Banning menthol: the Canadian firsts.

Two months have passed since World No Tobacco Day (May 31), during which the Canadian province of Nova Scotia became the world's first jurisdiction to successfully implement a ban on menthol cigarettes.

It is possible that this event will receive as many conflicting views in Geneva, headquarters to both the World Trade Oragnization and the World Health Organization, as it has in Ottawa, where the federal government refusal to ban this harmful additive is at odds with the recommendations of health analysts and provincial governments.

Menthol: banned in Canada but not by the government of Canada

There are at least two main reasons why menthol in cigarettes is considered to be a harmful additive to tobacco products:  it makes cigarettes more attractive to young people, and by giving a cooling sensation it can trigger smokers to inhale dangerous smoke more deeply into their lungs.

Canada was one of the first jurisdictions to ban flavouring additives in cigarettes, but declined to include menthol in its 2009 law, and repeated this exemption when new regulations were issued earlier this year.

As the regulatory notice for this change sets out, there was a unanimous call from sub-national health authorities, health professionals, academics, and NGOS for "a total ban on all flavoured tobacco products, including menthol products." Only industry groups and a lone member of the general public opposed such a ban. "Of the 58 submissions, 50 specifically called for a comprehensive ban of all flavours, including menthol in all tobacco products."

No health rationale was provided for rejecting the call, and the regulatory notice makes clear this was a decision that was based on policy choices, not evidence. "While the Department is concerned about the use of flavours, including menthol in cigars as well as in other tobacco products, it has chosen at this time to focus its attention on reducing the appeal of certain types of flavoured cigars to counter industry innovation since the 2009 amendment. "

A small percentage of the Canadian market

The market for mentholated cigarettes in Canada is relatively small. (Euromonitor estimates that only 3% of the cigarettes sold in Canada have had menthol added to them.) Tobacco companies have not yet introduced into Canada the novelty menthol products, like 'click convertibles' that have become a popular niche market in South America and Eastern Europe.

Nonetheless, as with other flavoured tobacco products, menthol has emerged as a factor in the uptake of smoking by young people. Although it is a small market, it is thought to have a disproportionately harmful effect on vulnerable population and to create larger long-term consequences.

Leadership by provincial governments

Recognizing that the federal government was not going to take action, some provincial governments planned to exercise their own authority to regulate the tobacco market. This spring six provincial governments began or completed the process of legislating this additive off the market.

Nova Scotia's ban came first (May 31, 2015), with Alberta, New Brunswick, Quebec, Ontario and Prince Edward Island scheduled behind. Collectively, these six provinces include 70% of Canada's smokers.

(See chart of implementation dates below)

The challenges, trade and otherwise.

The Canadian government may find itself in the awkward position of defending internationally a position that it refuses to accept domestically.

It was only a week ago that Canada officially notified the World Trade Organization that this trade-contentious contentious policy was already implemented in one Canadian jurisdiction. Earlier this summer, it had given notice of the upcoming restrictions in New Brunswick and Ontario. (G/TBT/N/CAN/458, G/TBT/N/CAN/462 and G/TBT/N/CAN/455). Presumably notices will also follow when the legal groundwork has been completed in Alberta, Quebec and PEI.

Bans on menthol have been much discussed at the WTO. A challenge to the US ban on clove cigarettes by Indonesia was upheld because its law did not also ban menthol, thus leaving two "like products" with different and discriminatory treatment. The suggestion that Alberta would impose a ban drew fire from Indonesia at a meeting of the Committee on Technical Barriers to Trade earlier this spring, even though no formal notice had been given. (G/TBT/M/65) Brazil's regulation banning all additives (Resolution No. 112, 29 Nov 2010) was discussed on at least four occasions by the same committee. (G/TBT/M/54, G/TBT/M/55, G/TBT/M/56, G/TBT/M/57 ).

Last year, the European Union adopted a new tobacco directive which required states to ban menthol flavouring by 2020. This has not yet been discussed at WTO, but the government of Poland has threatened legal action.

Legal action has already started against provincial bans. Imperial Tobacco filed a challenge against Nova Scotia's law a few days before the ban went into effect - although little more about this lawsuit has been made public.

Legislation	Alberta	Ontario	Quebec
Name	Bill 33 Tobacco and Smoking Reduction Act and Regulations	Bill 45, the Making Healthier Choices Act	Bill 44: An Act to bolster tobacco control
Date introduced	November, 2013	November 24, 2014	May 5, 2015
Date enacted		May 28, 2015
Date ban implemented	September 30, 2015	Not yet established (“up to 2 years” after January 1, 2016)	9 months after enactment of law

Legislation	New Brunswick	Nova Scotia	Prince Edward Island
Name	Bill 44, An Act to Amend the Smoke-free Place Act,	Bill 90 Tobacco Access Act	Bill No. 10, An Act to Amend the Tobacco Sales and Access Act
Date introduced	May 27, 2015	April 17, 2015	June 9, 2015
Date enacted	June 6, 2015	May 11, 2015	July 10, 2015
Date ban implemented	January 1, 2016	May 31, 2015	TBD

Canada chooses health over trademark rights

 In an April 10, 2015 legal brief to the World Trade Organization (WTO), Canada has strongly defended the rights of WTO member states to legislate to control tobacco and, by extension, to protect public health. Canada’s brief is a third-party submission, soon to be available on the WTO website (www.wto.org), in a formal WTO dispute in which the Dominican Republic, Cuba, Honduras, Indonesia and the Ukraine are contesting the validity of new Australian law that requires plain packaging for cigarettes. Since none of the five countries sells any significant amount of tobacco or tobacco products to Australia, it is strongly suspected that the tobacco industry is somehow involved in the laying of these five complaints.

The clear and concise Canadian brief points out that the complainants have cherry-picked their way through international law, citing passages that support their case, while ignoring others that do not. The Canadian brief then provides a comprehensive review of all pertinent international law and judgements. The brief concludes that international trade law, when properly and comprehensively read, does provide WTO members with the ability to regulate in the interest of public health, and that this is “a right that was carefully and purposefully preserved” by the drafters of international trade law. If the Dispute Settlement Panel were to agree with the interpretations of the five complainants, not only would this “erode [WTO ] Members’ ability to regulate in the interest of public health,” it would also “create new rights for trademark owners [and] establish obligations for Members.”

The authors of the Canadian brief can see that an adverse decision against Australia in this case would not only be a blow tobacco control, it would curtail the right of sovereign nations to legislate to protect the health of their citizens. Let us hope that the Canadian argument will be persuasive and that public health protection will not sacrificed to the commercial interests of tobacco companies.

Canada's submission can be read here.

A Tale of Two Surveys

This week our crackerjack colleagues at the Propel Centre for Population Health Impact issued their most recent report on Tobacco Use in Canada. As always, this report is clear and offers important insights into the smoking behaviour of Canadians.

And, as always, the analysis is based almost entirely on the Canadian Tobacco Use Monitoring Survey and its successor, the Canadian Tobacco and Drugs Survey.

These are large surveys launched in 1999 by Health Canada and administered by Statistics Canada. They ask a wide-ranging series of questions on smoking behaviour of about 14,500 Canadians. Results which were once produced every six months are now produced every two years.

The CTUMS-CTADS prevalence data gives a very rosy picture. A rousing 40% reduction in smoking prevalence since the beginning of this century.

From Propel's Tobacco in Canada 2015 report

The results of another survey conducted by Statistics Canada give a quite different picture, especially if the number of smokers are considered and not merely the prevalence.

The Canadian Community Health Survey was launched at about the same time as Health Canada's Tobacco Use Monitoring Survey.
There are only a few questions on smoking behaviour, as the survey tries to get information on a wide range of health behaviours of the 65,000 Canadians interviews. Initially results were provided every 2 years - now they are given every year.

CCHS estimates of the number of Canadian smokers provides a much less rosy picture. The reduction in the number of smokers has been a more modest 14%.

From PSC Fact Sheet: Smoking rates in Canada

The two surveys, launched in the same year and asking nearly identical questions about core smoking behaviour have been consistent in their differing results. CCHS always tracks higher.

A wise colleague once reminded me that mistakes are inevitable -- and that the real challenge is the direction of your error.  Is it not prudent to err in the direction of not understating the problem?.

 For me, that means using the CCHS data until it is proven to be less reliable, and to give profile to the number of smokers as well as smoking rates.

Tobacco industry profits in Canada exceed $1 billion: PMI

In a recent presentation to investors, Philip Morris International provided a graph of the 40 most profitable tobacco markets.

This graph illustrated three important variables that are sometimes difficult to get hold of: the number of cigarettes sold, the market share of Philip Morris and the total profitability of the industry.

With only 6 million of the world's estimated 1 billion cigarettes, Canada might be thought of as a relatively small market. But in terms of profitability, Canada would appear to be in the top 10 and a more profitable market than much larger countries, like France and the United Kingdom.

Sadly, the data used to create the graph was not released, so comparing profitability requires some physical measurement. Putting the results side-by-side suggests to me that the net revenue (profits) from cigarette sales in Canada are closer to $2 billion than to $1 billion.

On sales of fewer than 30 billion cigarettes, that means the companies on average are clearing almost 7 cents per cigarette, or $1.30 per package.

The entire presentation can be downloaded from Philip Morris International's web-site. The graph can be found on slide 5 of the March 17 2015 presentation to the Consumer Analyst Group of Europe (CAGE) Conference.

Manitoba raises taxes on cigarettes by $1.00 per carton

Manitoba became the most recent province to raise the price of cigarettes through taxation. Effective midnight last night, the provincial tax on a cartoon of cigarettes was increased by $1.00 to $59.00.

Additional excise taxes charged by the federal government ($21.03 per cartoon), provincial sales tax of 7% and GST of 5% gives a total tax bill of somewhere around $90 per carton.

Even before the tax increase, Manitoba had the highest cigarette taxes in Canada, with Nova Scotia close behind. The lowest rates are found in Ontario and Quebec.

Also today, Newfoundland and Labrador increased the provincial sales tax to 15%, which will have a modest effect on cigarette prices in that province.

Fact-sheet can be downloaded here:

	Excise Taxes			Sales taxes applied to tobacco				Comparative cost of a package of 20 cigarette)
Per 200 cigarettes	Federal Excise Tax	Prov. Excise	Total Excise taxes	GST	PST	HST	Total
British Columbia	$21.03	$47.80	$68.83			12%	12%	$11.07
Alberta	$21.03	$45.04	$66.07	5%			5%	$10.09
Saskatchewan	$21.03	$50.00	$71.03	5%	10%		15%	$11.62
Manitoba	$21.03	$59.00	$80.03	5%	7%		12%	$12.32
Ontario	$21.03	$27.94	$48.97			13%	13%	$8.92
Quebec	$21.03	$29.80	$50.83					$8.49
New Brunswick	$21.03	$38.00	$59.03			13%	13%	$10.06
Nova Scotia	$21.03	$51.04	$72.07			15%	15%	$11.74
Prince Edward Island	$21.03	$45.00	$66.03			14%	5%	$10.95
Newfoundland	$21.03	$47.00	$68.03			15%	15%	$11.27
Northwest Territories	$21.03	$57.20	$78.23	5%			5%	$11.36
Nunavut	$21.03	$50.00	$71.03	5%			5%	$10.61
Yukon	$21.03	$42.00	$63.03	5%			5%	$9.77