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Issues in the Global Tobacco Economy: Selected Case Studies

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Issues in the Global Tobacco Economy: Selected Case Studies Issues in the global tobacco economy: Selected case studies Food and Agriculture Organization of the United Nations Rome, 2003 The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The views expressed herein are those of the authors and do not necessarily represent those of the Food and Agriculture Organization of the United Nations nor of their affiliated organization(s). All rights reserved. Reproduction and dissemination of material in this information product for educational or other non-commercial purposes are authorized without any prior written permission from the copyright holders provided the source is fully acknowledged. Reproduction of material in this information product for resale or other commercial purposes is prohibited without the written permission of the copyright holders. Applications for such permission should be addressed to the Chief, Publishing Management Service, Information Division, FAO, Viale delle Terme di Caracalla, 00100 Rome, Italy or by e-mail to [email protected] © FAO 2003 ISSUES IN THE GLOBAL TOBACCO ECONOMY TABLE OF CONTENTS FOREWORD ...........................................................................................................................vii ACKNOWLEDGEMENTS ....................................................................................................viii ACRONYMS USED IN THE TEXT, CURRENCIES...........................................................viii 1 OVERVIEW ................................................................................................................1 2 TOBACCO IN BRAZIL..............................................................................................7 2.1 INTRODUCTION ....................................................................................................7 2.2 ANALYSIS OF THE ECONOMIC SIGNIFICANCE OF TOBACCO...................7 2.2.1 At farm household level...........................................................................................7 2.2.2 At state level ............................................................................................................8 2.2.3 At federal level.........................................................................................................9 2.3 ANALYSIS OF CHANGES IN PRODUCTION, AREA AND YIELDS ...............9 2.3.1 Factors affecting production, area and yields...........................................................9 2.3.2 Improvement of tobacco quality and grading ........................................................12 2.3.3 Fuelwood as a major constraint in production .......................................................13 2.3.4 Crop substitution possibilities................................................................................13 2.3.5 Interviews at farm household level ........................................................................15 2.3.6 Future developments in tobacco supply.................................................................16 2.4 THE IMPACT OF GOVERNMENT POLICIES ...................................................16 2.4.1 Introduction............................................................................................................16 2.4.2 Impact of government policies on production........................................................17 2.4.3 Impact of government policies on marketing.........................................................17 2.4.4 Impact of government policies on consumption ....................................................18 2.5 DEVELOPMENTS IN TOBACCO PROCESSING AND MANUFACTURING.20 2.5.1 Cigarette industry...................................................................................................20 2.5.2 Employment in manufacturing...............................................................................21 2.5.3 Impact of changes in tobacco manufacturing technologies....................................22 2.6 WHOLESALE AND RETAIL CHAINS................................................................22 2.7 REVIEW OF DEVELOPMENTS IN TOBACCO CONSUMPTION ...................23 2.7.1 Cigarette consumption ...........................................................................................23 2.7.2 Cigar consumption.................................................................................................24 2.7.3 Impacts of price and income ..................................................................................25 2.7.4 Future developments in tobacco demand...............................................................25 2.8 TRADE IN TOBACCO AND CIGARETTES .......................................................26 2.8.1 Future developments in the tobacco trade..............................................................26 2.9 GOVERNMENT REVENUE FROM THE TOBACCO SECTOR........................27 2.9.1 Source of government revenue...............................................................................27 2.10 TOBACCO CONTROL MEASURES ...................................................................29 2.10.1 Changes in legislation on cigarette consumption in Brazil ....................................29 2.10.2 Non-price measures ...............................................................................................29 2.10.3 Bans on advertising and promotion........................................................................29 2.11 CONCLUDING REMARKS..................................................................................29 2.12 REFERENCES........................................................................................................30 3 TOBACCO IN THE PEOPLE’S REPUBLIC OF CHINA .......................................33 3.1 INTRODUCTION ..................................................................................................33 3.2 PRODUCTION OF TOBACCO.............................................................................33 3.3 PRODUCTION PLANNING AND MARKETING...............................................34 3.4 DEMAND FOR TOBACCO LEAF .......................................................................35 3.5 TRADE IN TOBACCO AND CIGARETTES .......................................................37 3.6 ECONOMIC SIGNIFICANCE OF TOBACCO AND CIGARETTE PRODUCTION.......................................................................................................38 3.6.1 Tobacco production and rural employment ...........................................................38 3.6.2 Tobacco production and rural household income ..................................................39 3.6.3 Government revenue..............................................................................................40 3.7 CONCLUDING COMMENTS...............................................................................41 3.8 APPENDIX ON CONSUMPTION STATISTICS .................................................41 iv 4 TOBACCO IN INDIA...............................................................................................43 4.1 INTRODUCTION ..................................................................................................43 4.2 AREA, PRODUCTION AND YIELD ...................................................................43 4.3 IMPACT OF GOVERNMENT POLICIES ON PRODUCTION OF TOBACCO 44 4.4 CROP SUBSTITUTION POSSIBILITIES.............................................................46 4.4.1 Economics of tobacco versus alternative crops......................................................46 4.4.2 Micro-level information on shifting from tobacco to other crops..........................47 4.4.3 Economics of inter-cropping systems as an approach to agricultural diversification ........................................................................................................48 4.4.4 Economic implications of diversification on tobacco land ....................................48 4.5 MARKETING CHANNELS AND PRICE DETERMINATION OF CIGARETTES ..................................................................................................50 4.6 INDIAN BIDI AND CIGARETTE INDUSTRY ...................................................51 4.6.1 The bidi industry....................................................................................................51 4.6.2 Cigarette industry...................................................................................................52 4.7 ECONOMIC ANALYSIS OF TOBACCO MANUFACTURING ENTERPRISES.......................................................................................................52 4.7.1 Impact of introduction of new processing technologies and equipment ................53 4.8 DEVELOPMENTS IN TOBACCO CONSUMPTION..........................................54 4.9 TRADE IN TOBACCO AND TOBACCO PRODUCTS.......................................55 4.9.1 Imports...................................................................................................................57 4.10 ECONOMIC SIGNIFICANCE OF TOBACCO.....................................................57 4.11 COSTS OF SMOKING ..........................................................................................58 4.12 TOBACCO CONTROL MEASURES ...................................................................59
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