WINSTON-SALEM, N.C. -- hey are among the few American consumer products that people the world over still consider a gauge of style and panache, something worthy of bending the budget. Now, as strong-arm trade diplomacy and the demise of communism fling open market after market abroad, they are enjoying a phenomenal export boom, arriving by the truckload in places as diverse as Berlin's Alexanderplatz and Tokyo's Ginza.
Japanese smokers will puff their way through about 42 billion American-made cigarettes this year; Soviet smokers are to get more than 37 billion as the Kremlin attempts to appease popular anger over a tobacco shortage. Thailand, one of many Asian countries that by tradition let its many smokers buy only locally rolled brands, has just become the latest to legalize imports.
U.S. tobacco exports reached $5 billion in 1989 and were growing at a 25 percent rate in the first nine months of 1990. "It's ... taken off," said Thomas C. Slane, a vice president at the Tobacco Merchants Association of the United States. "Every year it's just bigger and bigger." Yet, in an era when it is an act of American patriotism to whittle down the nation's trade deficit, there is little crowing to be heard from the companies that made it happen. The reason: Foreign markets have become a new front in the battle of U.S. health groups against smoking. Going international, too, they have joined forces with foreign anti-smoking groups and, in some cases, with foreign cigarette makers that are trying to block imports.
The export boom has proved a godsend to cigarette companies here in North Carolina, in the heart of tobacco country. It has put back to use plant capacity that was left idle by the gradual decline in smoking in the United States. In the first six months of this year, total U.S. cigarette production grew about 2 percent to supply the export market, following a 3 percent decline in 1989.
The companies say their products sell well abroad, typically at prices substantially above those of local brands, for simple reasons. "It's quality of tobacco and the level of technology that the U.S. industry possesses," said Richard Snyder, executive vice president at Philip Morris International Inc., the foreign arm of the Philip Morris Cos. "The U.S. companies have a clear competitive edge."
U.S. cigarette factories are automated to levels little known abroad, equipped with machines that can roll tens of thousands per minute. American cigarettes do not fall apart in smokers' hands, as many in the developing world do. They contain tobacco that many smokers feel is superior. And they are smartly packaged and smartly promoted.
Many analysts believe sales are also aided by the cigarettes' close association with American pop culture. The Marlboro Man is known the world over as a symbol of the American mystique. Brands such as Kent, Salem, Camel and others that American smokers take for granted are in many countries a standard of luxury and style, in that same way that American music, videos and hairstyles may be.
U.S. exports are growing fast, but for now they amount to only about 3 percent of annual world consumption of about 5.3 trillion cigarettes. U.S. tobacco companies, together with large European tobacco companies, also have major business producing cigarettes in foreign countries. In the 1970s, for instance, companies moved into Latin America to buy control of state-owned tobacco companies.
Direct exports from the United States often flow with little concern for politics. Panama took 753 million; South Africa took 290 million; its communist neighbor Angola 5.5 million. Before the Persian Gulf crisis, Iraq was a major buyer, taking 106 million cigarettes in the first seven months of 1990. Its occupation of Kuwait has cut off American companies from a market that took 1.1 billion cigarettes in that period.
Demand is so strong that intercontinental smuggling networks have sprung up to supply smokers in countries that ban imports. By one estimate, Thailand takes in about 1.5 billion cigarettes this way. An executive with R.J. Reynolds International Tobacco Inc. visiting that country recently bought five smuggled packs of Salem and, by tracing their labeling, the company determined the pipeline was beginning as far away as Mexico and Europe.
Politics of a different sort is part of the tobacco business, however: trade politics.
Since the mid-1980s, U.S. trade negotiators have been prying open Asian countries that had both many smokers and big trade surpluses with the United States. In an era in which free flow of products across borders is the ideal, these countries were on shaky ground from a trade point of view. Their cigarette markets were controlled by government-owned monopolies, in some cases protected by total bans on imports. The Long Life brand of Taiwan's monopoly, for instance, had more than 90 percent of the market. In South Korea, the mere possession of foreign smokes for many years was out-and-out illegal.
Under pressure, Japan liberalized its laws in 1986, South Korea liberalized its in 1987, Taiwan in 1988, and now Thailand has followed suit. In some products, the opening of markets in these countries has often had little effect on actual import figures. Not so with cigarettes. Foreign brands now have about 15 percent of the 310 billion cigarettes-a-year Japanese market, up from less than 3 percent in 1985. They have about 5 percent of South Korea's market and 6 percent of Taiwan's.
U.S. companies in general are often accused of failing to adapt their products to local conditions in export markets, but that has not been the case with cigarettes. For instance, Japanese smokers favor charcoal-filter cigarettes, so U.S. companies have shipped them across the Pacific in huge quantities at a time when they are little used at home.
In Eastern Europe and the Soviet Union, the rising fortunes of U.S. cigarette makers are due not to trade negotiations but to communism's collapse and popular demand in societies where smoking is widespread and cigarettes are viewed as one of the few luxuries ordinary people can afford.
American cigarettes, smuggled in or bought in special shops that require hard currency, have long held status as an underground currency in that region, functioning less as things to light than as bribes, cab fares and special presents to special friends. In Romania, Kent evolved as the favored brand; in the Soviet Union, it has been Marlboro, a pack of which fetches as much as 50 rubles, or about $8.
This summer, the Soviet Union's wrenching move toward a market economy made it hard for smokers to get cigarettes of any kind. Many Soviet cigarette factories shut down, citing lack of machinery parts. Imports from former satellites, notably Bulgaria, were disrupted, in part because sellers were demanding hard currency in payment. Suddenly, Soviet smokers -- consumers of 420 billion cigarettes a year -- had a shortage on their hands.
In several cities, citizens took to the streets and lay across trolley tracks in protest. In one case, angry smokers blocked a street near the Kremlin until a local kiosk was restocked.
Soviet officials decided on emergency imports. And since they had to spend hard currency, they decided to get something that people really wanted. In September, Reynolds and Philip Morris announced they had signed a deal to sell it 34 billion cigarettes, a figure that was subsequently raised. Reports had it that Moscow was going to pay partly by selling gold, diamonds and oil; whether true or not, it was in line with the value that Soviets place on American cigarettes.
Philip Morris for years had limited local production of its brands in the Soviet bloc. By and large, these products were available only to the communist elites, but the company now is expanding availability. Reynolds, meanwhile, is starting production of American brands at a cigarette factory in Leningrad, initially the Winston brand. It also has an agreement to help upgrade Soviet cigarette factories.
In Eastern Europe, the advance also has been swift, particularly in the former East Germany. Tobacco company representatives streamed east soon after the breaching of the Berlin Wall a year ago and within months had literally bought the market. Reynolds, Philip Morris and the West German company Reemtsma Cigarettenfabriken GmbH purchased the factories and brand names of the former East German monopoly cigarette maker.
These days, young women dressed as cowboys offer samples of Marlboros in town squares in what used to be East Germany. Lucky Strike's street promoters have invited citizens to step up and exchange their old cigarettes, just as the nearly worthless East German currency was traded in for the West's deutsche marks earlier this year.
It is not just American companies that are stepping up overseas trade. The state-owned Japan Tobacco Inc. registered a 48 percent rise in exports in its 1989 fiscal year as well, some of them to the United States, which in 1989 imported about $800 million in foreign tobacco products, including tobacco leaf that is made into cigarettes and other products. Japan Tobacco is pitching Mild Seven, its domestic flagship product, with an advertising campaign in U.S. cities.
Fighting the U.S. companies every step of the way are American health groups, which feel the companies are cynically pushing a poisonous product abroad at a time when Americans are turning away from it.
"For every smoker who quits in Boston or Baltimore, new smokers are being aggressively targeted and recruited by U.S. tobacco companies in Bangkok and Beijing," Rep. Henry Waxman (D-Calif.), one of the companies' biggest critics in Congress, wrote recently. Developing countries should spend their limited foreign exchange on developmental purchases, not cigarettes, they say.
Anti-smoking groups argue that with large advertising budgets and a glamorous product, U.S. companies are increasing the number of smokers overseas, particularly among women and young people. They note that in Japan, TV advertising of cigarettes has increased markedly since the door was opened in 1986 and smoking levels in Japan showed an uptick in 1989.
Advertising links smoking to U.S. popular culture, the groups argue. They cite, for instance, a Winston commercial run in the Philippines in which young people are shown dancing to a rock song with the lyrics, "Give me the spirit of the U.S.A."
Many want all U.S. cigarettes sold overseas to bear health warning labels. (Depending on the country in which they are sold, some do not carry such labels at all.)
Above all, anti-smoking groups argue that issues of health override any economic gain the United States may realize from cigarette exports. They attack the White House for making it a top-priority trade issue. "The U.S. government should not be in the business of encouraging exportation of cigarettes," said Scott Ballin of the American Heart Association. " ... Every country, including the United States, should be doing everything possible to discourage its use worldwide."
Anti-smoking activists have flown abroad to link up with counterparts, notably in the recent import-ban battle in Thailand. There, a strange de facto alliance was born between the local tobacco monopoly, which wanted to keep imports out to preserve its sales, and the anti-smoking forces, which wanted the same thing but for entirely different reasons.
Earlier this year, Thailand and the United States argued out the ban before a disputes board of the Geneva-based General Agreement on Tariffs and Trade (GATT). The Thais contended the ban was justified as a means of reducing smoking. Maintaining a government monopoly, it said, served to control a social ill. If cigarettes were illegal, it said, people might switch to narcotics such as opium and marijuana.
GATT eventually ruled against Thailand's import ban, saying it must treat foreign and domestic cigarettes alike. But GATT upheld the country's right to keep a ban it had imposed on cigarette ads.
Elsewhere, U.S. cigarettes can provoke a nationalistic response. Anti-American student groups in South Korea have organized boycotts, saying their purchase is a treacherous blow to the welfare of Korean tobacco farmers.
Tobacco companies say all they want is the right to sell products that are legal in every country of the world. Tobacco exports are a key support to the U.S. economy, they say, providing jobs directly for 125,000 Americans in 1989. Opposition abroad to American cigarettes is protectionism plain and simple, they say, an attempt to use health concerns to guard local jobs and interests.
Companies argue that there is no evidence that advertising or American companies' presence increases smoking. W. Andrew Copenhaver, an attorney for the Tobacco Exporters Association, pointed to the newly opened countries of Asia. "Somehow," he said, "these countries had 70 or 80 percent of their adult male population smoking when we weren't there at all." Advertising, he said, serves only to switch smokers from brand to brand.
The tobacco industry accuses its opponents of a presumptuous arrogance. The real message of anti-smoking groups, said Snyder of Philip Morris, is that "the U.S. has the right attitude and that we should therefore force it on the rest of the world, that they can't make their own judgments."
Correspondent David Remnick contributed to this article from Moscow.