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Tobacco Regulation: What the EU Has, Has Not, and Should Have Done

Tobacco Regulation: What the EU Has, Has Not, and Should Have Done •

by Scott B. Nelson and Jan Mošovský

If Covid-19 has done one thing, it has underscored the vital importance of health. Not only have we been willing to give up many hard-won liberties in exchange for it, but ironically we have also sacrificed other health concerns to focus on Covid’s threat to health.

This applies particularly to illnesses and conditions that require timely discovery and beginning of treatment, which in turn depends mostly on regular screenings and preventive diagnoses. One of the most serious illnesses which this applies to is cancer, the second leading cause of death in the US in the pre-pandemic period. Current research shows that the last year has already seen the number of cancer-related deaths rising, and due to the neglected screenings and procedures, we can expect this number to climb for several more years after the end of the pandemic.

In the light of these events, the approach we take to combating cancer is even more important, and given the state of healthcare in most of Europe, this responsibility falls on the states. More recently, the EU has increasingly taken on this challenge in the form of its Beating Cancer plan and other actions, which for the most part include regulations of particular markets.

The market most often subject to these regulations is the market for tobacco products. Instead of focusing on the impact of Covid, let us sum up and evaluate the EU’s effort in this regard, and then discuss them and the state of the debate on tobacco regulation from the liberal standpoint.

What the EU Has Done

For a long time, tobacco products were mostly unregulated apart from standards applying to most consumption goods, and if they were regulated, it was the province of state governments.

The first supranational initiative to take place in Europe was the establishment of WHO’s Framework Convention on Tobacco Control (FCTC) in 2005. Among other requirements, it included bans on the advertising of tobacco products, large obligatory label warnings on the product itself and a ban on labels such as “light” or “mild” on the product, higher taxes on tobacco products, and steps to limit the public exposure to tobacco smoke in indoor public places, which through a twisted definition of public spaces came to be a step toward banning smoking in private businesses in many countries.

The first legislation from the EU came in the form of the Tobacco Products Directive (TPD), approved first in 2001 and later reviewed several times, entering into force in 2014 and becoming applicable in 2016.

Interestingly, in the 2010s, as a consequence of the interlinked effect of changes in customer demand and innovation by the producers, the market shifted from standard tobacco products to less harmful tobacco-related products. Most popular among them remain electronic cigarettes, first introduced to the European market around 2006. E-cigarettes are a promising harm reduction technology because they deliver nicotine without the chemicals in tobacco smoke, and they therefore remain attractive to smokers.

These products were initially un- or under-regulated, which may have also increased the speed of their conception and introduction to the market: it was more profitable for producers to invest in new products that would be – at least initially – comparatively less taxed and regulated than the traditional products.

As the popularity of e-cigarettes, vaping and other substitutes grew, so did the demand for more stringent regulation that would also cover these products. The first move in this direction was made in December 2012, when the European Commission adopted its proposal to revise the TPD to introduce restrictions on the use and sale of e-cigarettes. This proposal was voted down by the European Parliament in October 2013, in favour of regulating cross-border marketing of e-cigarettes like tobacco products, meaning that sales of e-cigarettes to under-18s would be prohibited in the European Union, along with most cross-border advertising. Warning labels also would be required.

In 2014, the European Parliament approved further regulation of tobacco products, including e-cigarettes. The new regulations forbade advertising of e-cigarettes, set limits on maximum concentrations of nicotine in liquids, limited maximum volumes of liquid that could be sold, required child-proof and tamper-proof packaging of liquid, set requirements on purity of ingredients, required that the devices deliver consistent doses of vapour, required disclosure of ingredients and nicotine content, and empowered regulators to act if the regulations are violated – all of this amounts to one of the largest single steps taken with regards to regulation in this area. Only minor changes of technical matters were made in the following few years.

The TPD is said to be the most lobbied piece of legislature in the EU’s history. Given this fact, it is hard to fairly establish the extent of its merits and costs. Pro-European or pro-paternalistic legislation sources are typically biased towards overplaying its benefit to public health, as are most medical professionals, who generally tend to favour these good lifestyle regulations. Eurosceptic voices on the other hand tend to overestimate the costs of these regulations, while underestimating their effect. 

What can be said with certainty is that the regulation did achieve some improvement in public health, and it did come at a cost, in both lost opportunities and innovation, as will be outlined below. We can further conclude that due to the centralized nature of the regulation, there is very limited way for us to balance their respective weight. While health can theoretically be measurable and comparable, and financial outlays even more so, when the individuals are unable to freely choose between the two, we cannot objectively determine whether the benefits are worth the costs. When there is no regulatory competition between states that are culturally and economically relatively similar, as are the EU member states, even the health and financial effects are difficult to evaluate, as no comparable alternative is available.

The whole body of European regulation of tobacco and tobacco-related products was recently reviewed by the Scientific Committee on Health, Environmental and Emerging Risks (SCHEER). In an opinion from spring of 2021, it discussed the perceived merits of existing regulations and provided recommendations, which should serve as the basis for future European regulation.

SCHEER issued its opinion mostly on medical matters, claiming that there is evidence for risks to the respiratory tract and other harmful health effects, especially but not limited to the cardiovascular system from using e-cigarettes. It also found weak evidence of carcinogenicity of the respiratory tract due to long-term exposure to substances contained in e-cigarettes, and similar level of evidence related to second-hand exposure. 

Overall, it claims there is some evidence that electronic cigarettes are a gateway to smoking for young people and strong evidence that flavours have a relevant contribution for attractiveness of use of electronic cigarette and initiation. But only weak evidence for the support of electronic cigarettes’ effectiveness in helping smokers to quit while the evidence on smoking reduction is assessed as weak to moderate.

SCHEER’s opinion, overwhelmingly arguing for more European regulation, was met with disagreements not only from Eurosceptics and liberals, but also professionals preferring harm reduction practices.

In an article in The Harm Reduction Journal, O’Leary et al state that the opinion’s conclusions are not adequately backed up by scientific evidence and did not discuss the potential health benefits of using alternative combustion-free nicotine-containing products as a substitute for regular tobacco cigarettes, and generally omitted the health benefits of the substitution of e-cigarettes for cigarette smoking. 

SCHEER did not evaluate alternative hypotheses to the gateway theory and overemphasises the role of flavours on consumption by youth. O’Leary argues that SCHEER’s assessment of cardiovascular risk was contradicted by numerous reviews, and he proceeds to discuss deficiencies in the data used and certain erroneous statements contained in the opinion.

Nonetheless, while the SCHEER opinion may be viewed as biased or controversial, especially by those not in favour of stricter centralized European regulation, it is likely that this is precisely what we are going to get in the future during the review of the TPD.

What the EU Has Not Done

While many liberals – especially non-consequentialist natural rights libertarians – might not be fans of the principle of proportionality, there is no denying that what is most obviously missing from most of the EU’s regulatory attempts and conclusions (not least in the recent opinion of SCHEER) is a discussion about reconciling the two conflicting interests pertaining to the problem of tobacco regulation – the interest of public health vs individual rights and free choice.

These two, although not inherently incompatible, are in conflict in the EU’s current tobacco regulation policy. While the bans and restrictions arguably benefit public health, this comes at a cost of both limited work and labour and entrepreneurial opportunities. Both are of non-negligible disutility to an individual and to society, in both seen and unseen ways. The seen disadvantage clearly is the preference given to paternalism over natural rights, the loss of potential income obtained by firms and workers, and the consumers’ pleasure in the product.

The unseen disadvantages contain innovation that does not take place as a consequence of direct bans or regulation, or as a consequence of the sector being less attractive to investment due to regulation. Said innovation would likely be towards less harmful and addictive products, as has been the latest trend in the market, which in turn would be an effective step in combating cancer. Innovation may also come as a result of consumption of certain tobacco-related products. As with alcohol, products whose consumption brings people together and leads them to talk and exchange information increases innovativeness, as shown for instance by Andrews.

In general, for an organization that has among its chief purposes to promote individual rights and free trade, it is disappointing that a proper employment of the test of proportionality is missing from the EU’s strategy and regulatory outputs. If it were used more systematically, chances are that the policy would result in a more innovation-friendly as well as more harm reduction centred approach.

Evaluation of the Policies

In order to evaluate the best steps for the regulatory bodies to follow, we need to assess both sides of the argument. Let us therefore examine both the existing policies and their alternatives on their merits in terms of public health.

The approach that generally seems to yield the best results, as evidenced by the experience of the fight against alcohol or the drug war, is harm reduction rather than bans and prohibitive regulations and criminalization.

Harm reduction policies protect the users best and also tend to work out best for the public budgets – alongside not having to spend on fighting illegal trade and related criminality (connected with cheaper and less safe illegal substances and organized crime), taxes from legal sales contribute more to public revenue, and in the long-run also save on healthcare costs, as harm reduction tends to be a better way to fight addiction by allowing users to use alternative competitive products that are less addictive or harmful to addicts, and gradually phase out use altogether if they choose to.

As part of harm reduction policies, no tobacco product should be made altogether illegal, as is the case for instance with flavoured vapes in some countries, or for instance snus outside of Sweden. This only reduces competition and is often not based on real data of the product’s harmfulness (a case in point is the disputed claim that flavoured vapes are a gateway product). Complete bans are generally both to the detriment of the consumer and public revenue. The only products that should be made illegal are those that for various reasons pose a significant risk to consumer safety, due to the presence of other toxic substances, the risk of product malfunction, etc.

As part of harm reduction policies, excise taxes on tobacco products (if there need to be some) should be informed by up-to-date research, and reflect the harmfulness of the product. Thus vaping, nicotine patches, e-cigarettes, etc., should be in a significantly lower tax bracket than cigarettes. A related issue is insurance premiums, which in most European states function more as taxes than as insurance payments, as they are calculated as a percentage of one’s salary instead of being based on the riskiness of one’s behaviour. A change in this regard that would allow insurance companies to charge higher premiums to more risky clients would promote responsible behaviour in a rights non-violating way.

It could naturally be argued that in states with public healthcare, premiums reflecting the client’s behaviour are essentially the same as taxes on tobacco products, only more difficult to establish and collect. And while this may be true, this argument ignores one of the chief benefits of the free market: its value as a discovery procedure. It is true that collecting taxes might be easier than devising an insurance premium system, and it essentially comes down to the same in public healthcare systems, especially if the proceeds from these taxes are directly designated for treatment (which, more often than not, they are not). The problem is that we have no way of knowing what the proper sum to be collected is. A competitive healthcare system, where more insurance companies are free to set up different premiums for tobacco users (and possibly other types of risky behaviour), allows us to better assess the costs of smoking for the individual, and thus to better price it.

The most difficult case for a liberal to address might be the question of plain packaging and advertising bans. From the classical liberal perspective, these are clearly a violation of the rights of producers and advertisers. From the economist’s point of view, however, they seem to be to some extent effective in reducing usage depending on the country, and while harming the producers, it is hard to see a perspective in which they are inherently harmful to the consumer, apart from lowering the smoking or vaping experience and the user’s knowledge of available products. It is in any case not our purpose to debate the aesthetic demerits to the consumer’s experience elicited by plain packaging – we hope only that this logic is not extended such that diseased livers begin to mar the bottle of our beloved Châteauneuf-du-Pape.

As most countries ban not only e-cigarettes but also all tobacco products and most close substitutes such as alcohol advertising, it is hard to argue that this ban gives an unfair advantage to competitors. It could on the other hand be argued that when a brand-new tobacco-related product is invented and not yet covered by the legislation, it makes the market more open to competition by giving it the initial opportunity from advertising before the legislation is updated. This can further be argued to be beneficial to users, as newly invented products typically tend to be less harmful.

What a Classical Liberal Would Like to See Done

It has been noted above that most of the debate on smoking regulations revolves around health risks and addictiveness and not around individual rights. And no true liberal would argue that these aspects are not important.

However, as has been mentioned, they are not the whole of the debate, and liberals should keep emphasising the natural rights argument to do as one wills with one’s own body, rather than getting involved in purely consequentialist debates on tobacco regulations. Not only does it miss essential points, but it is also strategically less effective. In the purely economic debate over the taxes collected through tobacco products or those paid by citizens not suffering from cancer, resources devoted to fighting organized crime and various other related expenses, the liberal argument grows weaker. Rather than being categorically firm as the argument from natural rights is, it becomes contextual.

And once the debate becomes less economic and begins to leave out the effect on the public budget, which we believe still favours liberal policies, and instead centres on health effects only, the liberal argument grows very weak indeed. Harm reduction is overall the best practice from the viewpoint of the society in general, but once we focus only on the number of cancer cases, it becomes obvious that the “best” policy to meet this criterion is a total ban. Liberals should push advocates of stringent regulation on bans on their weak points, such as the immorality of paternalism, rather than meeting them only in the field of dispute over facts pertaining to health risks (and even here, when it comes to treating tobacco-related products such as e-cigarettes as standard tobacco products, it seems that the liberal’s opponent has lost the field without giving it up).

The ideal debate on tobacco policy would include both the aspects of public health and individual rights, and try to maximize the first while not violating, or minimally violating, the latter. Harm reduction approaches are a good start in this direction.

Such practices would mitigate the setbacks to public health while at the same time leaving the individuals and firms freer to enjoy themselves, produce and innovate. Incentives would need to be carefully set up, so that both the firms and the consumers feel the responsibility for their actions and their consequences. This does not mean anything as drastic as leaving individuals to cover astronomic fees for cancer or other related treatments or screenings. But it might mean giving the – in many European countries publicly-owned – health insurance companies the power to reflect the risky behaviour of certain clients in their premiums, as mentioned above.

An important aspect of devising a proper policy to combat cancer is also the trade-off between the inflexibility of the central EU approach and the certainty for producers and consumers brought about by its uniformity. Innovation is inherently linked to this. Decentralization not only incites positive competition between both regulators and entrepreneurs, but allows for exploring a larger number of different routes in the search of the best harm reduction practices, which can then be implemented on the EU level.

A decentralized European harm reduction policy has thus the potential of becoming a laboratory of regulatory practices, allowing better solutions to be found, as well as leaving entrepreneurs more space for innovation and introduction of ever safer products and generally lower risks.

There is a myth in public policy that consumer protection essentially means limiting the producers, and consequently the choices of the consumers, and thus pushing them to make the choices the legislators consider best. Liberal consumer protection on the other hand should empower, not limit, the consumers. This is very well understood by organizations such as the Consumer Choice Center and other bodies that preserve the individual’s dignity and freedom to choose.

Scott B. Nelson is Research and Strategy Advisor at the Austrian Economics Center. His most recent book is Tragedy and History: The German Influence on Raymond Aron’s Political Thought. He has two upcoming books: a work of political philosophy on Cicero and modern politics, and a short introduction to Austrian School founder Carl Menger.

Jan Mošovský is an economics doctoral student at Charles University in Prague. He is also regional coordinator for Central Europe at European Students for Liberty and has a keen interest in political philosophy.

The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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