India’s E-Cigarette Ban and Multilateral Trade Rules: Going up in Smoke?

Introduction

India has joined the bandwagon of countries taking action against the use of Electronic Cigarettes. On 11 September 2019, the United States communicated its intention to ban the sale of most flavored e-cigarettes.[1] Shortly after, on 18 September 2019, the Government of India approved the promulgation of The Prohibition of Electronic Cigarettes Ordinance, 2019.[2] The Ordinance seeks to completely ban the production, manufacture, import, export, transport, sale, distribution, storage and advertisement of Electronic Cigarettes. According to the Government, this decision has been taken to help protect the population, especially the youth, from the risk of addiction through e-cigarettes.

The recitals to this Ordinance state that India is a signatory to the World Health Organization Framework Convention on Tobacco Control, and refers to the decision of the Conference of Parties urging the Parties to consider prohibiting or regulating Electronic Cigarettes. The Ordinance defines the term “electronic cigarette” to mean an electronic device that heats a substance, with or without nicotine flavours, to create an aerosol for inhalation.[3] Neither the act of consumption nor the storage of electronic cigarettes in a non-commercial capacity attracts any liability under this Ordinance.[4] This calls into question whether the Ordinance truly aims to protect public health in India.

This blog post examines whether the Ordinance could be justified under the rules of the World Trade Organisation (WTO). This brief introduction is followed by an analysis of the regulatory space available to India to pursue public health objectives. It concludes by observing that India’s measure may not withstand legal scrutiny, if challenged at the WTO.

Regulatory space to pursue public health objectives under the rules of the WTO

The WTO prohibits certain forms of trade discrimination in its General Agreement on Tariff and Trade (GATT). The obligation of National Treatment (Article III GATT) requires that imported products be treated at par with “like” products manufactured domestically. The concept of “likeness” is central to the administration of GATT’s non-discrimination provisions. Cigarettes and e-cigarettes may be likened to each other on the basis of their competitive relationship and their physical properties, end use, consumer perception and tariff classification.[5] Therefore, a ban on e-cigarettes may be considered to violate the national treatment provision. India would then have to defend its measure under Article XX GATT, entitled “General Exceptions”, which allows Members to derogate from their WTO obligations in order to pursue health-related policy measures. [6] The regulatory space available to Members under this provision has been examined below.

India’s measure would have to fulfil two tests in order to comply with Article XX GATT. First, India would have to prove that the measure is ‘necessary’ to protect human life. Second, it would have to prove that the measure does not constitute an overtly protectionist disguised restriction on international trade.[7] In interpreting this provision, panels and Appellate Body have developed a controversial “necessity” test.

In Brazil-Retreaded Tyres, Brazil imposed an import ban on retreaded tyres as a measure to reduce the accumulation of waste tyres in Brazil. The Appellate Body Report in this caseprovides a succinct summary of the ‘necessity’ test:

In order to determine whether a measure is “necessary” within the meaning of Article XX(b) of the GATT 1994, a panel must assess all the relevant factors, particularly the extent of the contribution to the achievement of a measure’s objective and its trade restrictiveness, in the light of the importance of the interests or values at stake. If this analysis yields a preliminary conclusion that the measure is necessary, this result must be confirmed by comparing the measure with its possible alternatives, which may be less trade restrictive while providing an equivalent contribution to the achievement of the objective pursued.[8]

This means that the importance of a Member’s regulatory goal would be considered while assessing the contribution of the measure to its objective.[9] The contribution of the measure to the overall objective could be critical in cases where a very restrictive measure, like a trade embargo, is being used.[10]

At this juncture, it becomes relevant to analyse the importance of India’s regulatory goal. India has imposed the prohibition in the interest of public health to protect people from the harmful effects of e-cigarette consumption. However, there is varying evidence in scientific literature and a lack of global consensus on tackling the harmful effects of consumption of e-cigarettes.

Research has suggested that vaping is indeed safer than smoking cigarettes, but the full risks remain unknown.[11] For instance, the National Academy of Sciences, Engineering and Medicine comprehensively analysed the evidence on the human health effects of e-cigarettes. The Report states that while e-cigarettes are not without health risks, they are likely to be far less harmful than conventional cigarettes. However, the report cautions that the long-term health effects are not yet clear and whether they have an overall positive or negative impact on public health is currently unknown.[12] On the other hand, The Indian Council of Medical Research issued a white paper recommending a complete ban on e-cigarettes based on available scientific evidence.[13]

In light of this uncertainty, a complete ban on the production, manufacture etc. of e-cigarettes may be called into question at the WTO for not being a measure “necessary” to protect public health. In other words, this trade-restrictive measure may be challenged as being incompatible with the understanding of Article XX(b) GATT.

Conclusion

Currently, 29 countries have banned the sale of all types of E-Cigarettes.[14] However, there has been no challenge against such a measure at the WTO. This may be due to a global backlash against the consumption of e-cigarettes. Nonetheless, countries should be wary of a potential challenge against such measures due to its impact on international trade.

India’s 2019 Ordinance on the Prohibition of Electronic Cigarette imposes a complete ban on activities relating to the manufacture, production, sale etc. This is a highly trade-restrictive measure. In the absence of conclusive evidence of the harmful effects of e-cigarettes, India could have considered regulating the sector through appropriate taxation, enforcing a minimum age for sales, guidelines for public usage, control on the ingredients of the product etc.[15] Effectively regulating the sector would have provided information on the harmful effects of their consumption.

In the absence of any such measure on conventional cigarettes, it appears that the public health objective in this case is simply a ruse. The measure is likely to be considered a disguised restriction on trade since India does not manufacture these e-cigarettes. India should have reconciled the health objectives with its other international obligations, before deciding on the prohibition of e-cigarettes.

[1] Sheila Kaplan, ‘Trump Administration Plans to Ban Flavored E-Cigarettes’, available at <https://www.nytimes.com/2019/09/11/health/trump-vaping.html> last accessed 9 October 2019.

[2] See Prohibition of Electronic Cigarettes (Production, Manufacture, Import, Export, Transport, Sale, Distribution, Storage and Advertisement) Ordinance, 2019, available at < http://egazette.nic.in/WriteReadData/2019/212582.pdf> last accessed 8 October 2019.

[3] See Section 3(d) of The Prohibition of Electronic Cigarettes Ordinance, 2019.

[4] Yashdeep Chahal, Electronic Cigarettes Ordinance-A Peculiar Case of Legislative Mismatch, available at < https://www.livelaw.in/columns/electronic-cigarettes-ordinance-a-peculiar-case-of-legislative-mismatch-148340> last accessed 8 October 2019.

[5] The focus of this blog post is not on the “like” product analysis but on the application of Article XX(b) GATT. See Maria Foltea and Anna Markitanova, The “Likeness” of E-Vapour Products and Cigarettes in the World Trade Organization, European Journal of Risk Regualtion, 8 (2017), pp.342-363.

[6] Article XX(b) GATT states:

Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(b) necessary to protect human, animal or plant life or health;

(Emphasis Added)

[7] See WTO Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, paras 156–63; Also see J. Liberman, A. Mitchell, ‘In Search Of Coherence Between Trade And Health: Inter-Institutional 
Opportunities’, Maryland Journal of International Law,(2010) 25: 143–86.

[8] Appellate Body Report, Brazil–Measures Affecting Import of Retreaded Tyres, WT/DS332/AB/R, para 156.

[9] See B. McGrady, ‘Necessity Exceptions in WTO Law: Retreaded Tyres, Regulatory Purpose and Cumulative Regulatory Measures’, Journal of International Economic Law (2008), 12(1): 153–173.

[10] Supra Note 7, para 210.

[11] Vaping is the action of inhaling the vapor through the mouth from a battery operated electronic device, such as e-cigarettes, that heats and vaporizes a liquid or a solid.

[12] National Academies of Sciences, Engineering and Medicine, ‘Public Health Consequences of E-Cigarettes’, (Washington, DC: The National Academies Press) 2018.

[13] Indian Council of Medical Research, ‘White Paper on Electronic Nicotine Delivery System’, 2019, available at <http://www.ijmr.org.in/documents/IndianJMedRes_whitepaper.pdf> last accessed 9 October 2019.

[14] See Country Laws Regulating E-Cigarettes, available at <https://www.globaltobaccocontrol.org/e-cigarette/sale> last accessed 9 October 2019.

[15] A number of countries have implemented measures concerning each of the possible regulatory alternatives mentioned, see <https://www.globaltobaccocontrol.org/e-cigarette/policy-domains> last accessed 9 October 2019.