Yogyakarta and Surakarta, the central of Java. Tobacco farming during the colonialization identic with the Cultuurstelstel system in which Indonesian workers were forced to work in the colonials‘ tobacco farming for more than 40 years (1830 – 1870)154.
The plantation of Tobacco outside Java was initiated by J. Nienhuys in 1863 in Deli Serdang, North Sumatera. In 1863, the research center to support the tobacco plantation was built with the name of Deli Proefstation. Up until today, those three areas are still the top producers of tobacco in Indonesia that produce
152 Markus, S. (2015). Petani tembakau di Indonesia: Sebuah paradoks kehidupan. Yogyakarta: Leutikaprio. 153 Ibid. 154 Ibid. 67
the high quality of tobacco acknowledged by many countries in the international trade155.
Tobacco plantation continued to be growing ever since, a study records that from 1980 until 2013, the average of tobacco farming growth is 4.12% from 141.225 hectares become 270.232 hectares with 7.92% average annual growth of tobacco products industry of the same period.156 This has proven that tobacco remains to be one of the most important commodities to Indonesia.
Similar as 2016, in the previous years the contribution of tobacco commodities, including the tobacco-processed products were remarkable. Below is the data of Indonesian tobacco export from 2012 to 2015.
Table 3.1 Indonesian Export of Tobacco Products from 2012 until 2015 under HS Code 24, ITC Calculation Based on UNCT.
Product Export 2012 Export 2013 Export 2014 Export 2015 Cigars, cheroots, cigarillos and cigarettes of 617,831,000 708,141,000 804,714,000 793,317,000 tobacco or of tobacco substitutes Unmanufactured tobacco; tobacco 159,564,000 199,589,000 181,323,000 156,784,000 refuse Manufactured tobacco and 16,781,000 23,655,000 39,401,000 31,780,000 manufactured
155 Pusat Data dan Informasi Pertanian (Indonesia). (2009). Outlook komoditas pertanian hortikultura. Jakarta: Pusat Data dan Informasi Pertanian, Departemen Pertanian. 156 Ibid. 68
tobacco substitutes and "homogenised" or "reconstituted" Total 794,176,000 931,385,000 1,025,438,000 981,881,000 Tobacco farming is categorized into three which are Citizens-Owned Farm, State-Owned Farm, and Private-Owned Farm. In 2015, the total of Citizens- Owned Farm comprises 99.60% of total tobacco farm in Indonesia, State-Owned Farm comprises 0.31%, and Private-Owned Farm comprises only 0.09%.157
Looking at the steady growth of the industry, Indonesian Government is expecting the growth in the industry for at least 2.49% annually.158 In 2019, the government is targeting the tobacco industry to produce 295.804 tons.159 This target aims to comply with the ASEAN target of tobacco product availability in 2019, that reaches 490.427 tons production with the annual growth of 1.36%.160
III.2 Tobacco and Indonesian Economy and Social (2011 – 2016)
Since the first plantation of tobacco in Indonesia, tobacco sector and its products remain to be one of the most important aspects for Indonesian economy. In the Strategic Plan of Ministry of Agriculture, tobacco belongs to the 39 national flagship products. Based on Indonesia Bureau of Statistic in 2016, tobacco industry contributes 0.94%, a 4.60% of contribution from manufacturing industry to the GDP of the total Indonesian GDP of 117 trillion rupiahs.161 Total export of Indonesian tobacco products in 2016, reached the amount of 109.9
157 Badan Pusat Statistik. (2016). Analisis Komoditi Ekspor 2010 - 2016 (06110.1721). Jakarta, ID: Author. 158 Pusat Data dan Informasi Pertanian (Indonesia). (2009). Outlook komoditas pertanian perkebunan. Jakarta: Pusat Data dan Informasi Pertanian, Departemen Pertanian. 159 Ibid. 160 Ibid. 161 Badan Pusat Statistik. (2016). Pendapatan Nasional Indonesia 2012-2016 (07130.1701). Jakarta, ID: Author. 69
thousand tons with the value of USD 959,7 million.162Besides contributing huge amount of rupiahs to the GDP, Indonesian tobacco industry also contributes to the welfare of the people. Based on the data of Ministry of Industry, 4.28 million of Indonesian citizens work in the manufacture and distribution sector of tobacco products while 1.7 million Indonesian citizens work in the tobacco farming.163 This has become one of the solutions to the unemployment issue of the nation.
The tobacco industry still becomes one of the main concerns of Indonesian government in the upcoming years by setting up a roadmap of tobacco industry development in Indonesia within the period of 2010 – 2020. In 2010 – 2015, the main concern of the government in the tobacco industry lied on the boosting national income through the industry, ensuring the public health, and labor absorption.164 In 2016 – 2020, the government puts the concern on the society health and labor absorption, yet still maintains and increases the contribution of the industry to the GDP through tax; the target is 2% of the total GDP and 5.1% of national budget.165
One of the main factor the tobacco is still one of the biggest in Indonesian is that the domestic consumption in very high. A study reveals that 65% of total Indonesian men are smokers.166 The smoking prevalence in Indonesian women is half compared to the men - 3% - due to the country‘s culture that perceives that smoking women as something unacceptable in the society.167
162 Badan Pusat Statistik. (2016). Analisis Komoditi Ekspor 2010 - 2016 (06110.1721). Jakarta, ID: Author. 163 Kementerian Perindustrian Republik Indonesia. (n.d.). Kemenperin: Kontribusi Besar Industri Hasil Tembakau Bagi Ekonomi Nasional. Retrieved from http://www.kemenperin.go.id/artikel/17257/Kontribusi-Besar-Industri-Hasil-Tembakau-Bagi- Ekonomi-Nasional 164 Ibid. 165 Kementerian Pertanian Republik Indonesia. (n.d.). Road Map 2007–2020 Industri Hasil tembakau dan Kebijakan Cukai. Author. 166 Indonesia Investments. (2016, May 23). Tobacco & Cigarette Industry Indonesia. Retrieved from https://www.indonesia-investments.com/id/business/industries-sectors/tobacco/item6873 167 Ibid. 70
With the huge number of population, around 255 million, Indonesia is a huge market for tobacco products as well, the second after China.168 The Tobacco Atlas revealed that two-third of Indonesian men are consuming tobacco products, mainly cigarettes.169 Further, the Tobacco Atlas also revealed that 53.7 million Indonesian adult and 2.6 million Indonesian youth are smokers.170 This number not only make Indonesia as the second largest market for tobacco products but also the third largest consumer of tobacco products right after China and Russia.171 This has made the tobacco industry has a firm standing and steady growth in the country. The easy access to the cigarettes and other tobacco products has made Indonesian smokers increasing every year.
Figure 3.1 The Total Production of Cigarettes in Indonesia 2011 – 2015, Indonesia Investments.
Cigarrettes Produced (Million) 360
350
340
330
320
310
300 2011 2012 2013 2014 2015
168 Ibid. 169 The Tobacco Atlas. (n.d.). Country Factsheet: Indonesia. Retrieved from http://www.tobaccoatlas.org/country-data/indonesia/ 170 Ibid. 171 Ibid. 71
III.2.1 Major Players in Indonesian Tobacco Industry
There are many tobacco players in Indonesia. In 2016, PT HM Sampoerna led the tobacco industry by having 29% of the market share, followed by Gudang Garam with 23% market share, and Djarum with 13% market share. 172 HM Sampoerna and Gudang Garam have registered their companies as public companies, while Djarum remains as private company. These three companies have become the dominant players in Indonesian tobacco industry since decades ago, therefore, it is hard for new companies to enter the market and compete with these three companies.
a. PT HM Sampoerna Tbk. HM Sampoerna was firstly established by a Chinese immigrant, Liem Seeng Tee, in Surabaya manufacturing kretek cigarettes and distributes it to market under the product of Dji Sam Soe. 173 In 2015, PT HM Sampoerna Tbk. along with its subsidiaries have employed around 29,500 employees plus Third Party Operations (TPO) – contract based employees of total 41,900 people. In sum, the company has employed around 71,400 people. PT HM Sampoerna has several products which are Dji Sam Soe – the most well-known product of the company, A Mild, Sampoerna Kretek, and U Mild. b. PT Gudang Garam Tbk. Same as PT HM Sampoerna Tbk., PT Gudang Garam Tbk. was firstly established in East Java, specifically in Kediri, in 1958. Gudang Garam has produced number of brands such as Gudang Garam Family, Surya Family, GG Family, and the others.174 In 2016, the domestic sales of the
172 Euromonitor International. (2017, July). Cigarettes in Indonesia. Retrieved from http://www.euromonitor.com/cigarettes-in-indonesia/report 173 http://www.sampoerna.com/id_id/about_us/pages/the_history_of_sampoerna.aspx# 174 http://www.gudanggaramtbk.com/ 72
company‘s products reached USD 5.4 billion, while the export sales reached USD 2.1 billion.175 c. PT Djarum PT Djarum was firstly established on April 21, 1951 by Oei Wie Gwan, in Kudus, Central Java.176 PT Djarum is known with many brands, such as Djarum Super, Djarum Super Mild, Djarum Super MLD Black Series, Djarum Coklat, Djarum Coklat Extra, Djarum Coklat Filter, Djarum Coklat Retro, Djarum 76, Djarum 76 Filter Gold, Djarum Istimewa, Djarum Istimewa Filter Clavo, Clavo Premio Filter, LA Lights, LA Lights Menthol, LA Ice, LA Bold, Djarum Black, Djarum Black Mild, Djarum Black Cappuccino, Djarum Black Menthol Cigarillos, Gold Seal, and Dos Hermanos for domestic brands.177 For international brands, the company produces Djarum Mild, Djarum Black Vanilla, Djarum Black Cherry, Djarum Special, Djarum Black, Djarum Black Supersmooth Gold Seal, Djarum Cherry, Djarum Black Bliss, Djarum Black Menthol Supersmooth, Spice Island, LA Lights, LA Menthol Lights, Djarum Splash, Djarum Super, Djarum Vanilla, Djarum Bali Hai, and Djarum Menthol.178
Tobacco industry has also been rooted in Indonesian society. Been existed since 1913, many Indonesian workers have relied their lives on tobacco industry, starting from the farmer, the hand-using workers, the factory workers, and many more. Tobacco industry also plays crucial role in the society. Besides providing the employment for the people around the industry, the companies are also conducting Corporate Social Responsibility (CSR) program to develop the society nearby. Below are some of the CSR of the tobacco companies:
a. PT HM Sampoerna Tbk.
175 Ibid. 176 http://djarum.com/world-of-djarum/history-of-djarum/ 177 Ibid. 178 Ibid. 73
In its Corporate Social Responsibility, PT HM Sampoerna conducts several activities that include179: 1. Delivering the information on the serious impact of smoking as it is very dangerous for the health. 2. Encouraging and supporting the implementation of effective regulations on tobacco product based on the principle to reduce the negative impact of smoking. 3. Encouraging and supporting the implementation of regulations concerning the minimum age to be allowed to purchase cigarettes and other tobacco products, as well as cooperating with retail stores to reduce the smoking prevalence in teenagers and children. 4. Cooperating with government and legal entities to support the prevention of legal trade of tobacco products. 5. Supporting the actions of environmental sustainability by reducing the natural resource exploitation, reducing the carbon emission, and waste recycle. 6. Supporting the tobacco farmer in order to support the national tobacco farming sustainability. 7. Through the Agricultural Labor Practices, the company is supporting the practice of good labor treatment especially by avoiding the child labor employment. 8. Supporting the local organization to increase the quality of life nearby the company.
In 2014, the company spent around USD 2.3 million for the CSR program while the Phillip Morris International added around USD 5.2 million for the CSR program for all over Indonesia.180 Some of the organizations that have been appointed by the company to assist the implementation of the CSR programs are Yayasan Aksi Cepat Tanggap (YACT), Yayasan Bina
179 From www.sampoerna.com, accessed on 07 November 2017. 180 Ibid. 74
Swadaya, Yayasan INOTEK, Yayasan Bangunan Cemerlang Indonesia, Social Transformation and Public Awareness, and Mondernisator.181
b. PT Gudang Garam Tbk. In 2016, PT Gudang Garam Tbk. spent around USD 2.2 million in its CSR activities. The CSR activities are based on the principle of Catur Darma; a meaningful life for society is a happiness; hardworking, persistent, honest, and having faith are the prices for success; the success is achieved through the contribution of others as well, and; employers are the main business partners.182 The values are then transformed into several CSR programs such as:
1. Sports, Education, and Healthcare. The company contributes to achieve the healthy life of the society as well as boosting the education through several programs. In 2016, the employees were involved in the local sport programs and blood donation. The company also provides scholarship, support school renovations, and provides free healthcare and treatment. 2. Creating Healthy Living Conditions The company is actively supporting the creation of healthy living conditions by providing the water tank, pump, and pipeline equipment to provide the clean water for some of the local areas. 3. Creating Healthy, Safety, and Environment (HSE) in the working environment. 4. Controlling the air pollution by conducting regular air quality test every six months by a pointed laboratory. 5. Hazardous and Toxic Management. 6. Waste Management. c. PT Djarum
181 Ibid. 182 From www.gudanggaramtbk.com, accessed on 07 November 2017. 75
PT Djarum is also committed in the CSR programs by establishing Djarum foundation that conducts numbers of activities as described below:183 1. Community Contribution The community contribution is conducted through several activities such as the free cataract operation to decrease the blindness of nearby community, regular blood donation from the employees to help the people, providing the fire-prevention and safety for rural area residents, construction of the infiltration well and storage tanks in order to achieve the clean water security during the dry season. 2. Djarum and Sport Activities PT Djarum supports the sport activities for the healthy life through opening the auditions to find talented athletes for badminton from all over Indonesia and providing sponsorship for sport activities. 3. Djarum Awareness for Environmental Issue Environmental issue has been one of the concerns for the company. The company has initiated several programs such as the trees plantation for around 2,150 km that is estimated to be able to absorb around 2.6 million CO2 annually in order to provide decent air for surrounding societies. 4. Djarum and Education PT Djarum believes that education is one of vital factors in creating future talents and therefore has put the education in its CSR agenda. Djarum provides huge amount of scholarship annually, conducts training, and sends Indonesian young talent to international conferences and competitions, encouraging the young talents to care toward the society around them. 5. Djarum and Culture
183 From www.djarum.com, accessed on 07 November 2017. 76
As the nation with various cultures, Djarum is committed to take part in preserving the culture through several activities, such as building Galeri Indonesia Kaya in one of the biggest shopping center in Indonesia for the cultural events and exhibitions.
III.3 The Other Side of Indonesian Tobacco Industry: Health and the Prosperity Issues
Despite the economic benefit enjoyed by Indonesia from the tobacco industry, Indonesian Government cannot just eyes on the growth of the tobacco industry and put aside the same importantly aspect of its citizens, the health and the prosperity. Previously has been mentioned that 53.7 million Indonesian adult and 2.6 million Indonesian youth are smokers.184 The number might sound good for the tobacco industry but at the same time it increases the worries and the problems for Indonesian Government. That big amount of smokers in Indonesia is disaster for the country as it costs the health and the productivity of the citizens. Beside the high smoking prevalence, there is a behind-the-stage story of the tobacco industry that often left the workers in such poor condition and far from prosperous.
Table 3.2 Smoking prevalence in Indonesia aged 15 years more by 2015, WHO 2017.185
Prevalence (%) Any smoked tobacco products Cigarettes smoking Current Daily Smokers Male 75.2 65.4 64.3 62.0 Female 2.9 1.8 2.7 1.7
184 Indonesia Investments. (2016, May 23). Tobacco & Cigarette Industry Indonesia. Retrieved from https://www.indonesia-investments.com/id/business/industries-sectors/tobacco/item6873 185 The data based on the repost of World Health Organization (WHO) on Global Tobacco Epidemic 2017 77
Total 39.0 33.6 33.5 32.9 Based on the data above, Indonesia belongs to the one of the highest smoking prevalence countries. For the adult smokers who are also workers, the productivity will be decreased as the health is decreasing as well. As mentioned previously, most smokers belong to the middle and low income class of society, if the smokers who work having their productivity decreased and health issues increased, the economic burden will increase and it is therefore hindering the economic growth of that particular segment of society. This will create a systemized poverty in which that particular segment of society will find it hard to quit the poverty as the tobacco consumption indirectly keeping them inside the poverty line. Indonesia is also known for its demographic bonus.186 However, if Indonesian youth have started to consume the smoked tobacco and cigarettes, the demographic bonus will be jeopardized in a blink of eye as the cigarettes enter their mouth. This is also such an unfortunate that one of the biggest assets in Indonesia is damaged by the tobacco products.
The health issue caused by tobacco is not only about the health effect from smoking and tobacco products consumption but also the health issue found among the tobacco farmers which is known as the Green Tobacco Sickness.187 The tobacco farming is very risky for the health of the farmers. The farmers are very fragile towards the sickness caused by the pesticide used in the cultivation and the nicotine breathed from the tobacco leafs. The study revealed that in Brazil, the sickness caused by these two factors is high. Among 130 farmers, 107 of them are suffering from Green Tobacco Sickness symptoms such as the migraine, limp, nausea, and many more especially in the male farmers.188 Meanwhile in Carolina, 18.4% of total 304 sample farmers are positive with GTS sickness with the skin- irritation and skin-burnt symptoms. This number is not much different from the
186 http://www.thejakartapost.com/news/2014/04/12/ri-must-prepare-demographic-bonus.html 187 Nicotine Exposure and Decontamination on Tobacco Harvesters' Hands. (2005). The Annals of Occupational Hygiene, 49(5). doi:10.1093/annhyg/meh112 188Markus, S. (2015). Petani tembakau di Indonesia: Sebuah paradoks kehidupan. Yogyakarta: Leutikaprio. 78
case in Indonesia. If we take a look to the safety standard and implementation, Indonesia is still far away behind those countries in general. If those developed countries still suffer from the sickness caused by direct interaction with tobacco plantations, it is highly predicted that the condition is worse in Indonesia. Many Indonesian farmers do not even understand about the healthy standard and procedures as most of the tobacco farmers are cultivating the tobacco from generation to generation with minimum knowledge in such aspect.
The other ironical side of Indonesian tobacco industry is that despite the growing of the tobacco industry, fact shows that the tobacco farmers are living in a condition which is far away from prosperity.189 All these times, the media only highlighted the gigantic tobacco industry that contributed a lot to the national economy and oftentimes forgetting the behind-the-curtain story, to tobacco farmers. Many Indonesian tobacco farmers admitted that the tobacco planting would not generate very much income, they will only got the bonus of income in the occasion when the price is quite high and the production is good due to supporting weather. However, in most case, those two do not come along, either the production is high but the price is not very profitable or the price is profitable but the production is quite low. 190 Of all total tobacco farmers in Indonesia, 72.2% of them live in poverty and most of them are low to not educated farmers.191
Based on a study conducted in Bojonegoro, East Java in 2012, the farmers receive only US$ 1.31 every day which amounted only US$ 34.15 per month, while the living cost is way more than that.192 In 2015, the Human Right Watch (HRW) Indonesia also revealed that there are many under-age children are working in the tobacco farming and are underpaid. The children are usually from 8 to 12 years old with the daily wage of US$ 0.37 to US$ 1.48 based on the
189 Ibid. 190 Ibid. 191 Ibid. 192 Ibid. 79
period of working, the longer they work usually they get better pay.193 This has added the point of the long ironic things list in Indonesian tobacco industry. Imagine that the children who are supposed to study are working on the farm due to financial limitation that eventually force them to work. In the long term, this has created a systematic poverty. The parents are not able to send the children to school but instead ask the children to work with them. Since the children have got education, they will have less opportunity to get out of their poverty zone and therefore their future will be not far away from being the farm worker. This situation keeps going on from generation to generation and therefore the poverty around the tobacco farming is quite hard to overcome. The government has imposed the restriction to employ the child labor, however since the children and the parents have no other options, the governmental regulation seemed to be ineffective.
Below are some facts found in the Indonesian tobacco farming by the World Bank:
1. Most of Indonesian tobacco farmers spend more on the tobacco cultivation compared to the revenue gained from it. 2. The cost of tobacco farming in Indonesia is quite high compared to other countries and also compared to other commodities. 3. Most of Indonesian tobacco farmers experience the lack of capital that around 53% of the total farmers must apply for loans as they are about to cultivate the tobacco. 4. It takes longer time to cultivate tobacco for the farmers compared to the time needed to cultivate other commodities.
193 Human Right Watch Indonesia. (2016, May 25). Child Tobacco Workers Suffer as Firms Profit. Retrieved from https://www.hrw.org/news/2016/05/25/indonesia-child-tobacco-workers-suffer- firms-profit 80
Table 3.3 The profit of tobacco per kg in major tobacco producer area in Indonesia in 2016 (USD), World Bank 2017.
Real Profit Perceived Profit Bojonegoro -1.95 0.24 Jember - 0.7 0.07 Central Lombok -0.59 -0.15 Eats Lombok -0.88 -0.01 Lumajang -0.16 0.09 Magelang -0.32 0.27 Temanggung -0.14 0.28 Total -0.30 0.11 It is very ironic how the tobacco farmers reap no profit from the cultivation but instead suffer from some lost despite the increasing of tobacco products consumption. This has been going on in many years in Indonesia. Aside from gaining no profit, the tobacco farmers are also facing several other problems such as the availability of the high-quality seeds, the global climate change that directly affecting the tobacco cultivation, and the limited land as many landowners have started to shift their activities to other commodities that are more profitable, as seen below.194
194 Markus, S. (2015). Petani tembakau di Indonesia: Sebuah paradoks kehidupan. Yogyakarta: Leutikaprio. 81
Figure 3.2 The growth of Tobacco Farming Area in Indonesia (2011-2016), Markus, S. (2015). Petani tembakau di Indonesia: Sebuah paradoks kehidupan. Yogyakarta: Leutikaprio.
The Growth of Tobacco Farming Area (2011 - 2016) 300
250
200
150
100
50
0 2011 2012 2013 2014 2015 2016
The data above shows that the tobacco farming land in Indonesia is fluctuating. Between 2011 and 2012, the growth was very significant reaching 18.1%. In the following year, the farming area was decreasing significantly of 28.66%, while in the other years the growth of the tobacco farming area has not shown very significant changes, especially from 2015 to 2016 where the change was only at the level of 0.07%. The stagnant growth of the tobacco farm is also caused by the increasing of tobacco import in Indonesia.
In fulfilling the demand of tobacco, Ministry of Industry of the Republic of Indonesia records that 40% of the total national demand for tobacco – 330,000 tons annually – are fulfilled through import activity.195 This also has become a dilemma in the government, if the tobacco industry depends only on the domestic production of tobacco, the demand would not be fulfilled. At the other hand, if the government keeps allowing the industry to import the tobacco as the raw materials, the domestic tobacco production will be threatened. Boosting the
195 Kementerian Perindustrian Republik Indonesia. (n.d.). RI Masih Impor Tembakau. Retrieved from http://www.kemenperin.go.id/artikel/13348/RI-Masih-Impor-Tembakau 82
domestic production is not also the best solution since the data shows that most of the tobacco farmers suffer USD 0.63 loss per kilogram of tobacco that they sell. This has made the government to once again reanalyze the national policy on the tobacco products as there are many things to be considered.
Table 3.4 Indonesian Tobacco Import from 2011 until 2016, UN Commission Trade.
Year Imported Tobacco (Tons) Imported Value (USD) 2011 106,570 507,188,000 2012 137,426 658,922,000 2013 121,218 627,301,000 2014 95,732 569,776,000 2015 75,353 412,328,000 2016 52,482 328,585,000 Even through the trend is showing downward, it turns out that the amount of the import is still burdening the domestic tobacco production. Therefore, the Indonesian Tobacco Farmers Association (APTI), representing tobacco farmers all over the nation, is urging the government to limit the tobacco import and the same time, the tobacco processing industry also raises their voice so that the demand for the raw materials can be fulfilled to support the production.196
A coin of two sides is how to explain Indonesian tobacco industry in the best way. On one side, tobacco products processing industry contribute a lot to the national GDP. At the other side, the health and poverty issue are literally killing particular segment of the citizens. Therefore, Indonesian government is very dilemmatic in determining the clear stance on this issue. If the government shuts down the tobacco industry both directly or through small steps, the country will suffer the loss of income from the tax and millions of people will lose their
196 Hermansyah, A. (2017, October 31). Tobacco Farmers Urge Government to Control Import. Retrieved from http://www.thejakartapost.com/news/2017/10/31/tobacco-farmers-urge- government-to-control-import.html 83
job. It is better for them to have the job even though far from ideal and dream job instead of having no job at all. However, keeping the industry operating means that the government is seemed to be not in the side of the people in helping to tackle health and economic issues. Therefore, even up until now, Indonesian government is still working on finding the best solution for both Indonesian citizens – tobacco farmers, consumer of tobacco products, and other citizens – and the tobacco industry. The government believes that both should be protected. Tobacco industry has been rooted in Indonesian culture since long ago and it is considered as one of the heritage – therefore, the government wishes to keep it – and the health and economic issues of the citizens are also other important aspects that cannot be abandoned. Indonesian government chose to keep both of them in the national agenda.
III.4 Indonesia – Australia Trade Relation on Tobacco (2012 - 2016)
Indonesia and Australia have good relation on the tobacco trade. It is therefore the implementation of Plain Packaging Act is perceived as an unfortunate by Indonesia as it could jeopardize the good trade relation that has been established since long time ago. Australia is one of the lucrative markets for Indonesian tobacco producers since the market is big and Australia does not produce any tobacco products.
Table 3.5 The Tobacco Products Trade Relation between Indonesia and Australia (2012 – 2016), ITC Calculation Based on UNCT.
Indonesia‘s export Indonesia‘s Export Australia‘s Import to Australia to the World from the World 2012 1,435,000 794,176,000 320,719,000 2013 3,789,000 931,385,000 454,358,000 2014 5,468,000 1,025,438,000 638,583,000
84
2015 6,694,000 981,881,000 720,814,000 2016 8,750,000 1,009,506 766,401,000 From the table above, the trade relation between Indonesia and Australia in the tobacco products shows an increasing trend despite the implementation of Plain Packaging Act by Australian Government. From 2012 to 2016, Indonesia shared 0.8% of total Australian import on the tobacco products.
Figure 3.3 Indonesia – Australia Trade Relation on Tobacco Products (USD) 2012 – 2016, ITC Calculation Based on UN Commission of Trade.
Indonesia - Australia Trade Relation on Tobacco Products (USD) 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 2012 2013 2014 2015 2016
85
Figure 3.4 Indonesia – Australia Trade Relation on Tobacco Products (USD) 2012 – 2016, UN Commission Trade.
Australia's Import from the World on Tobacco Products (2012 - 2016) 1,000,000,000
800,000,000
600,000,000
400,000,000
200,000,000
0 2012 2013 2014 2015 2016
At the same period, the demand of tobacco products in Australia is increasing despite the implementation of the Plain Packaging Act. This has become the interesting point in this discussion. Australian Government has tried to impose numbers of regulations and policies to support the smoking cessation in the country and the Plain Packaging Act 2011 has been marked as the strictest policy set by the government. At the very beginning of the Act‘s enforcement, the smoking prevalence seemed to achieve its goal as the smoking prevalence showed a decreasing point. However, as the time goes by, the decreasing of the smoking prevalence moves very slowly and many argue that the decreasing of the smoking prevalence might be caused by other factors. Therefore, the tobacco industry also argues that the Packaging Act has not become the best solution to decrease the smoking prevalence and therefore it shall not be kept.197 The Plain Packaging Act has not been able to solve the smoking problem very significantly but it has sacrificed the Intellectual Property Rights Protection as regulated in the TRIPS Agreement and the WTO Basic Principles. The sacrifice is just not worth the gain.
197 Direct Email Interview with Mr. Duane Layton on 17 October 2017. 86
III.5 Indonesian Government’s Stand on the Tobacco Industry in the Country and its Relation with Plain Packaging
Referring to the situation above, Indonesian government is left in a dilemmatic situation. To significantly cut the tobacco consumption and production in the country to increase the health issue of the citizens or to miss the additional – which is not small – tax income from the tobacco industry. Other issue that might make the situation more complex is that if Indonesian government then decides to cut the production or to stop producing tobacco – just like Australia – millions of Indonesian will be left unemployed that will put more people into the poverty life. Therefore, the dilemmatic situation has made Indonesian government to have no clear stance on the tobacco issue; in the meantime Indonesian government is trying to embrace both tobacco products production and to find solution to tackle the health and poverty issues.198 This also made Indonesia becomes one of very few countries that has not signed and ratify the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC) because one Indonesia ratify the convention, the tobacco industry in the country will be threatened.199
To embrace both situations, Indonesian government has tried to impose several regulations and policies in order to reduce the smoking number in Indonesia. Cigarettes commercial advertisement for example, the government has managed to regulate that all cigarettes advertisement that are aired on TV have to be aired on the late night shows and are not allowed to be aired during the prime time. The government has also imposed the policy on the tobacco packaging that regulates the packaging to contain some images to give warning on health impact of smoking.200 The government also imposes some tax on the tobacco products
198 Indonesia Investments. (2016, May 23). Tobacco & Cigarette Industry Indonesia. Retrieved from https://www.indonesia-investments.com/id/business/industries-sectors/tobacco/item6873 199 Ibid. 200 Ibid. 87
and cigarettes in order to make them less affordable for the citizens as explained below:
Figure 3.5 Tax of one pack cigarettes product in 2016 as estimated by WHO (case study: one of the most sold brand, Gudang Garam), WHO Report on Global Epidemic Report 2017.
88
Figure 3.6 Tax of other smoked tobacco products other than cigarettes as estimated by WHO in 2016, WHO Report on Global Epidemic Report 2017.
Figure 3.7 Indonesian Tax for other smokeless tobacco products as estimated by WHO in 2016, WHO Report on Global Epidemic Report 2017.
89
The high tax imposed on the tobacco products are supposed to reduce the smoking prevalence in many countries, including Indonesia. Yet up until now, the smoking prevalence has not showed any movement downward in a significant progress. The smoking prevalence is still high. Therefore, the government is still figuring out the best way to reduce the smoking prevalence but at the same time keeps the tobacco industry operating well.
Regarding the plain packaging, Indonesia has expressed its position in the issue since the very first time the issue is raised.201 Indonesia is at no favor toward the policy of putting all tobacco products, especially cigarettes, on a single standardized packaging. Even though from the trade relations between Indonesia and Australia on tobacco products above we can see that the export of tobacco products to Australia is increasing despite the implementation of plain packaging policy by Australian Government, Indonesia is still at no peace with the policy. Indonesia believes that the issues are not only limited to trade volume and the dollars but also to the other issues, especially Intellectual Property Rights.
It is believed that the consumers of tobacco products have the rights to easily identify the producers of the cigarettes and other tobacco products that they are consuming. The plain packaging has prevented such thing to happen since all brands are put in the single standardized packaging. Further, the packaging is also believed to be violating the intellectual property rights that under no circumstances shall be violated, unless there are provisions or regulations allow certain conditions to violate. In this case, there has been single provision or amendment toward the agreements binding both Indonesia and Australia that allows the member countries to violate the intellectual property rights protection regulated therein.
201 Mahendra, D. I. (2015, June 5). Kemasan Polos Rokok, Indonesia Gugat Australia ke WTO. Retrieved from http://www.mediaindonesia.com/news/read/18090/kemasan-polos-rokok- indonesia-gugat-australia-ke-wto/2015-06-05 90
Other issue that has become the worry of Indonesia in the plain packaging implementation in Australia is the trend of down-trading.202 Down trading is the consumers‘ preference shifting from high quality to the most suitable price products.203 The Plain Packaging Act has reduced the ability of tobacco products manufacturer to compete in the quality especially for the premium brands. 204 Therefore, the consumers are likely to shift their preferences to the other brands that might possess low quality. The manufacturers will gain less benefit from producing the premium products; most of them will then produce the lower quality products. Below is the table explaining how the market share is shifting from the premium brands to normal or even low price brands.
Table 3.6 The average market share growth of brands segments in Australia prior and after the implementation of Plain Packaging Act, Neil Dryden 2015.
Products Average Market Average Market Change Share Growth One Share Growth One Year Prior to Year After the Plain Packaging Plain Packaging Implementation Implementation Premium -4.9% -8.0% -3.2% Products Aspirational -3.5% -5.3% -1.8% Premium Products Value For Money -5.0% -8.9% -4.0% (VFM) Products Low Price 11.2% 14.2% 5% Products
202 Direct Email Interview with Mr. Duane Layton on 17 October 2017. 203 The impact of tobacco plain packaging in Australia (Neil Dryden 2015) 204 Please note that there is no difference between the premium and normal products packaging in the Plain Packaging 91
Figure 3.8 The average market share growth of brands segments in Australia prior and after the implementation of Plain Packaging Act, Neil Dryden 2015.
20.00%
15.00%
10.00%
Prior Plain Packaging 5.00% Implementation After Plain Packaging 0.00% Implementation Premium Aspirational Value For Low Price -5.00% Products Premium Money (VFM) Products Products Products
-10.00%
-15.00%
From the table and the graph above, it is identified that the down-trading trend is really happening in Australia due to the Plain Packaging Policy. Premium brands lose 3.2% market share while the low price products gained 5% additional market share.
Plain Packaging Act 2011 has made all the tobacco products especially cigarettes to be put in a single standardized packaging. This has created the confusion among the consumers since all the products look the same. This has hurt the premium tobacco products since there is nothing to distinguish it from the regular product and that is how it lost its market share or to be called as down- trading.
This is one of the worries that Indonesia is facing in the implementation of Plain Packaging Act. Therefore, Indonesia is avoiding this to go worse that could threaten the domestic tobacco industry by requesting the consultation upon the clash to the World Trade Organization (WTO) Dispute Settlement Body (DSB).
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CHAPTER IV THE AUSTRALIA’S PLAIN PACKAGING ACT 2011: PROBLEM SOLVING LEADING TO NEW PROBLEM
Looking at the smoking problems in the country, Australian Government tries to impose numbers of policies and strategies to reduce the smoking prevalence. The recent policy is the implementation of Plain Packaging Act which came into force in December 2012. The Australian Government believes that after long milestones, it is the most effective way to achieve the goal of a healthy citizen.205 While on the other side, the action taken by the government to tackle the health problem turns out to create new problems. As mentioned in the previous chapter, Indonesia and many other countries have brought the case to the World Trade Organization to ask for consultation as they feel like being the victim of the Australian Government‘s policy on the plain packaging. Explained before the reason of Indonesia in bringing the case to the WTO, besides the economic issue, some other issues are not less important. Intellectual Property Rights for example, it is not over night to create such a comprehensive agreement to protect the creation of human mind. It is neither taking low effort to make sure that the agreement is well implemented in its binding member countries. Governments of many countries have spent lots of money and efforts to socialize, promote, and make sure the agreement is implemented in their countries so that the innovation keeps going on without making the innovators feel like being exploited.206 Australian Government in this case has just turned all that action in to vain. This has created dispute in international trade between Indonesia and Australia. As explained in WTO, a dispute arises when a member government
205 Australian Government Department of Health. (2017, October 23). Introduction of Tobacco Plain Packaging in Australia. Retrieved from http://www.health.gov.au/internet/main/publishing.nsf/content/tobacco-plain 206 Kapczynski, A. (2012). The Cost of Price: Why and How to Get Beyond Intellectual Property Internalism. Yale Law School. Retrieved from http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=5700&context=fss_papers 93
believes another member government is violating an agreement or a commitment that it has made in the WTO.207
IV. 1 The Violation of Intellectual Property Rights by the Australia’s Plain Packaging Act 2011.
As explained in the previous chapter, Intellectual Property Rights (IPR) are the rights or benefits legally owned by certain people who are creators, owners of patents, trademarks, and any other copyrighted works either in the form of economy or other privileges in a certain period of time.208 The purpose of the rights granted to the people is that to appreciate their work of intelligent mind and therefore continues innovation is expected as the return. Governments all over the world are making big efforts to ensure the Intellectual Property Rights granting and protection are well implemented in their countries by referring to the TRIPS Agreement. The intellectual property rights protection is very crucial for the development of the countries‘ economy especially in the era of globalization and free trade like nowadays. If the intellectual property rights protection is well implemented, the atmosphere created will encourage the innovation and development of products within the country and that way, the economy will increase as the result.209 The good implementation of the intellectual property rights protection will also convince the developed nations that their technology will be save from any infringement in the case of technology transfer. The technology transfer will help the developing nations for better production activities and other manufacturing activities and eventually boost the economic growth. 210 Foreign direct investment and great cooperation on research and development between developed and developing nations can be established also as the result.
207 World Trade Organization, https://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm accessed on 29 January 2018. 208 Idris, K. (2003). Intellectual property: A power tool for economic growth. Geneva: WIPO. 209 https://www.slideshare.net/AshutoshSharma28/ipr-and-economic-development 210 Ibid. 94
Despite all of the benefits that countries could have if the intellectual property rights protection is well implemented, fact shows that protecting intellectual property rights will never be an easy task. There are tons of challenges faced by the governments in protecting the Intellectual Property Rights. Starting from the crosscutting issues between the Intellectual Property Rights protection and the greater good purpose to the infringement that occurs a lot in many countries have made the task of intellectual rights property protection challenging.
In the report of Intellectual Property Right Index (IPRI) 2017 issued by Property Rights Alliance, the score of world‘s property rights in 5.63 out of 10, only 3.45% increase from previous year.211 The same source also reveals that the highest score of the intellectual property rights protection goes to New Zealand with the score of 8.63, a 4.45% increase from last year‘s score. 212 The best improvement is performed by African countries, especially Ethiopia with 12% increase of score compared to the previous year making the country to the 87th position.213 On the other side, the worst score belongs to the Easter Europe and Central Asia with the average score of 4.94, a decrease of 0.1% from last year‘s score.214
Australia is one of the best IPR index by being in the 10th rank in the world and 4th rank in the Asia Pacific region. Australia performs 0.31 point increase from last year to the 8.24 point this year. Below is the detail of Australia‘s Intellectual Property Index.
211 Property Rights Alliance. (2017). International Property Rights Index 2017. Retrieved from Property Rights Alliance website: https://ipri2017.herokuapp.com/ 212 Ibid. 213 Ibid. 214 Ibid. 95
Figure 4.1 The Overall IPR Index Score of Australia in 2017, IPRI 2017.
Focusing to the intellectual property rights, Australia performs 0.04 points increase to 8.22 from last year‘s score.215 The patent protection is scored 8.667 in 20th position of global score and 3rd in the region.216 Meanwhile, the copyright protection is scored 8.0 securing the 5th global position and the 3rd in the region.217
At the other side, Indonesia is not as advanced as Australia in the implementation of the intellectual property rights protection. Indonesian Intellectual Property Rights Index is scored 5.17 – a 0.15 increase from previous year.218 The score brings Indonesia to the 68th rank in the world and the 14th in the Asia Pacific region. For the intellectual property rights protection alone, Indonesia is scored 5.57 placing Indonesia in the 47th position globally and 11th regionally.219 For patent protection, Indonesia is scored 5.56 placing the country in the 89th rank globally and 15th regionally.220 Meanwhile, copyright protection, Indonesia seemed to have lost of works to do by having only 1.60 score, 99th
215 Ibid. 216 Ibid. 217 Ibid. 218 Ibid. 219 Ibid. 220 Ibid. 96
global position, and 17th regional position.221 Below is the overall Indonesia‘s Intellectual Property Rights Index.
Figure 4.2 The Overall IPR Index Score of Indonesia in 2017, IPRI 2017.
Going back to the plain packaging issue, the implementation of such law by Australian Government is believed to have tarnished the protection of intellectual property rights protection as it clearly violates the TRIPS agreement as well as the basic principles of WTO. The Plain Packaging Act 2011 came into force in December 2012. During that time, the Intellectual Property Rights Index of Australia experienced decrease in the score.
Figure 4.3 The Trend of Australia‘s Intellectual Property Rights Index (IPRI) 2010 – 2017 (prior to after the Implementation of the Plain Packaging Act 2011) IPRI 2017.
The Trend of Australia's IPRI (2010 - 2017) 8.5 8 7.5 7 2010 2011 2012 2013 2014 2015 2016 2017
221 Ibid. 97
The graphic shows that the Intellectual Property Rights Index of Australia is at the level of 8.192 in 2010, before the enforcement of Plain Packaging Act. However, since the Act came into force the Australia‘s Intellectual Property Rights Index showed an up-and-down trend but never reached the score in 2010 until 2017.
The Australia‘s Plain Packaging Act 2011 is believed by Indonesia as the complainant country to have violated below agreements on the intellectual property rights protection (TRIPS Agreement).222
1. TRIPS Agreement Article 2 Paragraph 1 This article of the TRIPS Agreement regulates that all member countries involved in the agreement shall comply with the Paris Convention from article 1 to 12 and article 19 in order to fulfill the provisions in the Part I, II, and IV of the TRIPS Agreement. Part I of the TRIPS agreement is the part concerning the general provisions and the basic principles of the agreement. Part II of the TRIPS Agreement is the part concerning about the standards, scope, and use of intellectual property rights. Meanwhile, Part IV of TRIPS Agreement is the part concerning the acquisition and the maintenance of the Intellectual Property Rights and Related Inter-Parts Procedure. The specific part of the articles that have been violated by the implementation of the Plain Packaging Act is the Paris Convention Article 6quinquies (6.5) Point A Paragraph 1 and Article 10bis (10.2) Paragraph 1 stating that: “Every trademark duly registered in the country of origin shall be accepted for filing and protected as is in the other countries of the Union, subject to the reservations indicated in this Article. Such countries may, before proceeding to final registration, require the production of a certificate of registration in the country of origin,
222 Indonesia’s communication to WTO DSB Panel Number WT/DS467/1, G/TBT/D/46 IP/D/34, G/L/1041 dated on 23 September 2013. 98
issued by the competent authority. No authentication shall be required for this certificate.”223
“The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition.”224 The implementation of the Plain Packaging Act 2011by Australian is violating above provisions due to these following reasons:
1. The implementation of Plain Packaging Act 2011 has not fulfilled the provision that requires the trademarks registered in origin countries to be protected in any other countries as it is. This means that there is no change and modification of the trademarks outside of the origin country is allowed to be made. The Plain Packaging Act 2011is not only modifying the trademarks of tobacco products from Indonesia but it is even eliminating the major and most important part of the trademarks, for example the color of the packaging, the designs, and other trademarks that distinguish one particular brand from other brands. 2. The implementation of Plain Packaging Act 2011 has not fulfilled the provision that require the participating countries in the agreement to provide the most effective way to protect the goods traded in the countries from unfair competition. The regulation to standardize all the packaging for tobacco products will create the unfair competition as it creates the confusion of goods between brands. The standardized packaging will confuse the consumers in choosing the brands compared to pack the tobacco products in the packaging that is different from one another. This has also created the disadvantages for the producers as they find it is difficult to make their products stand out from other products.
223 Paris Convention 1967 Article 6quinquies Point A Paragraph 1, from www.wto.org, accessed on 16 November 2017. 224 Paris Convention 1967 Article 10bis Paragraph 1, from www.wto.org, accessed on 16 November 2017. 99
2. TRIPS Agreement Article 3 Paragraph 1 The Article 3 Paragraph 1 of TRIPS Agreement regulates that all member countries shall protect the Intellectual Property Rights in no less effort that the countries where the Intellectual Property Rights originates as stated below: “Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection (3) of intellectual property, subject to the exceptions already provided in, respectively, the Paris Convention (1967), the Berne Convention (1971), the Rome Convention or the Treaty on Intellectual Property in Respect of Integrated Circuits. In respect of performers, producers of phonograms and broadcasting organizations, this obligation only applies in respect of the rights provided under this Agreement. Any Member availing itself of the possibilities provided in Article 6 of the Berne Convention (1971) or paragraph 1(b) of Article 16 of the Rome Convention shall make a notification as foreseen in those provisions to the Council for TRIPS.”225 The exceptions mentioned above are things that make the provisions are not applied in the condition that would create the arbitrary or unjustifiable discrimination between countries upon the same conditions and create a blur of the international trade restriction as well as the implementation of measures as follow.226
1. The necessity to protect public morals 2. The necessity to protect the human, animal, or plant life or health 3. Things that related to the activity of export and import of gold and silver 4. The necessity to enforce or obey any laws or regulations that are consistent with the Agreement such as the custom enforcement, monopoly regulations, the protection of patents, trademarks, copyrights, and the action to prevent the deceptive practices.
225 TRIPS Agreement Article 3 Paragraph 1, from www.wto.org, accessed on 16 November 2017. 226 GATT Agreement 1948 Article XX, from www.wto.org, accessed on 16 November 2017. 100
5. Things that are related to products of prison labors 6. Regulations that are imposed for the sake of the national treasures of artistic, historic, or archeology valued protection. 7. Regulations that are related to the conservation of exhaustible natural resources which are effective with the domestic law to restrict the production and consumption. 8. The intergovernmental agreement upon certain commodity that are agreed and approved by parties involved in the agreement 9. The regulations to restrict the export of certain materials that are necessary to fulfill the need of domestic processing industry in the time when the price of the materials is lower in the domestic than the world‘s price. The action is considered as the government‘s stabilization plan. The action is also justifiable as long as it is not in contradiction with the non-discrimination principle in the Agreement. 10. Things which are essential to the acquisition or distribution of particular goods or products in the moment of local short supply. The Agreement is also setting up several exceptions to ensure the national security of the member countries by emphasizing in Article XXI that the Agreement understands the importance of national security and therefore does not oblige the member countries to:227 1. Disclose certain information that might harm the national security interests. 2. Prevent any actions deemed necessary to protect the national interest on security. 3. Prevent member countries from fulfilling its obligations under United Nations Charter to maintain the peace and security of both domestic and international.
227 GATT Agreement 1948 Article XXI, from www.wto.org, accessed on 16 November 2017. 101
However, the Plain Packaging Act 2011 imposed by Australian Government is believed to violate the Intellectual Property Rights Protection even though the exception allows the member countries to consider about the health issue. On the other side, the obligations of the member countries seem to be outweighing the general exceptions of the health issue. Furthermore, there is no further measure on what kind of health issue shall be considered to be justifiable for member countries to not fulfill their obligations under the TRIPS Agreement.
Indonesia believes that through the Plain Packaging Act 2011, Australia has violated the Intellectual Property Rights by treating the tobacco products less favorably than they are being treated in the home countries. In the home countries, the tobacco products are allowed to be put in the customized packaging by the companies as registered in the national law.
3. TRIPS Agreement Article 15 Paragraph 4 The Article 15 Paragraph 4 of the TRIPS Agreement regulates that all trademarks applied in the goods and services shall not become any obstacles or any barriers for the goods or services to be registered regarding the trademark in other countries, as stated below: “The nature of the goods or services to which a trademark is to be applied shall in no case form an obstacle to registration of the trademark.”228
The implementation of the Plain Packaging Act 2011 has violated the provision by becoming the barrier and obstacle itself for tobacco products‘ trademarks to be registered in Australia since all the products must be put in a single standardized packaging without any trademarks to be appeal.
4. TRIPS Agreement Article 16 Paragraph 1 The Article 16 Paragraph 1 of the TRIPS Agreement regulates that the owner of a registered trademark to possess the exclusive rights from
228 TRIPS Agreement Article 15 Paragraph 4, from www.wto.org, accessed on 16 November 2017. 102
preventing the third parties from using the trademarks and gaining any particular benefit from it. The provision is also regulating the similar or identical trademarks to not create the confusion of the products and therefore things to distinguish should be available, as stated below: “The owner of a registered trademark shall have the exclusive right to prevent all third parties not having the owner’s consent from using in the course of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed. The rights described above shall not prejudice any existing prior rights, nor shall they affect the possibility of Members making rights available on the basis of use.”229
The Intellectual Property Rights Protection has been violated based on this provision since the Plain Packaging Act 2011 itself has regulated that all the tobacco products to be put in the single standardized packaging and hence create the confusion among all similar packaging products. This also indirectly allows the third party to have the benefits of the particular trademark owner through the confusion itself. If the products are put in the different packaging, one particular brand will be recognized easily by consumers however, the standardized packaging has made the consumer confuse and indirectly give the benefits for other brands. For example the premium products, there will be no other specialties distinguishing from low prices products. This condition has made the consumers taking longer time to distinguish between premium and non-premium brands, therefore, to shorten the time many consumers just take any brands as well as shifting of preference and this create the loss for the premium products, creating down-trading, as explained previously.
5. TRIPS Agreement Article 16 Paragraph 3
229 TRIPS Agreement Article 6 Paragraph 1, from www.wto.org, accessed on 16 November 2017. 103
Article 16 Paragraph 3 of TRIPS Agreement regulates the application of provisions in the Paris Convention 1967 that regulates the member states to terminate the registration or the use of a trademark that indicates the reproduction and imitation of a registered trademark, it is also prohibited to register similar trademark to create confusion between similar trademarks, especially towards he well-known trademark. Further in the TRIPS Agreement is also explained that the trademarks have connection with the owners of the trademarks in which the trademarks represent the interest of the owner. The practice of creating similar trademark would not only create confusion but also damage the interest of the owner of the well-known trademark, as stated below in Paris Convention Article 6bis (6.2) Paragraph 1 and TRIPS Agreement Article 16 Paragraph 3:
“The countries of the Union undertake, ex officio if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration, and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith. “230
“Article 6bis of the Paris Convention (1967) shall apply, mutatis mutandis, to goods or services which are not similar to those in respect of which a trademark is registered, provided that use of that trademark in relation to those goods or services would indicate a connection between those goods or services and all the owner of the registered trademark and provided that the interests of the owner of the registered trademark are likely to be damaged by such use.”231
230 Paris Convention 1967 Article 6bis Paragraph 1, from www.wto.org, accessed on 16 November 2017. 231 TRIPS Agreement Article 16 Paragraph 3, from www.wto.org, accessed on 16 November 2017. 104
These provisions above have been clearly violated by the implementation of the Plain Packaging Act. The provision in the Paris Convention Article 6bis has prohibited the creation of the same or very similar trademark in order to avoid the confusion between brands. However, the Act itself is making a certain standardized packaging by eliminating most important aspects of the trademarks and create all similar brands packaging, which is actually highly avoided by the provision, and therefore create confusion. This also has prevented the owner of the well-known trademark to enjoy the benefits of the popularity of their products as all the products are wearing the same uniform after the Plain Packaging Act came into force.
6. TRIPS Agreement Article 20 Article 20 of TRIPS Agreement regulates the use of the trademarks in trade. The Article ensure that no special requirements or form shall be encumbered to the registered trademarks in international trade. Such action is believed to reduce the capability of the trademark to distinguish the difference of one product from other products as mentioned below: “The use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings. This will not preclude a requirement prescribing the use of the trademark identifying the undertaking producing the goods or services along with, but without linking it ti, the trademark distinguishing the specific goods or services in question of that undertaking.”232 It is very obvious that this provision has been violated by the implementation of the Plain Packaging Act. This provision regulates that there shall no additional requirements be encumbered to the existing trademark that could lessen the capability of the trademark to distinguish the undertakings of a product from the undertakings of other products. The Act is clearly the additional requirement in the practice of trade between
232 TRIPS Agreement Article 20, from www.wto.org, accessed on 16 November 2017. 105
Australia and Indonesia – and other countries – that not only lessen the capability of one particular product to be distinguished from other products but also further eliminate most of it. This has become the fatal violation of the Act towards the TRIPS Agreement.
7. TRIPS Agreement Article 22 Paragraph 2b The Article 22 Paragraph 2b of TRIPS Agreement regulates the geographical indication rights of products. This Article regulates that all member countries involved in the Agreement shall provide law guarantee that the geographical indication rights are protected in the practice of trade. The protection of the geographical aims to protect the goods and/or services from unfair competitions as explained in the Paris Convention 1967 Article 10bis (10.2). ”In respect of geographical indications, Members shall provide the legal means for interested parties to prevent any use which constitutes an act of unfair competition within the meaning of Article 10bis of the Paris Convention (1967).”233
“(1)The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition; (2)Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition; (3) The following in particular shall be prohibited: - all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor; false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor; indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.”234
233 Paris Convention 1967 Article 10bis, from www.wto.org, accessed on 16 November 2017. 234 TRIPS Agreement Article 22 Paragraph 2b, from www.wto.org, accessed on 16 November 2017. 106
The geographical indication rights and the benefits derived from it has been totally abandoned by Australia‘s Plain Packaging Act 2011. The single standardized packaging makes it difficult for consumers to distinguish the geographic indication of the tobacco products in Australia. The provision also prohibits any kind of activity that leads to creation of confusion between the products, meanwhile the Australia has conducted such activity effectively since the Plain Packaging Act came into force.
8. TRIPS Agreement Article 24 Paragraph 3 Article 24 Paragraph 3 of TRIPS Agreement concerns on the same matter as previous point that all member countries involved in the agreement shall not diminish the protection of the geographical indications that are regulated by the laws and other regulations or agreement existed prior to the enforcement of the WTO Agreement, as stated below: “In implementing this Section, a Member shall not diminish the protection of geographical indications that existed in that Member immediately prior to the date of entry into force of the WTO Agreement.”235
As mentioned in the previous chapters, the geographical indications have been popular term in the practice of international trade. Many products are known of its originating countries. The Plain Packaging Act imposed by Australian government has totally diminish the geographical indication rights and benefits of the tobacco products. In a single standardized packaging, the geographical indication seems to be absent even though there is writing stating where the product came from, but compared to the original packaging, there seem to be no geographical indication in the plain packaging of tobacco products.
Besides violating those Intellectual Property Rights in the TRIPS Agreement, the Australian Plain Packaging Act has also violated the basic
235 TRIPS Agreement Article 24 Paragraph 3, from www.wto.org, accessed on 16 November 2017. 107
principle of World Trade Organization of Most favored Nation especially in the field of Intellectual Property Rights Protection, which states that:
“…With regard to the protection of intellectual property, any advantage, favor, privilege or immunity granted by a Member to the nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members...”236
Therefore, there was no country or institution has ever gone against Australian objective to increase the health of the people. It is such an unfortunate that the noble objectives have to be tarnished by the strategy of achieving the objectives. The Plain Packaging Act 2011 is believed to violate numbers of agreements relater to Intellectual Property Rights protection as well as the basic principle of the WTO. The Most Favored Nation in Intellectual Property Rights Protection regulates that all member countries must treat the intellectual property rights exactly as they are being protected in the home country. The Plain Packaging has not only treated differently but also seemed to be intentionally abandoning the protection of the Intellectual Property Rights.
What makes the situation become more ironic is that there has no certain prove that the Plain Packaging Act to be effective in reducing the smoking prevalence in Australia. Indeed, the smoking prevalence is decreasing but there are also numbers of other policies enforced in Australia that might contribute to the decreasing of the smoking prevalence, one of which is the high tax. On the other side, the identities of the industries that produce tobacco have been destroyed. This is Act is very bias and one sided. It takes years to build the legacy and the value of a brand. However, it only takes one single policy to destroy the value of the brands. Therefore it is believed that the Australian Plain Packaging Act has violated the international law that is believed to be the guideline of the conduct of international trade.
236 TRIPS Agreement General Provision Article 4, from www.wto.org, accessed on 16 November 2017. 108
IV.2 The Role of World Trade Organization in Settling the Dispute between Australia and Indonesia on the Australia’s Plain Packaging Act 2011 (2013 – 2017)
Based on the matter of perspective that the Australian Plain Packaging Act 2011 is deemed to have violated the TRIPS Agreement and the basic principle of WTO, thus Indonesia brought the case to the World Trade Organization to seek for the best solution of the case with the respect of applicable law and mechanism on 23 September 2013. The World Trade Organization takes part in this case by providing the media of consultation and discussion for the interested and disputing parties through certain mechanism in seeking the best solution of the dispute through the Dispute Settlement Body.
Under the Dispute Settlement Body, there are several legal bases that become the precondition for the dispute to be than categorized as the dispute that must be settled through the WTO Dispute Settlement Body. First and foremost, the dispute occurs between two or more trading partners that are about to be brought to WTO Dispute Settlement Body must be covered in one of the WTO Agreements.237 The plain packaging is related to one of the WTO Agreements, the TRIPS Agreement. Other than the TRIPS Agreement, there are other Agreements in WTO that can become the legal basis for any dispute in the request for consultation or dispute settlements in case any involving countries have failed to perform its obligation under the agreements that bother other countries, as below:
1. The General Agreement on Trade and Tariffs Article XXII and XXIII Article XXII of the GATT states in the first paragraph that all member countries shall firstly conduct consultation with the disputing member country or countries by themselves by referring to the provisions in this
237 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 1, from www.wto.org, accessed on 17 November 2017. 109
agreement. However if such action has been done and there is no mutual solution gained from the consultation, the second paragraph allows the member country or countries to request for consultation to the WTO.238 While the Article XXIII of GATT regulates that the member countries can request for consultation with other country if the action of the particular other country has failed to carry out its obligations under the agreement, applied other measures both relevant or irrelevant with the Agreement, and any other acceptable situation239 2. The Agreement on Agriculture Article 19. 3. The Agreement on the Application of Sanitary and Phytosanitary Measures Article 11. 4. The Agreement on Textiles and Clothing Article 8.10. 5. The Agreement on Technical Barriers to Trade Article 14. 6. The Agreement on Trade-Related Investment Measures Article 8. 7. The Agreement on Implementation of Article VI of GATT 1994. 8. The Agreement on Implementation of Article VII of GATT 1994. 9. The Agreement on Preshipment Inspection Articles 7 and 8. 10. The Agreement on Rules of Origin Articles 7 and 8. 11. The Agreement on Import Licensing Procurers Article 6. 12. The Agreement on Subsidies and Countervailing Measures Articles 4 and 30. 13. The Agreement on Safeguards Article 14. 14. The General Agreement on Trade in Services Articles XXII and XXIII.
Those Articles in the mentioned Agreements basically allow the member countries involved in Agreement to request for consultation once he dispute occurs.
238 Ibid. 239 GATT Agreement 1948 Article XXII & XXIII, from www.wto.org, accessed on 17 November 2107. 110
The request of consultation consists of the complaint from the requesting party. There are three types of complaints in the trade dispute settlement of WTO DSB.240 The first type is the complaint on violation. The complaint on violation submitted to WTO must consist the proofs of elimination or decrease of benefit enjoyed by the complainant country as the result of the failure of the other member countries to carry out their responsibilities set under the Agreements. The second complaint is the non-violation complaint. The non-violation complaint is the complaint that is challenging any further measures applied by other member countries even though the measures are in line with the Agreements as long as the measures eliminate or decrease the benefit enjoyed by other countries, especially the complainant. The last type of complaint is the situational complaint which refer to any complain based on any situation that resulted in the elimination or decrease of benefits enjoyed by the complainant country.
As the umbrella of the practice of trade beyond boundaries, the member countries of WTO perceived that it is also necessary to form a dispute settlement mechanism to help solve any upcoming problems occurred as the effect of the enforcement of the Agreement. The dispute settlement system has been found since the adoption of General Agreement on Trade and Tariffs (GATT). In the era of GATT adoption, the dispute settlement is decided by the chairman of the GATT Council by referring to the report of the working parties that represent the interest of parties in the dispute. The working parties will then be replaced by independent panels consist of three to five independent experts that have no interest relation with the disputing parties. The independent panels shall then submit a report to the GATT Council regarding the case and if the GATT Council approved the report, the report shall then have the legal status that binds the
240 Stages of Dispute Settlement in WTO DSB, from www.wto.org, accessed on 17 November 2017. 111
parties in the dispute and become the precedent of the next dispute on the same or similar case.241
In WTO DSB dispute settlement system as adopted from the result of Uruguay Round that shall be conducted through the mechanism in the picture.
241 https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c2s1p1_e.htm 112
Figure 4.4 The Stages of Dispute Settlement Under WTO DSB, WTO.
113
1. Consultation The World Trade Organization in the Dispute Settlement Understanding (DSU) actually prefers if the member countries that have dispute to discuss and consult by them regarding the dispute and to find the best solution by referring to the provisions in the WTO Agreements. 242 Therefore, for any dispute settlement under the WTO, the first stage will always be consultation between disputing parties with the hope that satisfactory solution would come as the output of the consultation and therefore, further litigation will not be necessary. 243 However, if the consultation does not end up in satisfactory solution in 60 days, the disputing parties may proceed to the next level by requesting the adjudication by an established panel.244 However, during the adjudication by the panel, the disputing parties are still encouraged to find the mutual solution. In submitting a request for consultation, the requesting member country shall address the request to the responding countries and notify the WTO Dispute Settlement Body. The submitted request to the WTO secretariat will then be spread to the public and other members to notify that a case is being built in the WTO DSB. The request of the consultation must provide the reasons for the consultation and the legal basis for the complaint.245 The member country that the consultation is addressed to (responding country) will be obliged to consider the request and be willing to make the consultation.246 Normally, the responding country shall have to reply the written request of consultation within 10 days and conduct the
242 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 3.7, from www.wto.org, accessed on 17 November 2017. 243 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 4.5, from www.wto.org, accessed on 17 November 2017. 244 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 4.7, from www.wto.org, accessed on 17 November 2017. 245 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 4.4, from www.wto.org, accessed on 17 November 2017. 246 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 4.2, from www.wto.org, accessed on 17 November 2017. 114
consultation in 30 days.247 If the responding country is not able to meet the criteria, the requesting country is allowed to directly proceed to the panel adjudication. The consultation will be conducted in Geneva in a very confidential forum.248 Therefore there are very limited information shall be disclosed regarding the consultation including to the secretariat of WTO. After the consultation, if no satisfactory and mutual solution was formed, the requesting and complaining country is allowed to request for the establishment of panel in minimum 60 days after the consultation.249 Beside the disputing member countries, other WTO member countries are welcomed to join the consultation as third parties. Usually the member countries requesting to be the third parties have something in common of interest either with the complaining or the responding country regarding the matter. The interested member countries must then submit a request to join the consultation to the disputing member countries. The responding member countries must agree upon the request. However the requesting country is free to either accept or refuse the request of the joint consultation. If the requesting member country then chose to refuse the request of the third parties, the third parties shall not be allowed to be involved in the consultation even though the interest of the third parties is very high on the issue being consulted. Regarding the trade dispute between Australia and Indonesia on the Plain Packaging Act 2011, Indonesia submitted the request of consultation both to Australia and the secretariat on September 25, 2013 with the number WT/DS467/1,G/TBT/D/46IP/D/34,G/L/1041. In the request Indonesia brought 4 points of Australia‘s considered-to-be violation to the Intellectual Property Rights which are the Number 148 and 149 of the Act
247 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 4.3, from www.wto.org, accessed on 17 November 2017. 248 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 4.6, from www.wto.org, accessed on 17 November 2017. 249 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 4.7, from www.wto.org, accessed on 17 November 2017. 115
2011, the Plain Packaging Act 2011 that is amended in the Tobacco Plain Packaging Amendment Regulation 2012 number 1, any related measures adopted by Australia regarding the plain packaging that are related to the implementation of Plain Packaging Act 2011. 250 Indonesia also mentioned in the request for consultation several articles that are violated due to the implementation of Plain Packaging Act 2011 as explained previously. On 30 September 2013, Guatemala submitted a request to be involved in the consultation as the third party considering Guatemala‘s interest in the case. Guatemala has two types of interests in the case. The economic interest as Guatemala‘s export value of tobacco and tobacco products reached USD 54 Million and also the health interest.251 On 2 October 2013, Nicaragua submitted the request to join the consultation considering the interest of Nicaragua on the tobacco product. Nicaragua considered the Act imposed by the Australian Government is threat to the tobacco production and the employment in the sector as the cigars export is one of the main export commodities from Nicaragua.252 On the same date with the Nicaragua, with the interest to see the application of the TRIPS Agreement provisions in the case, New Zealand submitted a request to join the consultation.253 On the following day, with the interest on the trade of the tobacco and tobacco products, Uruguay also submitted a request to join the consultation.254 To add the third parties in the consultation, on 4 October 2013, European Union also submitted the request to join the consultation bringing the crosscutting issues of Intellectual Property Rights protection and health
250 Indonesia’s communication to WTO DSB Panel Number WT/DS467/1, G/TBT/D/46 IP/D/34, G/L/1041 dated on 23 September 2013. 251 WTO Document WT/DS467/2, dated on 30 September 2013. 252 WTO Document WT/DS467/3, dated on 2 October 2013. 253 WTO Document WT/DS467/4, dated on 2 October 2013. 254 WTO Document WT/DS467/5, dated on 3 October 2013. 116
protection.255 On 7 October 2013, Norway also submitted its request to join the consultation as Norway was revising the tobacco policy to reduce the smoking prevalence at the moment and thus the outcome of the dispute shall be helpful to be a reference for Norway.256 On the same day with Norway, by considering its interest in trade, Canada submitted a request to join the consultation.257 Still on the same day, the Dominican Republic also submitted the request for joining the consultation considering its interest on trade as the major producer and exporter of tobacco products.258 On 8 October 2013, Brazil and Honduras submitted a request to join the consultation bringing the trade interest of both countries.259 As the producer and exporter of tobacco products Ukraine also submitted the request for joining the consultation on 11 October 2013.260 On 25 October 2013, to add the list of the third parties, Cuba submitted the request of joining the consultation.261 On 28 October 2013, Australia accepted Indonesia‘s request for the consultation as well allowing all the requesting member countries to get involved in the consultation.262 The consultation was then held on the following day, 29 October 2013, after the acceptance of Australia for the consultation. 2. The Panel Stage As mentioned previously, if the consultation between disputing countries failed to make a mutual and satisfactory solution toward the dispute, the complaining country shall then be allowed to request for the establishment of panel for the panel adjudication on the case in minimum 60 days after the consultation. Once the panel established and submits the adjudication
255 WTO Document WT/DS467/6, dated on 4 October 2013. 256 WTO Document WT/DS467/7, dated on 7 October 2013. 257 WTO Document WT/DS467/8, dated on 7 October 2013. 258 WTO Document WT/DS467/9, dated on 7 October 2013. 259 WTO Document WT/DS467/10 and WT/DS467/11, dated on 8 October 2013. 260 WTO Document WT/DS467/12, dated on 11 October 2013. 261 WTO Document WT/DS467/13, dated on 25 October 2013. 262 WTO Document WT/DS467/14, dated on 28 October 2013. 117
to the WTO DSB and the DSB has the saying on the dispute, all the disputing parties must obey the decision as the decision is legally binding the parties. 263 However, as mentioned before, even at this stage both disputing countries are still allowed to conduct further bilateral consultation to find a more mutual solution for the dispute. The stage to establish the panel, the complaining country must then submit a request for the panel establishment to the chairman of the WTO DSB and the request shall then be circulated to all members of WTO. The complaining country must also include the standard term of reference to become of the considerations for the panel to examine the dispute or in other words, the scope and limitation of the dispute to be examined by the panel by still attaching the basis for the complaint and the measures being complained. 264 The complaining country must be very careful in determining the term of reference for the panel‘s jurisdiction as the request can be overruled by the panel or rejected by the responding country. Different from the request for consultation, in the request for panel establishment, the responding country can refuse the adjudication by panel in the DSB meeting and DSB can also refuse the establishment of the panel if the consensus chose so.265 However, the consensus of the DSB can be overruled if it is against the request of the complainant country and the complainant country insists to establish the panel as agreed by the responding country. In the panels‘ adjudication, other members beside the disputing members are also welcomed to become the third parties and deliver their hearing on the case even though they did not join the consultation as the third party through notification to the panel by including their interest in becoming
263 World Trade Organization Dispute Settlement Understanding (WTO DSU), from www.wto.org, accessed on 17 November 2017. 264 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 7.1, from www.wto.org, accessed on 17 November 2017. 265 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 6.1, from www.wto.org, accessed on 17 November 2017. 118
the third party.266 However, the WTO member countries have only 10 days deadline to become the third parties of the panel adjudication after the panel established. The panel in the dispute shall consist of three or five independent members nominated by the DSB and agreed by the disputing members.267 The panels in the dispute must then perform their duties and responsibilities independently without being associated to any government or organization as well as the member countries are prohibited to influence the panels of the dispute.268 Once the panel has been established, the panel may proceed to work by first setting timeline for the adjudication. The disputing parties will then exchange submissions regarding the preliminary issues on the case as raised by the complainant country, such as challenging the request of the complainant country for the panel establishment. If it happens to be no preliminary issue on the case, the parties may proceed by submitting their first documents on the adjudication, including the third parties. It is worth noting that all the documents submitted are highly confidential. Only the panel report will be circulated to all WTO members. After the disputing parties submitted their first submission, the panel then invited the parties to deliver oral views on the case.269 For the third parties, there will be session specially made for them to present their views on the case.270 After presenting the oral statements on the case, the disputing parties may submit their rebuttals in about four weeks after the panel meeting which is also known as the second submission. The parties will
266 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 10.2, from www.wto.org, accessed on 17 November 2017. 267 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 8, from www.wto.org, accessed on 17 November 2017. 268 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 8.9, from www.wto.org, accessed on 17 November 2017. 269 Working Procedure Appendix 3 paragraph 9, from www.wto.org, accessed on 17 November 2017. 270 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 10.2, from www.wto.org, accessed on 17 November 2017. 119
then be invited to the substantive meeting to respond to the rebuttals but still without the third parties. For the third parties, the panel will provide other session to hear the views by providing the legal facts and arguments as well as answering questions from panels and other third parties. After all those processes done, the panel shall then make panel deliberation to compose the panel report without the parties and still in a highly confidential forum. 271 During the moment the panel is also prohibited to conduct any communication with one party without other disputing party. The report of the panel shall consist of two parts that are descriptive parts and the findings. After the descriptive report draft is composed, the disputing parties will then be invited again to provide their comments. This aims to make sure all the arguments and complains of the parties have been included in the descriptive report draft. Afterward, the panel will compose the findings containing the decision whether the complaint shall be uphold or rejected along with the considerations. 272 After the descriptive report, findings, conclusion, and recommendation are composed, the panel again distributes the report to the disputing parties to be reviewed in a very confidential way and the disputing parties are also still welcomed to argue on specific points. The interim review of the disputing parties will then become one of the considerations of the final panel report. Even though the documents and all the talks are very confidential, the party or parties often leak the draft of the report to the press.273 After the conclusion of the interim review, the panel should then submit the final report to the parties, normally within two weeks. In the dispute between Indonesia and Australia on the Plain Packaging Act 2011, the consultation did not come with mutual and satisfactory mutual
271 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 14.1 & 14.2, from www.wto.org, accessed on 17 November 2017. 272 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 12.7, from www.wto.org, accessed on 17 November 2017. 273 https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c6s3p4_e.htm 120
solution Indonesia requested the establishment of panel on 20 September 2013 with the document number of WT/DS467/15. The term of reference for the panel shall refer to the Article 7.1 of the Dispute Settlement Understanding.274 The request was the approved by the secretariat of DSB that the panel was established on 26 March 2014 and on 5 May 2014 the members of the panel were agreed to be consisted of three members namely: 1. Mr. Alexander Erwin, as the chairperson of the panel 2. Mr. Francois Dessemontet, as the member of the panel 3. Ms. Billie Miller, as the member of the panel.
On 14 October 2014, the chairperson of the panel submitted the notification of the timeline of the panel adjudication, of which stated that the final report shall be distributed to the disputing parties by the first half of 2016. On 27 October 2014, the panel submitted another communication regarding the preliminary ruling in which Australia challenged the request of Indonesia for the panel establishment due to the finding of the ambiguity of the Indonesian complain point number 4, as stated below:275
Any related measures adopted by Australia, including measures that implement, complement or add to these laws and regulations, as well as any measures that amend or replace these laws and regulations.276
Australia challenged the measures stated by Indonesia as it is ambiguous. After several communications, the panel decided to go on with case.277 The development of the dispute between Australia and Indonesia is still at this stage. The panel has not circulated the final report to disputing parties and therefore, the WTO DSB has not had the final saying on this case. The panel is targeting to circulate the final panel report by the end of third
274 WTO Document WT/DS467/15, dated on 6 March 2014. 275 WTO Document WT/DS467/19, dated on 27 October 2014. 276 Ibid. 277 Ibid. 121
quarter of 2017.278However, some media released the news that the panel favored Australia to continue implementing the Plain Packaging Act.279
Even though the reports of the panel contains the findings, conclusion, and recommendation, the report will not directly be adopted by disputing countries as the solution to the dispute. The recommendation will only turned into legally binding solution for disputing countries only when the WTO DSB in its final saying on the case agree to adopt the recommendation submitted by the panel, otherwise, the panel reports shall never come into legal regulation. 280 If there is no appeal from the disputing parties, it is very much likely that the report of the panel will be adopted by the WTO DSB, if one of the disputing parties decides to appeal, further step must be taken by the WTO DSB in concluding the final saying on the dispute.281
3. Appellate Review After the final report of the dispute being circulated to the disputing parties, the parties have the choices either to go on with the report or the file appeal on the final report. If one or both disputing parties then decide to file appeal regarding the panel‘s final report, there has to be review from appellate body. If the disputing countries are not in the same position on the panel‘s report, each of the party must be fast in either submitting appeal or requesting the panel‘s report to be put in the agenda of DSB Meeting of which the panel‘s
278 Summary of the Dispute DS 467 up to 3 October 2017, from www.wto.org, accessed on 17 November 2017. 279 ABC News. (2017, May 5). Australia Wins Landmark Plain Packaging Case. Retrieved from http://www.abc.net.au/news/2017-05-05/australia-wins-landmark-wto-tobacco-packaging- case/8498750 280 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 11, from www.wto.org, accessed on 17 November 2017. 281 Articles 4 paragraph 8 and 7 paragraph 6 SCM Agreement, from www.wto.org, accessed on 17 November 2017. 122
report shall than be adopted into legal binding. 282 For the party of the disputing countries wish to file appeal regarding the panel‘s report, it has to be done in 20 days after the panel final report is circulated or can also be in 60 days. Both disputing parties are allowed to file the appeal but nor third parties. The appeal is usually filed because one or even both disputing parties feel that the conclusion and recommendation of the panel‘s report deemed to have nullified or impair the benefits of the WTO Agreement enjoyed by the member country if the panel then be adopted. The third parties that have involved in the panel adjudication can participate in the appellate review through: a. Filling submission at no later than 25 days after the notice of appeal regarding their views on the case as well as to appear at the oral hearing in the appellate review or even to make oral statement in the review.283 b. Notifying at no later than 25 days after the appellate notice to the Appellate Body Secretariat to appear in the hearing of oral statement in the review as well giving oral statement but without filing submission.284 c. Neither filing submission nor making notification, but notify to appear in the review and to make oral statement.285 d. Neither filing submission nor making notification but to appear in the review and becoming the passive observer.286
The process of the appellate is not very much different from the panel adjudication process. The Appellate Body shall also submit the report to the
282 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 16 paragraph 4, from www.wto.org, accessed on 17 November 2017. 283 Rules 24(1) and 27(3)(a) of the Working Procedures, from www.wto.org, accessed on 17 November 2017. 284 Rules 24(2) and 27(3)(a) of the Working Procedures, from www.wto.org, accessed on 17 November 2017. 285 Rules 24(4) and 27(3)(b) and (c) of the Working Procedures, from www.wto.org, accessed on 17 November 2017. 286 Rules 24(4) and 27(3)(b) of the Working Procedures, from www.wto.org, accessed on 17 November 2017. 123
DSB in two forms, descriptive and findings. The appellate review normally takes no longer than 90 days, mostly in 60 days. If within 60 days of the appellate process, the appellate report has not been able to be submitted yet, the appellate body shall notify DSB the reason of the delay and the expected finish date.
4. Adoption of Reports by Dispute Settlement Body After the appellate review finished and the Appellate Body submitted the report to the DSB, the DSB must adopt the report unless the consensus decide not to adopt. Once the report is adopted by the DSB, all the parties must automatically adopt the reports as well and legally bound in the report.287 The time for the implementation by the disputing parties will then be agreed between the parties and the WTO DSB. If one of the disputing parties is not implementing the DSB final saying, the WTO will then have two choices either to give compensation or to suspend member‘s WTO obligation until the report then be implemented by the disputing parties.288
Table 4.1 The Development of the Australia – Indonesia Dispute Settlement on Australia‘s Plain Packaging Act 2011 under WTO DSB
2013 2014 2015 2016 2017
Indonesia requested for Indonesia Panel Panel consultation (25 September requested for announced announce 2013) Panel expected d delay of establishment issued of expected (6 March Adjudicati panel report issued of 2014) on (30 June panel 2016) report (21 Septembe r 2017) Guatemala Submitted WTO DSB Panel
287 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 17 paragraph 14, from www.wto.org, accessed on 17 November 2017. 288 World Trade Organization Dispute Settlement Understanding (WTO DSU) Article 2 paragraph 2, from www.wto.org, accessed on 17 November 2017. 124
Request to be the Third established announced Party in the Consultation (30 Panel (6 May delay of September 2013) 2014) expected issued of panel report (6 December 2016) Nicaragua Submitted Chairperson Request to be the Third of the Panel Party in the Consultation (2 announced October 2013) the timeline of adjudication (14 October 2014) New Zealand Submitted Panel issued Request to be the Third Communicatio Party in the Consultation (2 n concerning October 2013) the preliminary ruling proposed by Australia (27 October 2014) Uruguay Submitted Request to be the Third Party in the Consultation (3 October 2013 European Union Submitted Request to be the Third Party in the Consultation (4 October 2013) Norway Submitted Request to be the Third Party in the Consultation (7 October 2013) Canada Submitted Request to be the Third Party in the Consultation (7 October 2013) Dominican Republic Submitted Request to be the Third Party in the Consultation (7 October 2013) 125
Brazil and Honduras Submitted Request to be the Third Party in the Consultation (8 October 2013) Ukraine Submitted Request to be the Third Party in the Consultation (11 October 2013) Cuba Submitted Request to be the Third Party in the Consultation (25 October 2013) Australia Accepted Indonesia’s Request for Consultation (28 October 2013) Consultation (29 October 2013)
From the explanation above it is very obvious that WTO plays the very crucial role in this dispute between Australia and Indonesia on the Plain Packaging Act 2011 implemented by Australian Government. Australia is known as the first ever country in the world implementing such regulation in the national law. This has triggered number of countries to follow Australia to start making similar regulation. This has been a growing threat to the Intellectual Property Rights Protection as such regulation has violated the trademarks and geographical indication of the tobacco products. It is important to understand that the final decision on this dispute will become a landmark either for a stronger Intellectual Property Rights Protection or for the new chapter of both the Intellectual Property Rights Protection and Addressing Health Issue.
If the WTO DSB then finally decided to give the favor to Indonesia as the complainant, the protection of Intellectual Property Rights will become stronger than ever. Therefore all countries shall put aside all the plan to make and develop the similar regulation. Otherwise, if Australia gains WTO‘s favor, there might be many things as consequences following. One of which will be the increase of the 126
violation on the protection of Intellectual Property Rights. Many countries might follow the step taken by Australia in securing their nationals health either on the tobacco products or on other products. ―War‖ of regulation might also occur when some other countries ―hurting‖ by this regulation impose the same regulation on the Australia‘s export products that are considered as health- harming, for example Australian wine and junk foods. Therefore, it will not be an easy task for WTO to decide the best solution for the dispute.
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CHAPTER V
CONCLUSION
At the very beginning of the implementation Plain Packaging Act 2011, data showed that the smoking prevalence in Australia is decreasing. However, we also cannot conclude that the decrease of the smoking prevalence was merely the impact of the plain packaging act. It is also worth noting that during the implementation of the Plain Packaging Act, the other programs of the government were still enforced. However, at the other side of the policy, the tobacco industry is hurt by this policy as the identity of the tobacco industry is being killed in this packaging. The tobacco industry believes that the trademark and other identity are things that were built over years or even centuries that have the value and pride of the industry as well as giving certain benefits to the industry. Therefore, tobacco industry believes that this Plain Packaging Act 2011 has violated the Intellectual Property Rights Protection.
Many countries whose major commodities are tobacco are complaining about Australia‘s Policy representing the tobacco industry in their countries. Indonesia, as the front-liner, brought the case to the World Trade Organization to invite Australia for the consultation to find possible mutual solution for the problem in September 2013. The main concern of Indonesia‘s complaint is the Intellectual Property Rights Protection violation that is believed to bring bad impact to the tobacco industry in the country. Tobacco industry is one of the most important industries for Indonesia. Besides the contribution of the GDP that reaches 0.9% in 2016, the tobacco industry is also important for major Indonesian societies. The tobacco industry has become the living of million people in centuries as well as helping many people in need through the industry‘s Corporate Social Responsibility Program.
The basis of Indonesian complaint towards the Tobacco Plain Packaging Act 2011 is the Trade Related Aspect of Intellectual Property Rights Agreement 128
(TRIPS Agreement) articles 2 paragraph 1, 3 paragraph 1, 15 paragraph 4, 16 paragraph 1, 16 paragraph 3, 20, 22 paragraph 2(b), 24 paragraph 3. The other basis for the complaint is the Most Favored Nation (MFN) Principle of WTO in Intellectual Property Rights Protection. The implementation of the Plain Packaging Act 2011 has vividly violated those articles.
World Trade Organization through the Dispute Settlement Body (DSB) plays a very major role in this case. Besides providing the consultation media, panel‘s adjudication, and the decision, there are a very huge role of WTO in this case. As mentioned previously, Australia is the first country implementing such regulation with number of countries is in line to impose the same regulation. If the WTO DSB then grant the favor to Australia to implement such regulation, other countries will aggressively impose the same regulation. The decision of the WTO will be considered as the legal permit of the countries to do so. On the other side, if WTO grants the favor to Indonesia‘s complaint, the Intellectual Property Rights protection will be stronger than before.
The case is now being discussed by the panel in WTO DSB. Once the panel circulated the final panel report to the disputing parties, the next step will be taken and at last the decision of WTO will be adopted. There are always two sides of the story. One side, the Australia and the countries with the similar interest, are hoping that the WTO can give its favor to the Plain Packaging Act 2011. On the other side, the other countries are hoping that WTO can uphold the Intellectual Property Rights. Thus, it would be very wise of accommodating both interests would become the ultimate goal of the WTO by not abandoning any aspects of the rules and regulations.
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APPENDICES
APPENDIX A – MINUTES OF INTERVIEW
MINUTES OF INTERVIEW
Date : Tuesday, 14 November 2017 Time : 10.30 – 11.15 Place : PT HM Sampoerna Tbk – Pacific Place Jakarta Interviewer : Anthoni Nicolas Tarigan Interviewee : 1. Mr. Yos Adiguna Ginting – Independent Director of PT HM Sampoerna Tbk 2. Mr. Wilson Andrew – International Trade Manager of PT HM Sampoerna Tbk Topic of Discussion : The issue of Australia Plain Packaging Act 2011 on tobacco products and Intellectual Property Rights from the perspective of the player in the tobacco industry
1. How do you see Plain Packaging Act 2011?
We as the player in the sector can only respond to the question up to the limit of how the Act can impact the industry as we do not have the capacity to go directly fight the Australia on imposing certain regulation. Regarding the Plain Packaging Act 2011, simply put, we as the legal entity of the industry and has legal product wonder why we are not treated with the basic principles for the legal products. Basically, the case is about the trade dispute that is related to the intellectual property. In the plain packaging we can see that there is no logo, colors, and other trademarks attached. That has become the main complaint from us, it is not the health warning or other features, it is just that we, as the company who legally own the brand mark do not have the freedom to display our brand value to communicate our identity to our customers. By the implementation of the plain packaging, the customers will fail to easily identify the producers of the brand. Assume that all the cars on the street are produced in the same 135
style and color, this will confuse the customers of the manufacturer, they will not recognize which one is Hyundai, which one is what. The identity is one of the most important features for the producers. All the producers of all goods work hard to create an identity for the consumers to distinguish one brand from others. Therefore the brand, the identity, plays a very crucial role in the trade. Hence, we as the manufacturer of the tobacco products hope that the government can defend the interest of the industry in Indonesia.
2. If take a look of the trade data between Indonesia and Australia. The trend shows an increasing number of the export from Indonesia to Australia despite the implementation of this Plain Packaging Act 2011 (2011 – 2016). Then what becomes the worry of the industry if the economically does not hurt the industry?
Regarding that matters, we have to categorize based on the harmonized- system (HS) code because we as the player in the industry, if one door closes, we will try to enter through other doors. However, what matter is that the step taken by the Australian government to make this product become generic. We always ask the purpose of such action, what are the alternatives to achieve the goals, and amongst all those alternatives, which one is the most effective. Furthermore, even though the purpose is noble, still we need to obey the applicable laws and regulations. This has become our concern for so long, if the data shows that the export is increasing, we can assume that the consumption is increasing as well. So if the consumption is increasing, then the purpose is not fulfilled while the industry has been hurt by the way the pursuance of the purpose. The increasing of the export cannot also be assumed that the industry should be fine despite the ban on the display of the brand. There is other thing that matters, the value of the brand. The players in the industry have struggled and strived over decades to make the brand highly valuable.
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Take the example of cars, just piles of steels, however, why the products of Mercedes Benz are way more expensive than other, say Hyundai, while the function is the same – because of the brand. Same things go to other products, fashion, and the others. Such kind of essence needs to be considered. We have to analyze the goal again, the Australia stated that the goal is to reduce the consumption however, fact shows that the consumption increasing, we have to rethink about the way we achieve the goals which in this case has violated numbers of agreements and hurt the industry. This act can also harm the industry by creating the down-trading as there is no display of the trademark, the players in the industry will have a “price” war in which they put aside the matter of quality and emphasize on the price. Since there is no distinguish from a premium to regular brand, the customers for sure will prefer the cheaper price and this will hurt the producers of premium products.
3. Based on your view, how is this issue best solved?
The noble purpose still needs to obey the applicable law and regulations. We believe that there are many other instruments can be used to achieve this purpose without violating the rules and regulations. We also hope that Australian government to evaluate the rules and regulation and the impact of its implementation, if the real condition is still far from the purpose, may be the Act needs to be adjusted or even revoked and put other instruments into force to achieve the purpose, such as the excise and tax. This issue will become the precedent of many issues in the world to the products that are considered as health-harming to be put into the same treatment. Therefore, this issue needs to be solved very wisely.
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APPENDIX B – WTO DOCUMENTS
WT/DS434/12, WT/DS435/17 WT/DS441/16, WT/DS458/15 WT/DS467/16
28 April 2014
(14-2591) Page: 1/2
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING (WT/DS434)
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING (WT/DS435, WT/DS441, WT/DS458, WT/DS467)
PROCEDURAL AGREEMENT BETWEEN AUSTRALIA AND UKRAINE, HONDURAS, THE DOMINICAN REPUBLIC, CUBA AND INDONESIA
The following communication, dated 24 April 2014, addressed to the Chairperson of the Dispute Settlement Body, is circulated at the request of Australia on behalf of all the signatories to this procedural agreement.
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Panels have been established at the requests of Ukraine (DS434), Honduras (DS435) and Indonesia (DS467) to examine their respective complaints concerning Australia's plain packaging requirements applicable to tobacco products and packaging (the "tobacco plain packaging measure"). Dominican Republic (DS441) and Cuba (DS458) have each requested the establishment of dispute settlement panels to consider their respective complaints concerning the same matter. Those requests will be considered at the WTO Dispute Settlement Body meeting on 25 April 2014. In relation to the tobacco plain packaging disputes, Australia, Ukraine, Honduras, Dominican Republic, Cuba and Indonesia (hereafter referred to as "the parties") have reached the following agreement:
Arrangements for the establishment of related Panels:
Dominican Republic (DS441) and Cuba (DS458) will proceed with their panel requests at the 25 April 2014 Dispute Settlement Body meeting and Australia will agree to the establishment of those panels at that meeting. At that point, five panels will have been established to examine complaints related to the same matter (the tobacco plain packaging measure) within the meaning of Article 9.3 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).
Arrangements for the composition of the Panels:
Pursuant to Article 8.7 of the DSU, on 24 March 2014, Ukraine requested the Director-General to determine the composition of the panel in DS434. On 26 March 2014, Australia requested the Director-General to determine the composition of the panel in DS435.
On 23 April 2014, Australia requested the Director-General to determine the composition of the panel in DS467. On 25 April 2014, Australia will request the Director-General to determine the composition of the panels in DS441 and DS458.
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WT/DS434/12 • WT/DS435/17 • WT/DS441/16 • WT/DS458/15 • WT/DS467/16 - 2 -
The parties have agreed that a meeting with the Director-General on panel composition will take place on 24 April 2014. In order to ensure that the views of all parties are taken into consideration by the Director-General for the selection of panelists, the Director-General has been requested to allow the full participation of all the parties in the meeting with him on 24 April 2014, irrespective of the stage of the respective disputes.
The Director-General will compose the panels in DS434, DS435, DS441, DS458 and DS467 on 5 May 2014, and the same panelists will be appointed in all these disputes, pursuant to Article 9.3 of the DSU.
The parties agree that following the composition of the Panels by the Director-General on 5 May 2014, all the requirements of Article 8 of the DSU will have been met.
Without prejudice to their respective rights under the DSU, the parties agree to the harmonisation of the timetable for the panel proceedings in DS434, DS435, DS441, DS458, DS467, pursuant to Article 9.3 of the DSU. The parties will undertake best endeavours to agree on a timetable to propose to the Panels.
Miscellaneous:
The parties agree to continue to co-operate in all matters related to this agreement and not to raise any procedural objections to any of the steps set out in this agreement. If during the application of this agreement the parties consider that a procedural aspect has not been properly covered by this agreement, they will endeavour to find a solution within the shortest time possible that will not affect the other aspects and agreed steps contained in this agreement.
Hamish McCormick Yurii Klymenko Ambassador Ambassador Permanent Mission of Australia Permanent Mission of Ukraine
Dacio Castillo Luis Manuel Piantini Munnigh Ambassador Ambassador Permanent Mission of Honduras Permanent Mission of Dominican Republic
Anayansi Rodriguez Camejo Syafri Adnan Baharuddin Ambassador Ambassador Permanent Mission of Cuba Permanent Mission of Indonesia
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WT/DS467/1, G/TBT/D/46 IP/D/34, G/L/1041
25 September 2013
(13-5132) Page: 1/3
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST FOR CONSULTATIONS BY INDONESIA
The following communication, dated 20 September 2013, from the delegation of Indonesia to the delegation of Australia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.4 of the DSU.
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My authorities have instructed me to request consultations with the Government of Australia pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, Article 14.1 of the Agreement on Technical Barriers to Trade ("TBT Agreement"), Article 64.1 of the Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS Agreement") and Article XXII of the General Agreement on Tariffs and Trade 1994 ("GATT 1994") with respect to certain Australian laws and regulations that impose restrictions on trademarks, geographical indications, and other plain packaging requirements on tobacco products and packaging.
The challenged measures at issue are:
Tobacco Plain Packaging Act 2011, Act No. 148 of 2011, "An Act to discourage the use of tobacco products, and for related purposes";
Tobacco Plain Packaging Regulations 2011 (Select Legislative Instrument 2011, No. 263), as amended by the Tobacco Plain Packaging Amendment Regulation 2012 (No. 1) (Select Legislative Instrument 2012, No. 29);
Trade Marks Amendment (Tobacco Plain Packaging) Act 2011, Act No. 149 of 2011, "An Act to amend the Trade Marks Act 1995, and for related purposes"; and
Any related measures adopted by Australia, including measures that implement, complement or add to these laws and regulations, as well as any measures that amend or replace these laws and regulations.
The measures apply to the retail sale of cigarettes, cigars, and other tobacco products. The measures establish comprehensive requirements regarding the appearance and form of the retail packaging of tobacco products, as well as the tobacco products themselves. The measures also establish penalties, including criminal sanctions, for the violation of these requirements. The measures require, inter alia, the following:
with respect to the retail packaging of tobacco products, the measures (i) regulate the appearance of trademarks and geographical indications, including by prohibiting the display of design and figurative features, including those forming part of these intellectual property rights; (ii) prescribe that the brand and variant names forming part of trademarks appear on the front face, top and bottom of the package in a
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WT/DS467/1 • G/TBT/D/46 • IP/D/34 • G/L/1041
- 2 -
1 uniform typeface, font, size, color, and placement ; (iii) prohibit the display of other words (except for basic information, including country of origin and manufacturer contact details); and (iv) mandate a matt finish and drab dark brown color (Pantone 448C) for retail packaging;
the measures establish that individual cigarettes may not display trademarks, geographical indications or any other marking other than an alphanumeric code for product identification purposes;
the measures provide that individual cigars may carry: the brand name, variant name, country of origin, and an alphanumeric code; these must be displayed in a uniform typeface, font, size, and color on a single band in a drab dark brown color (Pantone 2 448C) ; and
the measures regulate other aspects of both tobacco packaging and tobacco products, such as the following requirements: (i) a retail package for cigarettes must be in a 3 prescribed size, form and material; (ii) cigarettes must be white ; and (iii) a cigar tube must be cylindrical, rigid, and have an opening of at least 15 mm.
These measures regulating the plain packaging and appearance of tobacco products for retail sale appear to be inconsistent with Australia's obligations under the following provisions of the TBT Agreement, the TRIPS Agreement, and the GATT 1994:
Article 2.1 of the TBT Agreement, because the technical regulations at issue accord to imported tobacco products treatment less favorable than that accorded to like products of national origin;
Article 2.2 of the TBT Agreement, because the technical regulations at issue create unnecessary obstacles to trade because they are more trade-restrictive than necessary to fulfill a legitimate objective;
Article 2.1 of the TRIPS Agreement, which incorporates the provisions of the Paris Convention for the Protection of Industrial Property, as amended by the Stockholm Act of 1967 ("Paris Convention"), in particular, (i) Article 6quinquies of the Paris Convention, because trademarks registered in a country of origin outside Australia are not protected "as is"; and, (ii) Article 10bis of the Paris Convention, because Australia does not provide effective protection against unfair competition, for example, creating confusion between the goods of competitors;
Article 3.1 of the TRIPS Agreement, because Australia accords to nationals of other Members treatment less favorable than it accords to its own nationals with respect to the protection of intellectual property;
Article 15.4 of the TRIPS Agreement, because the nature of the goods to which a trademark is to be applied forms an obstacle to the registration of the trademark;
Article 16.1 of the TRIPS Agreement, because the measures prevent owners of registered trademarks from enjoying the rights conferred by a trademark;
Article 16.3 of the TRIPS Agreement, because the measures prevent owners of registered trademarks that are "well known" from enjoying the rights conferred by a trademark;
1 The brand name and variant must displayed in Lucida Sans typeface; no larger than 14 points for the brand name and 10 points for the variant name; with only the first letter capitalized; in regular font; in the color Pantone
Cool Gray 2C; and below the graphic health warning on the front surface of cigarette packs. 2 They must appear only once on the band and be displayed in Lucida Sans typeface; no larger than 10 points in size; in regular font; and in the color Pantone Cool Gray 2C. The brand and variant name should be placed horizontally along the length of the band so that they run around the circumference of the cigar. 3 However, a cigarette may include an imitation cork tip that is printed brown, and is placed over a filter tip.
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WT/DS467/1 • G/TBT/D/46 • IP/D/34 • G/L/1041
- 3 -
Article 20 of the TRIPS Agreement, because the use of trademarks in relation to tobacco products is unjustifiably encumbered by special requirements, such as (i) use in a special form, for example, the uniform typeface, font, size, color, and placement of the brand name, and, (ii) use in a manner detrimental to the trademark's capability to distinguish tobacco products of one undertaking from tobacco products of other undertakings;
Article 22.2(b) of the TRIPS Agreement, because Australia does not provide effective protection against acts of unfair competition with respect to geographical indications, for example, creating confusion among consumers with respect to the origin of goods;
Article 24.3 of the TRIPS Agreement, because Australia is diminishing the level of protection it affords to geographical indications as compared with the level of protection that existed prior to 1 January 1995; and
Article III:4 of the GATT 1994, because the measures at issue accord to imported tobacco products treatment less favorable than that accorded to like products of national origin.
Indonesia reserves the right to raise additional claims or matters during the course of these consultations, and in any future request for panel proceedings.
Indonesia looks forward to Australia's response to this request and to fixing a mutually acceptable date for consultations.
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WT/DS467/2
30 September 2013
(13-5222) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST TO JOIN CONSULTATIONS
COMMUNICATION FROM GUATEMALA
The following communication, dated 26 September 2013, from the delegation of Guatemala to the delegation of Australia, the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.
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In accordance with Article 4.11 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU"), the Government of Guatemala hereby notifies its desire to join in the consultations requested by Indonesia concerning certain Australian laws and regulations that impose trademark restrictions and other plain packaging requirements on tobacco products and packaging.
The request for consultations to Australia from Indonesia, dated 20 September 2013, was circulated to the WTO Members on 25 September 2013 as document WT/DS467/1, IP/D/34, G/TBT/D/46, G/L/1041.
Guatemala has a substantial trade interest in these consultations, as it exports more than US 54 millions of tobacco and tobacco products. Additionally, Guatemala has a systemic interest in public health issues; in particular, how Members reconcile their obligations under the WTO Agreements and the achievement of their own legitimate objectives.
A copy of this letter is being sent to the Chairman of the Dispute Settlement Body, with a request that it be circulated to the Members. Looking forward to hearing from you at your earliest convenience, I would like to take this opportunity to thank you for considering this request.
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WT/DS467/3
2 October 2013
(13-5293) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST TO JOIN CONSULTATIONS
Communication from Nicaragua
The following communication, dated 27 September 2013, from the delegation of Nicaragua to the delegation of Australia, the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.
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Pursuant to Article 4.11 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), the Government of Nicaragua hereby notifies to Australia, Indonesia and Dispute Settlement Body its interest to join the consultations requested by the Government of Indonesia under Articles 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, Articles 2.1, 3.1, 15, 20, 22.2(b), 24.3, and 16 of the Agreement on Trade- Related Aspects of Intellectual Property Rights (the "TRIPS Agreement"), Article 2.1 and 2.2 of the Agreement on Technical Barriers to Trade (the "TBT Agreement"), and Article III:4 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994") concerning certain Australian laws and regulations that impose trademark restrictions and other plain packaging requirements on tobacco products and packaging (the "measures").
Our country has a substantial trade interest in these consultations as manufacturer of cigars which represent one of the most important exports to Nicaragua and the Australian measures will undermine the competitive opportunities having also a negative impact in the production and employment in this sector. Nicaragua respectfully asks that its substantial trade interests in these consultations be recognized.
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WT/DS467/4
2 October 2013
(13-5295) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST TO JOIN CONSULTATIONS
Communication from New Zealand
The following communication, dated 30 September 2013, from the delegation of New Zealand to the delegation of Australia, the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.
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Pursuant to Article 4.11 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), New Zealand hereby notifies the Governments of Australia and Indonesia as well as the Dispute Settlement Body (DSB) that it wishes to be joined in the consultations requested by Indonesia in the document circulated to WTO Members on 25 September 2013 entitled "Australia – Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging" (WT/DS467/1, G/TBT/D/46, IP/D/34, G/L/1041).
New Zealand has a substantial trade interest in the subject of the consultations and a systemic interest in the application and interpretation of the provisions of the Agreement on Trade- Related Aspects of Intellectual Property Rights, the Agreement on Technical Barriers to Trade, and the General Agreement on Tariffs and Trade 1994.
New Zealand looks forward to confirmation of receipt and acceptance of this request and advice regarding the timing and venue for the consultations. I have further requested that this communication be circulated to the Members of the DSB.
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WT/DS467/5
3 October 2013
(13-5328) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST TO JOIN CONSULTATIONS
Communication from Uruguay
The following communication, dated 1 October 2013, from the delegation of Uruguay to the delegation of Australia, the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.
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I have the honour to address His Excellency, in reference with the request for consultations presented by Indonesia in Australian Plain Packaging Requirements Applicable to Tobacco Products and Packaging (WT/DS467/1, IP/D/34, G/TBT/D/46, G/L/1041), distributed to Members last 25 September 2013.
To this respect, my authorities have instructed me to notify the consulting Members and the Dispute Settlement Body of the desire of Uruguay to be joined in these consultations, pursuant to Article 4.11 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, having in mind the substantial trade interest and the standing of Uruguay in these consultations.
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WT/DS467/6
4 October 2013
(13-5368) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST TO JOIN CONSULTATIONS
Communication from the European Union
The following communication, dated 3 October 2013, from the delegation of the European Union to the delegation of Australia, the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.
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This letter relates to a communication circulated to WTO Members on 25 September 2013 (WT/DS467/1, G/L/1041, IP/D/34, G/TBT/D/46) entitled Australia – Certain Measures concerning Trademarks, Geographical Indications and other Plain Packaging Requirements Applicable to Tobacco Products and Packaging, by which Indonesia requests to hold consultations with Australia.
The consultations will touch upon issues concerning the balance between health and other interests in domestic measures, under the prism of three WTO agreements: the TRIPS Agreement, the TBT Agreement, and the GATT 1994. The European Union attaches great importance to the pursuit of policies aimed at tackling the negative health effects of tobacco consumption and it has adopted measures in that regard. At the same time, the European Union is the world's leading importer of raw tobacco, it imports significant volumes of manufactured tobacco, and it is the largest exporter of cigars and cigarettes.
In view of the foregoing, and pursuant to Article 4.11 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, the European Union hereby notifies the Government of Australia, the Government of Indonesia and the Dispute Settlement Body that, in the light of the substantial trade interest of the European Union, it desires to be joined in the consultations requested by Indonesia.
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WT/DS467/7
7 October 2013
(13-5416) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST TO JOIN CONSULTATIONS
Communication from Norway
The following communication, dated 4 October 2013, from the delegation of Norway to the delegation of Australia, the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.
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My authorities have instructed me to request, pursuant to Article 4.11 of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes, that Norway be joined in the consultations requested by Indonesia on 20 September 2013 in a communication circulated to Members on 25 September 2013 entitled Australia – Certain Measures concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (WT/DS467/1).
Norway is currently in the process of implementing revisions to its own tobacco policy, and has already introduced a number of measures in order to reduce smoking. Norway thus has a substantial trade interest in this dispute.
Norway looks forward to receiving Australia’s reply to this request.
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WT/DS467/8
7 October 2013
(13-5421) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST TO JOIN CONSULTATIONS
Communication from Canada
The following communication, dated 4 October 2013, from the delegation of Canada to the delegation of Australia, the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.
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In accordance with Article 4.11 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), the Government of Canada hereby notifies its desire to join in the consultations requested by Indonesia under Article 4 of the DSU, Article 14.1 of the Agreement on Technical Barriers to Trade, Article 64.1 of the Agreement on Trade-Related Aspects of Intellectual Property Rights and Article XXII of the General Agreement on Tariffs and Trade 1994 with respect to certain Australian measures relating to trademarks, geographical indications and other plain packaging requirements on tobacco products and packaging.
The relevant communication from the Permanent Mission of Indonesia, dated 20 September 2013, was circulated to WTO Members on 25 September 2013, as Australia – Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (WT/DS467/1, G/TBT/D/46, IP/D/34, G/L/1041).
Canada has a substantial trade interest in these proceedings as an importer of tobacco products and the interpretation of WTO obligations in this dispute could materially affect Canadian domestic measures. Accordingly, Canada requests to join in these consultations.
A copy of this letter is being sent to the Chairman of the Dispute Settlement Body with a request that it be circulated to Members.
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WT/DS467/9
7 October 2013
(13-5232) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST TO JOIN CONSULTATIONS
Communication from the Dominican Republic
The following communication, dated 4 October 2013, from the delegation of the Dominican Republic to the delegation of Australia, the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.
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I have received instructions from my country's authorities to request, pursuant to Article 4.11 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, that the Dominican Republic be joined in the consultations requested by Indonesia on 20 September 2013 regarding Australia – Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (WT/DS467/1, circulated on 25 September 2013).
The Dominican Republic is a major producer and exporter of tobacco products and therefore has a substantial trade interest in these consultations.
The Dominican Republic looks forward to receiving Australia's response.
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WT/DS467/10
8 October 2013
(13-5440) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST TO JOIN CONSULTATIONS
Communication from Brazil
The following communication, dated 4 October 2013, from the delegation of Brazil to the delegation of Australia, the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.
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Pursuant to Article 4.11 of the DSU, I would like to inform you that Brazil considers it has a substantial trade interest in the following dispute: Australia – Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (Complainant: Indonesia) (DS467).
In light of the above, I have been instructed to express Brazil's desire to be joined in the consultations requested by the Indonesia in document WT/DS467/1. I look forward to receiving Australia's reply to this request.
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WT/DS467/11
8 October 2013
(13-5441) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST TO JOIN CONSULTATIONS
Communication from Honduras
The following communication, dated 3 October 2013, from the delegation of Honduras to the delegation of Australia, the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.
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Pursuant to Article 4.11 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), the Government of Honduras notifies the Government of Australia, the Government of Indonesia, and the Dispute Settlement Body of its desire to be joined in the consultations requested by Indonesia in Australia – Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging, as set out in the communication circulated to WTO Members on 25 September 2013 (WT/DS467/1).
Honduras has a substantial trade interest in this dispute as a major producer and exporter of tobacco products.
Honduras looks forward to your reply.
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WT/DS467/12
11 October 2013
(13-5540) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST TO JOIN CONSULTATIONS
Communication from Ukraine
The following communication, dated 2 October 2013, from the delegation of Ukraine to the delegation of Australia, the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.
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Pursuant to Article 4.11 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), Ukraine notifies the Government of Indonesia, the Government of Australia, and the Dispute Settlement Body that, in light of the substantial trade interest of Ukraine, it desires to be joined in the consultations requested by Indonesia in a communication circulated to WTO Members on 25 September 2013 (WT/DS467/1, G/TBT/D/46, IP/D/34, G/L/1041) entitled Australia – Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging.
Ukraine is an important producer and exporter of tobacco products and therefore Ukraine has a substantial trade interest as well as a systemic interest in these proceedings.
Ukraine looks forward to being informed of the date and venue of the consultations.
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WT/DS467/13
25 October 2013
(13-5901) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST TO JOIN CONSULTATIONS
Communication from Cuba
The following communication, dated 11 October 2013, from the delegation of Cuba to the delegation of Australia, the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.
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Pursuant to Article 4.11 of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes, I would like to inform you that Cuba considers it has a substantial trade interest in the following dispute: Australia – Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (Complainant: Indonesia) (DS467).
In light of the above, I have been instructed to express Cuba's desire to be joined in the consultations requested by Indonesia in document WT/DS467/1.
Cuba looks forward to receiving Australia's reply to this request.
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WT/DS467/14
28 October 2013
(13-5946) Page: 1/1
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
ACCEPTANCE BY AUSTRALIA OF THE REQUESTS TO JOIN CONSULTATIONS
Brazil, Canada, Cuba, the Dominican Republic, the European Union, Guatemala, Honduras, New Zealand, Nicaragua, Norway, Ukraine, and Uruguay notified the Dispute Settlement Body (DSB) of their desire to be joined in the consultations requested by Indonesia, pursuant to Article 4.11 of the DSU.
The delegation of Australia informed the DSB that it had accepted the requests of Brazil, Canada, Cuba, the Dominican Republic, the European Union, Guatemala, Honduras, New Zealand, Nicaragua, Norway, Ukraine, and Uruguay to join the consultations.
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155
WT/DS467/15
6 March 2014
(14-1346) Page: 1/3
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
REQUEST FOR THE ESTABLISHMENT OF A PANEL BY INDONESIA
The following communication, dated 3 March 2014, from the delegation of Indonesia to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.
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On 20 September 2013, the Government of Indonesia requested consultations with the Government of Australia pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"), Article XXII of the General Agreement on Tariffs and Trade 1994 ("GATT 1994"), Article 64.1 of the Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPs Agreement"), and Article 14.1 of the Agreement on Technical Barriers to Trade ("TBT Agreement") with respect to certain Australian laws and regulations that impose restrictions on trademarks, geographical indications, and other plain packaging requirements on tobacco products and packaging.
Consultations were held on 29 October 2013 with a view to reaching a mutually satisfactory solution. These consultations clarified certain issues pertaining to this matter, but failed to resolve the dispute. Therefore, Indonesia respectfully requests, pursuant to Articles 4.7 and 6 of the DSU, Article XXIII of GATT 1994, Article 64.1 of the TRIPs Agreement, and Article 14.1 of the TBT Agreement, that the Dispute Settlement Body ("DSB") establish a Panel to examine this matter. Indonesia asks that this request be placed on the agenda of the DSB meeting to be held on 26 March 2014. Indonesia further requests that the Penal have the standard terms of reference, as set forth in Article 7.1 of the DSU.
A. Specific Measures at Issue
This request for establishment of a Panel concerns the following measures:
Tobacco Plain Packaging Act 2011, Act No. 148 of 2011, "An Act to discourage the use of tobacco products, and for related purposes";
Tobacco Plain Packaging Regulations 2011 (Select Legislative Instrument 2011, No. 263), as amended by the Tobacco Plain Packaging Amendment Regulation 2012 (No. 1) (Select Legislative Instrument 2012, No. 29);
Trade Marks Amendment (Tobacco Plain Packaging) Act 2011, Act No. 149 of 2011, "An Act to amend the Trade Marks Act 1995, and for related purposes"; and
Any related measures adopted by Australia, including measures that implement, complement or add to these laws and regulations, as well as any measures that amend or replace these laws and regulations.
The measures apply to the retail sale of cigarettes, cigars, and other tobacco products. The measures establish comprehensive requirements regarding the appearance and form of the retail packaging of tobacco products, as well as the tobacco products themselves. The measures also
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- 2 - establish penalties, including criminal sanctions, for the violation of these requirements. The measures require, inter alia, the following:
With respect to the retail packaging of tobacco products, the measures (i) regulate the appearance of trademarks and geographical indications, including by prohibiting the display of design and figurative features, including those forming part of these intellectual property rights; (ii) prescribe that the brand and variant names forming part of trademarks appear on the front face, top and bottom of the package in a 1 uniform typeface, font, size, color, and placement ; (iii) prohibit the display of other words (except for basic information, including country of origin and manufacturer contact details); and (iv) mandate a matt finish and drab dark brown color (Pantone 448C) for retail packaging;
the measures establish that individual cigarettes may not display trademarks, geographical indications or any other marking other than an alphanumeric code for product identification purposes;
the measures provide that individual cigars may carry: the brand name, variant name, country of origin, and an alphanumeric code; these must be displayed in a uniform typeface, font, size, and color on a single band in a drab dark brown color (Pantone 2 448C) ; and
the measures regulate other aspects of both tobacco packaging and tobacco products, such as the following requirements: (i) a retail package for cigarettes must be in a 3 prescribed size, form and material; (ii) cigarettes must be white ; and (iii) a cigar tube must be cylindrical, rigid, and have an opening of at least 15 mm.
B. Legal Basis of the Complaint
These measures regulating the plain packaging and appearance of tobacco products for retail sale appear to be inconsistent with Australia's obligations under the following provisions of the TBT Agreement, the TRIPS Agreement, and the GATT 1994:
Article 2.1 of the TBT Agreement, because the technical regulations at issue accord to imported tobacco products treatment less favorable than that accorded to like products of national origin;
Article 2.2 of the TBT Agreement, because the technical regulations at issue create unnecessary obstacles to trade because they are more trade-restrictive than necessary to fulfill a legitimate objective;
Article 1.1 of the TRIPS Agreement, because Australia has failed to give effect to the following provisions of the TRIPS Agreement;
Article 2.1 of the TRIPS Agreement, which incorporates the provisions of the Paris Convention for the Protection of Industrial Property, as amended by the Stockholm Act of 1967 ("Paris Convention"), in particular, (i) Article 6quinquies of the Paris Convention, because trademarks registered in a country of origin outside Australia are not protected "as is"; and, (ii) Article 10bis of the Paris Convention, because Australia does not provide effective protection against unfair competition, for example, creating confusion between the goods of competitors;
1 The brand name and variant must be displayed in Lucida Sans typeface; no larger than 14 points for the brand name and 10 points for the variant name; with only the first letter capitalized; in regular font; in the color Pantone Cool Gray 2C; and below the graphic health warning on the front surface of cigarette packs. 2 They must appear only once on the band and be displayed in Lucida Sans typeface; no larger than 10 points in size; in regular font; and in the color Pantone Cool Gray 2C. The brand and variant name should be placed horizontally along the length of the band so that they run around the circumference of the cigar. 3 However, a cigarette may include an imitation cork tip that is printed brown, and is placed over a filter tip.
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Article 3.1 of the TRIPS Agreement, because Australia accords to nationals of other Members treatment less favorable than it accords to its own nationals with respect to the protection of intellectual property;
Article 15.4 of the TRIPS Agreement, because the nature of the goods to which a trademark is to be applied forms an obstacle to the registration of the trademark;
Article 16.1 of the TRIPS Agreement, because the measures prevent owners of registered trademarks from enjoying the rights conferred by a trademark;
Article 16.3 of the TRIPS Agreement, because the measures prevent owners of registered trademarks that are "well known" or might become "well known" from enjoying the rights conferred by a trademark;
Article 20 of the TRIPS Agreement, because the use of trademarks in relation to tobacco products is unjustifiably encumbered by special requirements, such as (i) use in a special form, for example, the uniform typeface, font, size, color, and placement of the brand name, and, (ii) use in a manner detrimental to the trademark's capability to distinguish tobacco products of one undertaking from tobacco products of other undertakings;
Article 22.2(b) of the TRIPS Agreement, because Australia does not provide effective protection against acts of unfair competition with respect to geographical indications, for example, creating confusion among consumers with respect to the origin of goods;
Article 24.3 of the TRIPS Agreement, because Australia is diminishing the level of protection it affords to geographical indications as compared with the level of protection that existed prior to 1 January 1995; and
Article III:4 of the GATT 1994, because the measures at issue accord to imported tobacco products treatment less favorable than that accorded to like products of national origin.
C. Request for the Establishment of a Panel
Accordingly, Indonesia requests, pursuant to Article 4.7 and 6 of the DSU, Article XXIII of GATT 1994, Article 64.1 of the TRIPs Agreement, and Article 14.1 of the TBT Agreement , that the DSB establish a Panel with the standard terms of reference as set out in Article 7.1 of the DSU. Indonesia asks that this request be placed on the agenda of the meeting of the DSB scheduled for 26 March 2014.
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WT/DS467/17
6 May 2014
(14-2740) Page: 1/1
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
CONSTITUTION OF THE PANEL ESTABLISHED AT THE REQUEST OF INDONESIA
NOTE BY THE SECRETARIAT
1. At its meeting on 26 March 2014, the Dispute Settlement Body (DSB) established a panel pursuant to the request of Indonesia in document WT/DS467/15, in accordance with Article 6 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).
2. The Panel's terms of reference are the following:
To examine, in the light of the relevant provisions of the covered agreements cited by the parties to the dispute, the matter referred to the DSB by Indonesia in document WT/DS467/15 and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements.
3. On 23 April 2014, Australia requested the Director-General to determine the composition of the Panel, pursuant to Article 8.7 of the DSU. This paragraph provides:
If there is no agreement on the panelists within 20 days after the date of the establishment of a panel, at the request of either party, the Director-General, in consultation with the Chairman of the DSB and the Chairman of the relevant Council or Committee, shall determine the composition of the panel by appointing the panelists whom the Director-General considers most appropriate in accordance with any relevant special or additional rules or procedures of the covered agreement or covered agreements which are at issue in the dispute, after consulting with the parties to the dispute. The Chairman of the DSB shall inform the Members of the composition of the panel thus formed no later than 10 days after the date the Chairman receives such a request.
4. On 5 May 2014, the Director-General accordingly composed the Panel as follows:
Chairperson: Mr Alexander Erwin
Members: Mr François Dessemontet Ms Billie Miller
5. Argentina, Brazil, Canada, Chile, China, Cuba, the Dominican Republic, the European Union, 1 Guatemala, Honduras, India, Japan, the Republic of Korea, Malawi , Malaysia, Mexico, New Zealand, Nicaragua, Nigeria, Norway, Oman, Peru, the Philippines, the Russian Federation, Singapore, Chinese Taipei, Thailand, Turkey, Ukraine, the United States, Uruguay, and Zimbabwe have reserved their rights to participate in the Panel proceedings as third parties.
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1 On 14 April 2014, Malawi notified its interest to participate as a third party.
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WT/DS467/17/Rev.1
12 June 2015
(15-3051) Page: 1/2
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
CONSTITUTION OF THE PANEL ESTABLISHED AT THE REQUEST OF INDONESIA
NOTE BY THE SECRETARIAT
Revision
1. At its meeting on 26 March 2014, the Dispute Settlement Body (DSB) established a panel pursuant to the request of Indonesia in document WT/DS467/15, in accordance with Article 6 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).
2. The Panel's terms of reference are the following:
To examine, in the light of the relevant provisions of the covered agreements cited by the parties to the dispute, the matter referred to the DSB by Indonesia in document WT/DS467/15 and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements.
3. On 23 April 2014, Australia requested the Director-General to determine the composition of the Panel, pursuant to Article 8.7 of the DSU. This paragraph provides:
If there is no agreement on the panelists within 20 days after the date of the establishment of a panel, at the request of either party, the Director-General, in consultation with the Chairman of the DSB and the Chairman of the relevant Council or Committee, shall determine the composition of the panel by appointing the panelists whom the Director-General considers most appropriate in accordance with any relevant special or additional rules or procedures of the covered agreement or covered agreements which are at issue in the dispute, after consulting with the parties to the dispute. The Chairman of the DSB shall inform the Members of the composition of the panel thus formed no later than 10 days after the date the Chairman receives such a request.
4. On 5 May 2014, the Director-General accordingly composed the Panel as follows:
Chairperson: Mr Alexander Erwin
Members: Mr François Dessemontet Ms Billie Miller
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1 5. Argentina, Brazil, Canada, Chile, China, Cuba, the Dominican Republic, Ecuador , the 2 European Union, Guatemala, Honduras, India, Japan, the Republic of Korea, Malawi , Malaysia, Mexico, New Zealand, Nicaragua, Nigeria, Norway, Oman, Peru, the Philippines, the Russian Federation, Singapore, Chinese Taipei, Thailand, Turkey, Ukraine, the United States, Uruguay, and Zimbabwe have reserved their rights to participate in the Panel proceedings as third parties.
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1 On 1 June 2015, Ecuador notified its interest to participate as a third party. 2 On 14 April 2014, Malawi notified its interest to participate as a third party.
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WT/DS467/18
14 October 2014
(14-5863) Page: 1/1
Original: English
AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING
COMMUNICATION FROM THE CHAIRPERSON OF THE PANEL
The following communication, dated 10 October 2014, was received from the Chairperson of the Panel with the request that it be circulated to the Dispute Settlement Body.
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Article 12.8 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) provides that the period in which a panel shall conduct its examination, from the date that the composition and terms of reference of the panel have been agreed upon until the date the final report is issued to the parties to the dispute, shall, as a general rule, not exceed six months.
Article 12.9 of the DSU provides that, when a panel considers that it cannot issue its report within six months, it shall inform the Dispute Settlement Body (DSB) in writing accordingly and indicate the reasons, together with an estimate of the period within which it will issue its report.
The Panel in Australia – Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (WT/DS467) was established by the DSB on 26 March 2014 and composed on 5 May 2014.
The Panel expects to issue its final report to the parties not before the first half of 2016, in accordance with the timetable adopted by the Panel on 17 June 2014 on the basis of a draft timetable proposed by the parties.
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