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The East: U.S. Tobacco Firms Look Overseas To Recoup Domestic Losses

Washington, 26 June 1997 (RFE/RL) - Experts say that U.S. tobacco firms are now aggressively looking abroad to sell cigarettes, especially to lucrative markets in Eastern Europe and the countries of the former Soviet Union, following a proposed multi-million dollar settlement with the U.S. legal and public health establishment.

The settlement, which must still be approved by the U.S. Congress and signed by the president, provides terms under which American tobacco companies agree to pay $368.5 billion to various state and public health funds, acknowledge that tobacco is an addictive substance, permit substantial federal control over their products, and abide by numerous restrictions on their advertising.

However, the settlement does not include any limitations or conditions on the sale of U.S. tobacco products abroad. Many industry analysts say this is exactly the loophole through which U.S. tobacco companies will finance a large part of the settlement.

Ralph Nader, a leading U.S. consumer advocate and anti-smoking crusader, says that American tobacco companies are actively seeking ways to more efficiently export their products abroad. For example, Nader says that while tobacco consumption in the U.S. has fallen 17 percent over the past decade, exports rose a staggering 259 percent.

Nader says U.S. tobacco giants Philip Morris -- maker of Marlboro brand -- and R.J. Reynolds -- the maker of Camel cigarettes -- now sell more than two-thirds of their products overseas.

Company statistics indicate that international sales of the two firms are on the rise. Philip Morris's international sales topped $24 billion in 1996, an increase of 16 percent from 1995.

R.J. Reynolds's international sales totaled $3.6 billion in 1996, marking a 12 percent increase over the previous year.

Experts say it is no surprise that American tobacco firms are targeting Eastern Europe and the former Soviet Union since a substantial part of the populations smoke, smoking is still socially acceptable, and anti-smoking laws are weak or non-existent.

Robert Weissman, an attorney for Essential Information -- a non-profit consumer research and advocacy organization founded by Nader -- told RFE/RL that U.S. tobacco firms have been aggressively stepping up their campaign in Eastern Europe and the former Soviet Union for the past several years.

Weissman says: "Companies have already moved in with slick marketing strategies and major corporate acquisitions strategies where they have been buying up the old state-owned firms and getting a significant foothold in the market."

According to Weissman, these investments not only increase market presence in the region, but also provide the political influence that goes with being a local employer.

Weissman says the U.S. tobacco firms will continue to penetrate the largely unregulated markets of the region, using all the strategies they used in the United States, and including some that were never acceptable such as giving away free samples of cigarettes and sponsoring youth events such as concerts and sporting events.

Weissman says the tobacco companies are also using a marketing strategy unique to Eastern Europe and the former Soviet Union which is to associate tobacco and smoking with perceived American values such as liberty, freedom, affluence, fashion and sophistication.

Says Weissman: "In Eastern Europe and the former Soviet Union [these values] have a special resonance because of their recent history of living under authoritarian regimes. There is no question that the tobacco companies are playing on that history to try to market tobacco."

Analysts say that Russia is a particularly fertile market. According to the World Health Organization (WHO) statistics from 1995, about two-thirds of Russian men and one-third of Russian women smoke -- leading the world in terms of the proportion of the population that smokes.

Overall, Russians smoke so heavily that the nation imports more cigarettes than it produces.

WHO data indicates that about 300 billion cigarettes were manufactured or imported into Russia in 1995. Twenty-six factories located in Russia manufactured about 140 billion of those cigarettes, and the rest -- more than 50 percent or 150 billion cigarettes -- were imported.

U.S. tobacco companies are well aware of the potential profits to be made in Russia and the countries of the former Soviet Union.

Statistics obtained from the U.S. Department of Agriculture indicate that U.S. cigarette exports to the countries of the former USSR increased dramatically from 3.7 billion cigarettes in 1995 to 19.4 in 1996 -- a 424 percent increase in just one year.

John Banzhaf, executive director of a non-profit, anti-smoking organization called Action on Smoking and Health and a law professor at George Washington University in Washington, told RFE/RL that U.S. tobacco exports to the region are certain to increase in the coming years.

He says the U.S. tobacco industry sees the region as particularly profitable and easy to penetrate because the governments are too busy with more pressing matters of national importance and don't have the time or resources to "properly educate" their population about the dangers of smoking and second-hand smoke.

In regards to the proposed settlement, Banzhaf says he has problems with it, largely because it does not limit or restrict U.S. tobacco companies' activities in the rest of the world.

Banzhaf says he has spoken with representatives of anti-smoking organizations outside of the U.S. who told him they felt it was "very wrong" of America to try to solve its tobacco problems by exporting it abroad.

Weissman strongly agrees, saying: "There is no question that the settlement's exclusion of international issues and consideration for overseas victims represents a monumental double standard in an effort to address public health issues. Only four percent of the world's smokers are based in the United States. Most of the U.S. tobacco's products are sold abroad. It is really inexcusable that foreign countries are not included in [the settlement] in any way."