A landmark challenge to Australia’s plain packaging law for cigarettes and cigars at the WTO could have vast implications for how governments square the rules of trade with radical public health measures.

The case against Australia has been spearheaded by cigar producing nations Cuba, the Dominican Republic and Honduras, which say brandless packaging is an assault on their trading rights.

World Trade Organisation chief Roberto Azevedo is expected within days to name a three member panel of independent experts, who will then have six months to issue a ruling on whether Australia is out of line.

“Resolution of this dispute is critical because it will go a long way toward indicating whether the WTO will allow countries to take reasonable actions that are intended to protect the public’s health in an equitable and non discriminatory fashion”, Michael Siegel, a professor at the Boston University School of Public Health, told AFP.

The WTO panel was authorised in late April by a closed door meeting of its dispute settlement body.

The Geneva based WTO ensures that its 159 member economies respect the rules of global commerce and its panels have the power to authorise counter measures by the wronged countries, such as raising import tariffs on the guilty party’s goods.

An initial ruling would not be the end of the story, however, as the WTO dispute settlement process can grind on for years, amid appeals, counter appeals and assessments of compliance with rulings.

Australia’s law was fought tooth and nail by the tobacco industry before and since its entry into force in December 2012.

But it is lauded by the WTO and campaigners around the globe, who appreciate Canberra’s longstanding vanguard role in the fight against tobacco use the leading global cause of preventable death, claiming six million lives a year worldwide.

The legislation requires all tobacco products to be sold in drab green boxes, use the same typeface and contain graphic images of diseased smokers.

Australia and its supporters argue that by hitting the industry’s branding power and by pushing stark messages, the law will help curb the number of smokers, notably young people who might otherwise take up the habit and thereby replenish the industry’s customer base.

“Tobacco plain packaging is a legitimate measure designed to achieve a fundamental objective the protection of public health,” a spokesperson for Australia’s Department of Foreign Affairs and Trade told AFP.

Australia maintains that because plain packaging treats all players equally, it does not constitute discrimination under the so called TRIPS agreement covering trade and intellectual property rights.

The argument that the law breaches trademark rules also failed to convince the Australian High Court in a case brought by tobacco firms.

Honduras, Cuba and the Dominican Republic say the legislation harms their traditional cigar brands, thereby hurting farmers and hundreds of thousands of cigar sector employees in the three countries.

But analysts say the case tests the balance between TRIPS rules and measures that government argue are in the public interest, meaning a ruling could open a Pandora’s box of other cases.

TRIPS public interest exemptions have in the past been interpreted as being related to security or morals, rather than health or the environment, said Fredrik Erixon, director of the European Centre for International Political Economy.

“This is going to set a precedent,” he told AFP. “What we’re talking about here is the extent to which a government actually can deny a company the right to communicate its own trademark, to distinguish its own goods from other goods.”

Imperial tobacco earnings decline on supply-chain changes (1) – businessweek

Cigarette buy toronto В» list palace brand cigarettes, what are the different types of kool cigarettes

Imperial Tobacco Group Plc (IMT), Europe s second biggest tobacco company, said first half earnings from cigarettes declined as it implemented a program to improve its supply chain and invest in its brands.

Adjusted operating profit for tobacco fell 5 percent to 1.3 billion pounds ($2.2 billion) in the six months ended March 31, the Bristol, England based maker of Davidoff and Gauloises Blondes said today in a statement. That compares with the 1.33 billion pound average estimate of nine analysts surveyed by Bloomberg.

Our stock optimization program has inevitably impacted some of our numbers, but I m pleased with our underlying performance, Chief Executive Officer Alison Cooper said in the statement. Actively managing our cost base is releasing funds to invest in brands, she said.

Imperial said its supply chain program is on track to deliver incremental savings of 60 million pounds for the full year, even as it reduces inventories in growth markets, particularly in Russia and Iraq. Imperial reiterated its full year earnings outlook, and boosted the dividend by 10 percent, matching analyst estimates. The company will start quarterly dividend payments in 2015.

Results were very much in line, both in shape and magnitude, and no change to the guidance is the halfway message, analysts at Credit Suisse said in a note to investors.

The shares traded at 2,531 pence as of 8 08 a.m. in London, up 0.6 percent.

Growth Brands

Underlying volumes rose 4 percent in the period among Imperial s so called growth brands, which include Davidoff and JPS. The performance reflects the quality of growth we re targeting and were achieved against a backdrop of market declines of 4 percent, the company said.

Imperial said its share of business in its growth regions declined because of regulatory changes in Russia, where there are difficult market conditions. Excluding Russia, market share improved in growth countries.

Although underlying volumes improved, with market share negative and very limited volume/share disclosure we think investors need more to take confidence, James Bushnell, an analyst at Exane BNP Paribas, said in a note to investors. He has an underperform recommendation on the stock.

BAT Ahead

Imperial shares gained 7.7 percent this year before today, buoyed by an improved economic outlook in southern Europe and the introduction of the company s first electronic cigarette in February, catching up with competitors such as British American Tobacco Plc (BATS), which released its Vype e cigarette last year. Still, U.K. profit, which accounts for about a fifth of the total, is under threat as the government plans to outlaw branded tobacco packaging as early as next year.

Imperial will launch one new e cigarette this year, CEO Cooper said on a conference call.

The company started selling its Puritane e cigarettes in the U.K. through the Boots drugstore chain starting in late February. Imperial has been viewed as a laggard on alternative nicotine products as BAT introduced its Vype e cigarette in the U.K. in 2013 and is awaiting approval for an aerosol based nicotine delivery device that could go on sale in the country as soon as this year.

The use of e cigarettes in the U.K. has tripled over the past two years and 2.1 million Britons now use the devices, according to a YouGov survey commissioned by anti smoking group ASH.

Logistics Unit

Imperial also said today that it s continuing to review an initial public offering for its Logista unit. The European logistics business was acquired in 2008 as part of the 12.6 billion euro ($17.5 billion) takeover of cigarette maker Altadis SA. Imperial inherited a 59.6 percent stake and bought the rest in a deal that valued Logista at 2.3 billion euros.

Introducing standardized packaging will bring the U.K. into line with Australia, where cigarettes have been sold in uniform packages since December 2012. The governments of Ireland, Scotland and New Zealand are also proposing to ban branded packs, while European authorities are taking a tougher stance.

On Feb. 26, the European Parliament voted to require that cigarette packs feature a combined pictorial and text warning covering 65 percent of the front and back, and banned cigarettes and roll your own tobacco with distinguishing flavors including menthol.

While cigarette sales in the European Union, which account for more than 60 percent of profit, remain subdued by historical standards, the indications are that the worst might be over, not least in Spain, Martin Deboo, an analyst at Jefferies International in London, said before the earnings announcement.

The smoking rate in the U.K. has dropped below 20 percent, probably the lowest in 80 years, according to a study by University College London, published in February.

To contact the reporter on this story Gabi Thesing in London at gthesing

To contact the editors responsible for this story Celeste Perri at cperri David Risser, Robert Valpuesta