Portside

Big Tobacco is pushing back against a strict anti-smoking provision in the massive Trans-Pacific trade deal — and it has enlisted the support of the most powerful Republican in the Senate.

The ire of Senate Majority Leader Mitch McConnell and other tobacco-state lawmakers throws a wrench into the delicate negotiations to close the agreement and secure congressional approval. President Barack Obama sees the deal as essential to securing his economic legacy.

Until now, McConnell has been among the president’s staunchest allies on the pact, which includes the U.S., Canada, Mexico, Japan and eight other Pacific Rim nations and would cover 40 percent of the world’s economic output.

While the Kentucky Republican stopped short of pulling his support, he warned in a letter that U.S. Trade Representative Michael Froman should “not set a new precedent for future U.S. trade negotiations by negatively carving out a specific American agricultural commodity — in this case tobacco.” That exemption would bar tobacco companies from the right to sue nations over laws they contend are damaging, such as anti-smoking measures.

Tobacco, McConnell wrote, is the second-highest agricultural export in Kentucky, which sold $300 million of the commodity in 2013 alone.

Despite the warnings from McConnell and other lawmakers, sources close to the talks say Froman pushed ahead with discussions on a tobacco exclusion with several countries, including Australia, New Zealand and Malaysia, during last month’s talks in Hawaii. “USTR was clear tobacco had to be treated differently, and there was general agreement on that,” an industry source said of the discussions in Maui.

Froman broached the tobacco exclusion discreetly in separate meetings with trade ministers. Although the issue wasn’t settled, observers say it helps that the other countries are taking the lead, allowing Washington to focus on other difficult-to-resolve areas, such as dairy market access and drug patent protections.

“USTR’s strategy seems to be taking a back seat, given that some countries are going to demand something on tobacco,” a source close to the talks said.

USTR spokesman Trevor Kincaid said neither Congress nor business groups should be blindsided by the inclusion of a tobacco provision in a final deal. “Over the past several years, the administration has consistently briefed Congress on the salience of tobacco issues for our TPP negotiating partners,” Kincaid said in a statement.

Obama acknowledged support for such language at an Export Council meeting last December, calling for striking a balance between public health and business interests.

“The big bugaboo that’s lifted up there is tobacco companies suing poorer countries to make sure that anti-smoking legislation is banned, or at least tying them up with so much litigation that ultimately smaller countries cave,” Obama said.

Anti-tobacco activists say the issue is critical for the tobacco industry, which sees some of its strongest growth potential in the fast-growing Asia-Pacific and other developing regions. The activists say the prospect of lawsuits by big tobacco has a chilling effect on national regulations, especially in smaller, poorer countries that may lack the financial means to argue a case or pay damages.

The tobacco discussions in Maui prompted lawmakers and business groups to send a flurry of letters and statements to Froman. Thirty-four House members wrote that barring the tobacco industry from participating in investor disputes would hurt farmers.

“We firmly believe that all agricultural exports and industries covered in the TPP should be afforded the same opportunities and protections,” the lawmakers said in the letter, which was spearheaded by North Carolina Rep. George Holding and signed by several Ways and Means Republicans.

Meanwhile, Sen. Thom Tillis, another North Carolina Republican, vowed to vote against the trade agreement although he supported legislation to allow Obama to fast track passage of the deal in Congress.

“Once we allow an entire sector to be treated unfairly in trade agreements, the question is, who’s next?” Tillis said in a floor speech July 30.

U.S. business groups have echoed those views, saying they oppose attempts to single out a specific product for special treatment.

“The high standards that the TPP should put in place to protect property and innovation and promote the rule of law should be ones that are applied without discrimination,” the American Farm Bureau Federation, National Association of Manufacturers and other groups wrote in a July 30 letter to Froman.

Added Phillip Morris International spokesman Corey Henry: “When governments embrace unequal treatment for one sector, they open a door to discrimination against all sectors.”

The tobacco giant has used international trade and investment rules to challenge Australia’s plain-packaging laws and other packaging and marketing laws in Uruguay. The company also filed a lawsuit with British American Tobacco against the British government in May over similar regulations. Britain could be among first countries in the European Union to impose the standardized tobacco packaging rule, which the EU approved last year.

The anti-tobacco proposal discussed among trade partners makes reference solely to “manufactured tobacco products,” said a source closely following the talks, adding that any language will be carefully worded to exclude leaf tobacco.

Other sources who were in Maui for the trade talks say it’s unclear what is actually being discussed.

“I think it’s still an open question as to how it will be treated,” said National Foreign Trade Council Chairman Alan Wolff, whose group opposes any tobacco language. “Is it treated by name? Is it treated by health exclusion of some sort?” He added: “Our feeling here … is that it’s a pretty slippery slope if you name a product.”

Meanwhile, House Democrats opposed to tobacco urged Froman to sign a deal that “clearly protects legitimate public health measures relating to tobacco from unwarranted challenges.”

The letter, pushed by Michigan Rep. Sander Levin, was signed by Ron Kind of Wisconsin and Earl Blumenauer of Washington, both of whom supported fast track legislation, as well as a dozen other Democrats.

Matthew Myers, president of the Campaign for Tobacco-Free kids, said the discussions with the administration have focused on preventing the tobacco manufacturers from filing “abusive suits.”

“We and others have not focused on curtailing trade or anything that would impact tobacco growers,” Myers said.