Monday, July 25, 2022

Eric Crampton: 'Prohibition' approach to smoking unlikely to succeed

Budget 2022 allocated just over $2.5 million a year, over four years, to the Customs Service to help it stop cigarette smuggling.

I wonder whether it will be enough. Prohibition is expensive to enforce, and legislation working its way through Parliament is going to be getting us awfully close to prohibition.

It is a bit of a shame. There are far better ways of encouraging harm-reduction if that were still the goal of tobacco policy.

In late June, the Government introduced the Smokefree Environments and Regulated Products (Smoked Tobacco) Amendment Bill.

The bill requires the Government to set regulations, within 21 months, limiting the amount of nicotine allowed in any smoked tobacco product.

Nicotine is the least harmful part of smoked tobacco. The by-products of combustion are, over time, deadly: the “tar” contained in cigarette smoke. Nicotine is an addictive stimulant, but it is not what causes cancer.

If the eventual regulations ban cigarettes with high nicotine concentrations, some smokers will respond by simply smoking more – increasing the damage caused by cigarette smoke.

Work published in the American Economic Review in 2006 showed that, when tobacco excise taxes increased, smokers responded by puffing harder on fewer cigarettes – and getting more of the bad stuff from each one.

It would be a bit like heavier drinkers responding to a 6% alcohol limit on beer by drinking more 5% beer.

But if the regulations instead push for very low nicotine content, as has been advocated by some in the tobacco control movement, it would be more like setting a 0.5% alcohol content limit on beer, which would be equivalent to prohibition.

Remember that America’s experiment with alcohol prohibition allowed the sale of near-beers with less than 0.5% alcohol.

It would be hard to drink enough 0.5% alcohol beer to achieve any level of intoxication. Water poisoning might hit first.

So near-beers were not particularly popular during prohibition.

And few cigarette smokers have been fans of the very low nicotine cigarettes that have been marketed thus far.

Vector Tobacco marketed the Quest low-nicotine cigarette range in America in the 2000s. The company’s 2009 annual report showed low-nicotine cigarette revenues dropping from $3.7m in 2007 to $1.5m in 2009, when the product was discontinued.

The company had spent more on research and development than it earned in sales in each of those years. Other low-nicotine cigarettes have not proven much more successful.

If the regulations in two years’ time effectively imposed prohibition on cigarettes by setting a very low nicotine requirement, would current smokers be more likely to finally shift to vaping? Or will they be more likely to shift to illicit tobacco?

The Government is making a rather large bet here. I hope the Customs Office will be ready. The Regulatory Impact Statement notes that “the illicit market has been increasing, and recommended policy changes are likely to exacerbate this”.

It also laudably notes that the ministry will commission research into the size of the illicit market and will attempt to track any changes.

If the regulations mandate de facto prohibition, the rest of legislation will not matter much. If mid-strength cigarettes remain legal, the other parts of the legislation are worth thinking through.

The legislation prohibits the sale of tobacco to anyone born after January 1, 2009. By 2029, the minimum purchase age for tobacco will be 20. By 2039, it will be 30. More likely, sometime in the late 2030s, the impracticability and silliness of prohibiting tobacco for a 28-year-old but not for a 29-year-old will lead to pressure for change.

In the interim before tobacco is fully prohibited, a sinking lid on tobacco retail will apply. Retailers will be licensed with a view to reducing outlet numbers. The Director-General of Health will be empowered to “set a maximum number of retail premises allowed in a certain area”.

If private retailers conspired to keep out competitors, the Commerce Commission could throw them in jail. If the Director-General of Health provides cartel profits to preferred retailers through a legislated regulatory regime, the Commerce Commission has no jurisdiction.

It all seems overkill, and overly punitive, as tobacco endgame. Smoking rates have been dropping as more smokers and potential smokers choose vaping instead. Very few youths now smoke. Action on Smoking and Health’s Professor Rob Beaglehole has noted that youths are already “almost smoke-free”.

Strengthening the black market would be a mistake.

Drawing a greater distinction between vaping and smoking, by allowing vaping in more places where smoking is currently prohibited, at the venue’s discretion, would help. Professor Beaglehole also recommends greater support for those trying to switch from smoking to vaping.

Snus, a lower-risk oral tobacco product that has proven remarkably effective in helping Scandinavian smokers quit, could provide an additional helpful alternative, if legalised. Vaping has not worked for everyone.

Prohibitionist approaches do not have a great track record. They are unlikely to prove more successful for tobacco.

Dr Eric Crampton is Chief Economist at the New Zealand Initiative. This article was first published HERE

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