UNITED STATES – MEASURES AFFECTING THE PRODUCTION AND SALE OF CLOVE CIGARETTES DS406 FIRST WRITTEN SUBMISSION OF THE UNITED STATES OF AMERICA November 16, 2010 Table of Contents I. INTRODUCTION........................................................1 II. PROCEDURAL HISTORY.................................................2 III. FACTS.................................................................3 A. Cigarette Smoking Trends in the United States.. 3 B. The Harms and High Costs of Smoking in the United States. 4 C. The High Cost of Prohibition..........................................6 1. A Sharp Increase in the Demand for Cessation Assistance Could Result in a Significant Stress for the U.S. Health Care System to Absorb. 7 2. Any Increase in Black Market Cigarette Sales Would Produce a Range of Public Health Problems........................................8 D. The U.S. Cigarette Market............................................8 E. The U.S. Flavored Cigarette Market....................................9 1. Menthol Cigarettes...........................................1 0 2. Clove Cigarettes.............................................1 1 3. Cigarettes With Other Characterizing Flavors.. 1 4 F. The Survey Results Support the United States’ Position and Undermine the Indonesian One. ..................................................1 9 1. Overview of Relevant Surveys..................................1 9 (a) Surveys That Study Non-Menthol, Non-Clove Flavored Cigarettes ....................................................2 0 (b) Surveys That Study Menthol and Clove Cigarette Use. 2 1 i. National Youth Tobacco Survey. ...................2 1 ii.Monitoring the Future............................2 1 iii.National Survey on Drug Use and Health.............2 2 2. The Reliable Survey Data Contradicts Indonesia’s Factual Conclusions ..........................................................2 4 G. Tobacco Legislation in the United States. 2 5 1. Introduction................................................2 5 2. 1998 Master Settlement Agreement . 2 6 3. The MSA Is Not a Sufficient Regulatory Tool of Tobacco Products. 2 7 4. 2006 State Attorneys General Consent Agreement with RJ Reynolds. 2 7 5. The 2006 Consent Agreement Does Not Keep Cigarettes With Characterizing Flavors Other Than Tobacco or Menthol Off the U.S. Market....................................................2 8 6. Federal Legislation Was Necessary to Keep Cigarettes with Characterizing Flavors Off the U.S. Market....................................2 9 H. The Family Smoking Prevention and Tobacco Control Act. 3 2 1. Background and Overview.....................................3 2 (a) Regulatory Standard Is “Appropriate for the rotection of Public Health”..............................................3 2 (b) Scope Extends to All Aspects of Production, Marketing, Distribution, and Sale...................................3 4 2. Purpose....................................................3 7 (a) Minimize the Harm Caused by Tobacco Products, in Particular by Reducing Smoking Among Youths. 3 7 (b) Balance Against Countervailing Factors. 3 8 3. Section 907 – Tobacco Product Standards.. 3 9 4. Mandate to Study the Public Health Impact of Menthol in Cigarettes. 4 3 I. The United States’ Approach to Tobacco Regulation Is Consistent With Global Efforts. .........................................................4 4 IV. LEGAL ARGUMENT....................................................4 5 A. Section 907(a)(1)(A) Is Not Inconsistent With the National Treatment Provisions Contained in the GATT 1994 or the TBT Agreement . 4 5 B. Section 907(a)(1)(A) Is Not Inconsistent With GATT Article III:4. 4 5 1. Introduction................................................4 5 2. GATT Article III:4...........................................4 6 3. Clove Cigarettes Are Not “Like” Tobacco and Menthol Cigarettes. 4 7 (a) Properties, Nature and Quality.. 4 9 i. Clove Cigarettes Have Distinct Physical Characteristics ..............................................4 9 ii. The Physical Characteristics of Menthol Cigarettes Are Not Like Clove Cigarettes.............................5 2 iii. Indonesia Is Incorrect That Clove Is a Flavoring Like Other Flavor Additives.................................5 2 (b) End-Uses............................................5 4 (c) Consumer Habits and Tastes.............................5 4 (d) International Tariff Classification. 5 6 (e) Conclusion on Like Product..............................5 7 4. Section 907(a)(1)(A) Does Not Afford Less Favorable Treatment to Clove Cigarettes Based on Origin. ...................................5 8 (a) Section 907(a)(1)(A) Is Facially Neutral With Respect to Domestic and Imported Cigarettes.................................5 9 (b) Section 907(a)(1)(A) is Not De Facto Discrimination Based on National Origin .......................................5 9 C. Section 907(a)(1)(A) Is Not Inconsistent With TBT Article 2.1. 6 2 D. Conclusion on National Treatment Claims. 6 3 E. Section 907(a)(1)(A) Is Not Inconsistent with TBT Article 2.2 . 6 4 1. Legal Overview of Article 2.2..................................6 4 2. Congress Included Section 907(a)(1)(A) in the FSPTCA in Order to Fulfill a Legitimate Objective . ......................................6 6 (a) The Objective of Section 907(a)(1)(A) Is a Legitimate Objective for Purposes of Article 2.2 . .............................6 6 (b) Congress Intended Section 907(a)(1)(A) to Protect the Public Health by Reducing Youth Smoking as Appropriate While Taking Into Account the Risk of Negative Consequences.. 6 6 i. Reducing Youth Smoking.........................6 7 ii. Reducing Youth Smoking as Appropriate for the Protection of the Public Health, Taking Into Account the Risk of Negative Consequences...........................6 8 (c) Section 907(a)(1)(A) Fulfills Its Legitimate Objective. 6 9 i. Section 907(a)(1)(A) Only Bans Cigarettes That Can Be Properly Considered “Starter” or “Trainer” Products Not Regularly Used by the U.S. Adult Population. 6 9 ii. Indonesia’s Arguments to the Contrary Are Unsupportable ..............................................7 0 3. Section 907(a)(1)(A) Fulfills the Legitimate Objective at the Level That the United States Finds Appropriate. 7 2 4. Indonesia’s View of What the U.S. Legitimate Objective and Appropriate Level Are Is Not Supportable. .................................7 4 5. Indonesia Has Failed to Establish That an Alternative Measure Fulfills the U.S. Legitimate Objective at the Level That the United States Considers Appropriate That Is Also Significantly Less Trade-Restrictive.. 7 4 (a) The Proper Interpretation of the Meaning of What Is More Trade Restrictive Than Necessary to Fulfill the Legitimate Objective Must Flow From the Text of Article 2.2. 7 5 (b) The Meaning of the Term “Necessary” as Used in the 1994 GATT Article XX Context Is Not Instructive to Understanding the Meaning of TBT Article 2.2 .............................7 7 i. GATT 1994 Article XX Does Not Inform as to the Meaning of TBT Article 2.2. 7 7 ii. Indonesia’s Analytical Approach Is Not Relevant to the Issue to Be Decided..............................7 8 (c) Indonesia Has Failed to Adduce Any Evidence That Proves Section 907(a)(1)(A) Is More Trade-Restrictive Than Necessary. 7 9 6. Indonesia’s Various Other Arguments Are Similarly in Error. 8 0 F. Indonesia Has Not Shown That the United States Acted Inconsistently With Its Obligations Under TBT Article 2.5....................................8 1 G. Indonesia Has Not Shown That Section 907(a)(1)(A) Is Inconsistent With Article 2.8..............................................................8 3 H. Indonesia Has the Burden of Showing That the United States Acted Inconsistently With TBT Article 2.9...............................................8 4 I. Indonesia Has Not Shown that the United States Acted Inconsistently With TBT Article 2.12. .....................................................8 5 J. Indonesia Has Failed to Show That the United States Acted Inconsistently With TBT Article 12.3..................................................8 6 K. Section 907(a)(1)(A) Is Justified Under Article XX. 8 8 1. Section 907(a)(1)(A) Falls Within the Scope of the Article XX(b) Exception..................................................8 9 (a) Section 907(a)(1)(A) Pursues a Policy Objective of Protecting Human Life and Health.................................8 9 (b) Section 907(a)(1)(A) Is Necessary to Protect Human Life and Health...............................................8 9 2. Section 907(a)(1)(A) Meets the Requirements of the GATT 1994 Article XX(b) Chapeau. ............................................9 1 (a) Section 907(a)(1)(A) is Not a Means of Arbitrary or Unjustifiable Discrimination Between Countries Where the Same Conditions Prevail. .............................................9 2 (b) Section 907(a)(1)(A) Is Not a Disguised Restriction on International Trade.....................................9 3 L. The United States Has Not Nullified or Impaired Benefits Accruing Directly or Indirectly to Indonesia..............................................9 4 V. CONCLUSION.........................................................9 4 List of Exhibits................................................................9 5 I. INTRODUCTION 1. Cigarettes, the product at issue in this case, present unique risks. As Gro Harlem Brundtland, former Director General of the World Health Organization, reportedly noted, a cigarette is the only consumer product that “when used as directed