economics of global tobacco control kenneth e. warner university of michigan school of public health...
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Economics of Global Economics of Global Tobacco ControlTobacco Control
Kenneth E. WarnerKenneth E. WarnerUniversity of Michigan School of Public HealthUniversity of Michigan School of Public Health
Presented to the Interagency Committee on Smoking Presented to the Interagency Committee on Smoking and Health, “Addressing the Global Tobacco Epidemic”and Health, “Addressing the Global Tobacco Epidemic”
Washington, April 13, 2005Washington, April 13, 2005
Principal source:Principal source: World Bank report, World Bank report,
Curbing the Epidemic: Curbing the Epidemic: Governments and the Economics Governments and the Economics
of Tobacco Controlof Tobacco Control (1999)(1999)
DisclosureDisclosure
Consultant to World Bank on work that led Consultant to World Bank on work that led to publication of to publication of Curbing the Epidemic Curbing the Epidemic (1997-99)(1997-99)
World Bank’s representative to 4 of the 6 World Bank’s representative to 4 of the 6 negotiating sessions on the Framework negotiating sessions on the Framework Convention on Tobacco Control (2001-02)Convention on Tobacco Control (2001-02)
CoverageCoverage1. Role of tobacco in global economy1. Role of tobacco in global economy
CoverageCoverage1. Role of tobacco in global economy1. Role of tobacco in global economy
2. Role of tobacco in individual countries2. Role of tobacco in individual countries
CoverageCoverage1. Role of tobacco in global economy1. Role of tobacco in global economy
2. Role of tobacco in individual countries2. Role of tobacco in individual countries
3. Global “net value” of tobacco3. Global “net value” of tobacco
CoverageCoverage1. Role of tobacco in global economy1. Role of tobacco in global economy
2. Role of tobacco in individual countries2. Role of tobacco in individual countries
3 Global “net value” of tobacco3 Global “net value” of tobacco
4. Methods of reducing tobacco 4. Methods of reducing tobacco consumptionconsumption
a. Supply restrictionsa. Supply restrictions
b. Demand restrictionsb. Demand restrictions
CoverageCoverage1. Role of tobacco in global economy1. Role of tobacco in global economy
2. Role of tobacco in individual countries2. Role of tobacco in individual countries
3 Global “net value” of tobacco3 Global “net value” of tobacco
4. Methods of reducing tobacco 4. Methods of reducing tobacco consumptionconsumption
a. Supply restrictionsa. Supply restrictions
b. Demand restrictionsb. Demand restrictions
5. Projected toll of tobacco, with and without 5. Projected toll of tobacco, with and without (additional) tobacco control(additional) tobacco control
Role of tobacco in global economyRole of tobacco in global economy
● ≈ ● ≈ 33 million people in tobacco farming 33 million people in tobacco farming worldwideworldwide- Includes seasonal workers, part-time workers, - Includes seasonal workers, part-time workers,
family members of farmers, & farmers who family members of farmers, & farmers who grow other cropsgrow other crops
- Of total, approx. 15 million in China- Of total, approx. 15 million in China
Role of tobacco in global economyRole of tobacco in global economy
● ≈ ● ≈ 33 million people in tobacco farming 33 million people in tobacco farming worldwideworldwide- Includes seasonal workers, part-time workers, - Includes seasonal workers, part-time workers,
family members of farmers, & farmers who family members of farmers, & farmers who grow other cropsgrow other crops
- Of total, approx. 15 million in China- Of total, approx. 15 million in China
● ● In most countries, tobacco manufacturing In most countries, tobacco manufacturing < 1% of total manufacturing employment< 1% of total manufacturing employment
Role of tobacco in global economyRole of tobacco in global economy
● ≈ ● ≈ 33 million people in tobacco farming 33 million people in tobacco farming worldwideworldwide- Includes seasonal workers, part-time workers, - Includes seasonal workers, part-time workers,
family members of farmers, & farmers who family members of farmers, & farmers who grow other cropsgrow other crops
- Of total, approx. 15 million in China- Of total, approx. 15 million in China
● ● In most countries, tobacco manufacturing In most countries, tobacco manufacturing < 1% of total manufacturing employment< 1% of total manufacturing employment
● ● Importance of distinguishing economic Importance of distinguishing economic presence ofpresence of tobacco from tobacco from dependence ondependence on tobacco tobacco [Industry’s economic argument][Industry’s economic argument]
Role of tobacco in individual Role of tobacco in individual countries: Leading tobacco leaf countries: Leading tobacco leaf producersproducers [thousands of metric tons, 2001[thousands of metric tons, 2001]]
ChinaChina 2,6612,661
IndiaIndia 701701
BrazilBrazil 568568
USAUSA 450450
TurkeyTurkey 260260
ZimbabweZimbabwe 175175
Leading tobacco leaf exportersLeading tobacco leaf exporters [thousands of metric tons, 1999][thousands of metric tons, 1999]
BrazilBrazil 343343
USAUSA 191191
ZimbabweZimbabwe 164164
ChinaChina 132132
TurkeyTurkey 129129
IndiaIndia 120120
Leading cigarette manufacturers Leading cigarette manufacturers [billions of cigarettes][billions of cigarettes]
ChinaChina 1,7491,749
USAUSA 717717
Russian Fed.Russian Fed. 293293
JapanJapan 265265
GermanyGermany 206206
IndonesiaIndonesia 190190
Leading cigarette exporters Leading cigarette exporters [billions of cigarettes][billions of cigarettes]
USAUSA 148148
TurkeyTurkey 111111
NetherlandsNetherlands 102102
GermanyGermany 9191
SingaporeSingapore 5959
ChinaChina 4242
Role of tobacco in individual Role of tobacco in individual countries: Burden of declining countries: Burden of declining
consumption/productionconsumption/production Most countries are net (or full) importers of Most countries are net (or full) importers of
tobaccotobacco Reductions in tobacco spending Reductions in tobacco spending aidaid their their
economieseconomies
Two countries are especially dependent Two countries are especially dependent on tobacco leaf exports: Zimbabwe and on tobacco leaf exports: Zimbabwe and MalawiMalawi
Global “net value” of tobaccoGlobal “net value” of tobacco
Net drain on world economy, reflecting Net drain on world economy, reflecting health and productivity costshealth and productivity costs
Recall lack of net contribution of tobacco Recall lack of net contribution of tobacco per seper se (i.e., substitutes would produce (i.e., substitutes would produce comparable economic value)comparable economic value)
Real cost of reductionReal cost of reductionin tobacco economyin tobacco economy
● Industry-projected job losses not real Industry-projected job losses not real [gross vs. net job loss][gross vs. net job loss]
● Real cost = transition costsReal cost = transition costs
Methods of reducingMethods of reducingtobacco consumptiontobacco consumption
● Supply restrictionsSupply restrictions
● Demand restrictionsDemand restrictions
Supply restrictionsSupply restrictions
1.1. Prohibition of production and sale of Prohibition of production and sale of tobacco products tobacco products [Bhutan][Bhutan]
2.2. Restriction on sales to youthRestriction on sales to youth
3.3. Crop substitution and diversificationCrop substitution and diversification
4.4. Price support/subsidy/allotment policiesPrice support/subsidy/allotment policies
5.5. Restrictions on international tradeRestrictions on international trade
6.6. Combating smugglingCombating smuggling
Demand restrictionsDemand restrictions
1.1. Cigarette taxationCigarette taxation
2.2. Consumer information Consumer information [e.g., school health [e.g., school health education; media anti-smoking campaigns]education; media anti-smoking campaigns]
3.3. Advertising/promotion restrictions/bansAdvertising/promotion restrictions/bans
4.4. Restrictions on smoking in public places Restrictions on smoking in public places and workplacesand workplaces
Cigarette taxationCigarette taxation
Tax increases Tax increases → price increases → → price increases → demand reductiondemand reduction
10% increase in price →10% increase in price →●● 4% decrease in quantity demanded in 4% decrease in quantity demanded in developed countriesdeveloped countries● ● 8% decrease in quantity demanded in 8% decrease in quantity demanded in developing countriesdeveloping countries
Real cigarette prices & per capita consumptionUS, 1970-2000
1500
1700
1900
2100
2300
2500
2700
2900
3100
1970 1975 1980 1985 1990 1995 2000
Year
Cig
aret
tes
per
capi
ta
60
80
100
120
140
160
180
Pric
e (1
982/
84 c
ents
)
consumption price
Cigarette taxationCigarette taxation (cont’d.)(cont’d.)
Sustained 10% increase in real price of Sustained 10% increase in real price of cigarettes in all regions of the world would cigarettes in all regions of the world would cause…cause…
40 million smokers to quit (and others not 40 million smokers to quit (and others not to start)to start)
10 million premature deaths avoided10 million premature deaths avoided
9 million of them in developing 9 million of them in developing countries!countries!
Cigarette taxationCigarette taxation (cont’d.)(cont’d.)
Increasing cigarette taxes inevitably Increasing cigarette taxes inevitably leads to revenue increases, generally leads to revenue increases, generally largelarge
Federal cigarette tax rate & cigarette tax revenue in the US 1960-2000
0.00
0.05
0.10
0.15
0.20
0.25
0.30
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
Year
Re
al c
iga
rette
tax
rate
pe
r p
ack
(19
82
/84
ce
nts
)
2
2.5
3
3.5
4
4.5
5
5.5
6
6.5
7
Re
al c
iga
rette
tax
reve
nu
e
(bill
ion
s o
f 19
82
/84
$)
Cigarette tax rate Cigarette tax renenue
Consumer informationConsumer information
School health educationSchool health educationEvidence indicates little effect unless best-Evidence indicates little effect unless best-practice programs implemented, with practice programs implemented, with “boosters” throughout secondary school “boosters” throughout secondary school [Lantz et [Lantz et al. 2000]al. 2000]
Antismoking media campaignsAntismoking media campaignsLarge, sustained, professionally-designed Large, sustained, professionally-designed campaigns effective campaigns effective [e.g., “truth” [e.g., “truth” (Farrelly et al. 2005)(Farrelly et al. 2005)]]
Advertising/promotion Advertising/promotion restrictions/bansrestrictions/bans
Restrictions/partial bansRestrictions/partial bansLimited impact; industry substitutes alternative Limited impact; industry substitutes alternative venues for advertising, novel promotional venues for advertising, novel promotional techniquestechniques
Complete ban on all forms of advertising Complete ban on all forms of advertising and promotionand promotion
Approx. 6% decrease in demand for Approx. 6% decrease in demand for cigarettescigarettes [Saffer and Chaloupka 2000][Saffer and Chaloupka 2000]
Restrictions on smoking in Restrictions on smoking in public places and workplacespublic places and workplaces
Associated with decreases in smokingAssociated with decreases in smoking
Smoke-free workplaces estimated to be Smoke-free workplaces estimated to be equivalent to large tax increase re equivalent to large tax increase re reducing smokingreducing smoking
If all workplaces in US became smoke-free, If all workplaces in US became smoke-free, consumption consumption 4.5% per capita 4.5% per capita [Fitchtenberg and [Fitchtenberg and Glantz 2002]Glantz 2002]
Toll of tobacco, with and without Toll of tobacco, with and without (additional) tobacco control(additional) tobacco control
Without additional tobacco control, 450 million Without additional tobacco control, 450 million deaths 2000-2050deaths 2000-2050- By 2030, 70% in developing countriesBy 2030, 70% in developing countries
With initiation and adult consumption With initiation and adult consumption 50%, 50%, 210 million premature smoking-produced 210 million premature smoking-produced deaths avoideddeaths avoided- Each gains 15-25 years of lifeEach gains 15-25 years of life
Bottom line Bottom line (and conclusion)(and conclusion)
Well-designed tobacco control is… Well-designed tobacco control is…
Bottom line Bottom line (and conclusion)(and conclusion)
Well-designed tobacco control is… Well-designed tobacco control is…
effectiveeffective
Bottom line Bottom line (and conclusion)(and conclusion)
Well-designed tobacco control is… Well-designed tobacco control is…
effectiveeffective
cost-effectivecost-effective
Bottom line Bottom line (and conclusion)(and conclusion)
Well-designed tobacco control is… Well-designed tobacco control is…
effectiveeffective
cost-effectivecost-effective
possibly cost-savingpossibly cost-saving
Bottom line Bottom line (and conclusion)(and conclusion)
Well-designed tobacco control is… Well-designed tobacco control is…
effectiveeffective
cost-effectivecost-effective
possibly cost-savingpossibly cost-saving
definitely humanedefinitely humane