TMETS/2003 INTERNATIONAL LABOUR ORGANIZATION Employment trends in the tobacco sector: Challenges and prospects Report for discussion at the Tripartite Meeting on the Future of Employment in the Tobacco Sector Geneva, 2003 INTERNATIONAL LABOUR OFFICE GENEVA Acknowledgements The information for this report was drawn from a wide range of sources, although it should be emphasized that data on training and retraining as well as examples of social dialogue were scarce in the sector under review. Extensive use was made of various publications, press articles, and web sites. The report was prepared by Clara Foucault- Mohammed, Food, Drink and Tobacco Specialist, Sectoral Activities Department. Parts of the report incorporate information from papers commissioned by the Office and prepared by: Yongqing He, Maureen Kennedy, Gijsbert van Liemt, Yuko Maeda, Michael Mwasikakata, Marcelo Paixão, Dr. Roska Ivanovna Petkova, Professor Nurettin Yildirak and Yunling Zhang. Many of these research and field studies have already appeared as ILO working papers. Statistical advice and data were provided by Mr. Eivind Hoffmann and Mr. Messaoud Hammouya of the ILO Bureau of Statistics: most of the figures are based on statistics collected by the ILO, UNIDO and OECD. No less worthy of mention are all the colleagues in ILO field offices who lent their cooperation and support. TMETS-R-2002-10-0337-EN.Doc/v4 iii Contents Acknowledgements ........................................................................................................................... iii Introduction ....................................................................................................................................... 1 Background to the Meeting..................................................................................................... 5 1. Policy issues in the tobacco sector.......................................................................................... 7 1.1. Social and labour costs of tobacco control policies.................................................... 7 1.2. The economic value of the product ............................................................................ 7 1.3. Corporate social responsibility ................................................................................... 9 1.4. Tobacco rich, tobacco poor ........................................................................................ 9 1.5. Tobacco a provider of welfare.................................................................................... 10 1.6. Prospect of an uncertain future................................................................................... 11 1.7. The draft Framework Convention on Tobacco Control (FCTC)................................ 12 1.8. Tobacco control policies............................................................................................. 13 1.9. Brazil: A case of dual tobacco policies ...................................................................... 16 1.10. A coordinated economic and social policy................................................................. 16 2. Consumption, production and international trade .................................................................. 18 2.1. Consumption............................................................................................................... 18 2.2. Production and international trade.............................................................................. 25 3. Employment trends in the tobacco sector ............................................................................... 31 3.1. Reducing overcapacity ............................................................................................... 31 3.2. A stabilized workforce ............................................................................................... 31 3.3. Tobacco growing: Agricultural policies and subsidies............................................... 31 3.4. Employment in growing: The figures......................................................................... 34 3.5. Child labour in tobacco growing ................................................................................ 40 3.6. Tobacco manufacturing: A capital-intensive industry................................................ 41 3.7. Employment in manufacturing: The figures............................................................... 43 4. Structure of the tobacco industry: Mergers, acquisitions, closures, privatization................... 48 4.1. Mergers and acquisitions............................................................................................ 48 4.2. Towards an oligopoly................................................................................................. 49 4.3. Eliminate overlapping operations............................................................................... 49 4.4. Voluntary retirement programmes, redeployment, indemnities and relocation ......... 49 4.5. Rationalization of the supply chain ............................................................................ 50 4.6. Product diversification and pursuit of efficiency........................................................ 50 4.7. Preferential support for China’s 36 key manufacturers.............................................. 51 4.8. The strategy of partnerships ....................................................................................... 52 TMETS-R-2002-10-0337-EN.Doc/v4 v 4.9. Delocalization to low-wage countries ........................................................................ 52 4.10. Tobacco monopolies: Moves towards privatization................................................... 53 4.11. Political sensitivities linked to privatization............................................................... 55 4.12. Restructuring of monopolies for better control .......................................................... 55 4.13. Employment consequences of privatization ............................................................... 56 4.14. Conclusion.................................................................................................................. 56 5. Factors driving changes in employment.................................................................................. 57 5.1. Polarizing trends and shrinking markets..................................................................... 57 5.2. Increased productivity, new technology and changing markets ................................. 57 5.3. National industry strategies: The Chinese case .......................................................... 60 5.4. Tobacco control policies............................................................................................. 61 5.5. Fiscal policies ............................................................................................................. 61 5.6. Political issues and social policy ................................................................................ 63 5.7. Illicit and counterfeit trade ......................................................................................... 64 5.8. Research and cigarette design..................................................................................... 65 5.9. Tobacco product regulation........................................................................................ 66 5.10. Litigation settlement costs.......................................................................................... 67 6. Dealing with change................................................................................................................ 69 6.1. Diversifying since the 1970s ...................................................................................... 69 6.2. Diversification into non-farm opportunities ............................................................... 70 6.3. Obstacles to alternatives in Turkey............................................................................. 72 6.4. Shaping social policy: Ethnic minorities and migrant workers in Bulgaria ............... 72 6.5. Cambodia: Tobacco to the rescue of a post-crisis economy....................................... 74 6.6. Absorbing shocks of market reforms: The case of China........................................... 74 6.7. Alternative uses of tobacco in the Philippines............................................................ 76 6.8. Diversification efforts: The case of the United States ................................................ 77 6.9. The need for diversification: The case of a developing country................................. 79 7. Summary and suggested points for discussion........................................................................ 81 Suggested points for discussion .............................................................................................. 82 Bibliography...................................................................................................................................... 83 Appendix: Special cases: Bidi and kretek ......................................................................................... 85 A.1. The kretek sector in Indonesia.................................................................................... 85 A.2. The bidi sector in India............................................................................................... 88 vi TMETS-R-2002-10-0337-EN.Doc/v4 Tables 1.1. Tobacco-related tax revenues, United Kingdom,