Big Tobacco's Global Reach: A Post Series • Part One: U.S. Aided Cigarette Firms in Conquests Across Asia • Part Three: In Ex-Soviet Markets, U.S. Brands Took on Role of Capitalist Liberator • Part Four: Vast China Market Key to Smoking Disputes

By Glenn Frankel
Washington Post Staff Writer
Monday, November 18 1996; Page A01

Second of Four Parts

The first thing Prakit Vateesatokit noticed were the billboards. The broad cowboy vistas and the chiseled features of the Marlboro Man sprouted suddenly in the summer of 1985 along the main highway to Bangkok International Airport, followed a few months later by full-color ads in Thai newspapers and magazines.

More disconcerting were the T-shirts, kites, baseball caps and school notebooks that began appearing with the Marlboro trademark. Philip Morris Inc. denied making or distributing these items and accused pirates of stealing the company logo. But it seemed to Prakit, a doctor and a leader of Thailand's fledgling anti-smoking movement, that someone was targeting children specifically to familiarize them with the brand.

All of it was a bit strange because Thailand's rules effectively banned the import of foreign cigarettes, and the only American brands available for sale were either in the duty-free shop at the airport or smuggled packs sold under the table by small-time street vendors. Then, in March 1989, Prakit learned to his surprise that after three years of secret talks, the Thai Finance Ministry was on the verge of approving a deal with the U.S. Trade Representative's Office that would open the country's markets to American brands. American tobacco was poised to enter a new and thriving market.

What Prakit witnessed was the beginning of a full-scale assault. Just as they had in three other promising Asian markets, the U.S. big three cigarette companies -- Philip Morris, R.J. Reynolds and Brown & Williamson -- had targeted Thailand and enlisted Washington's help in prying it open for their products. Following a carefully planned strategy, they started by softening the Thai market with advertisements and sponsorships, then applied U.S. government pressure and the threat of trade retaliation as stipulated by Section 301 of the U.S. Trade Act. After previous successes in Japan, South Korea and Taiwan, the companies were anticipating another triumph. Owen C. Smith, a Philip Morris executive who spearheaded the industry's campaign, said the companies hoped to ring up at least $150 million in cigarette sales from Thailand within a few years.

It did not happen. Instead, a handful of determined Thai health officials and doctors resisted the assault and rolled it back. Led by Prakit and fellow physician Hatai Chitanondh, a senior official in the Thai Public Health Ministry, the counterattack was aided by anti-smoking activists from other parts of Asia and from the United States. Invoking Thai nationalist sentiment and economic self-interest, they enlisted the support of the government and the state-run tobacco monopoly. They got themselves appointed to the official delegations that fought U.S. trade demands and pleaded Thailand's case before the World Trade Organization (WTO) in Geneva. There they made an impassioned health argument that won acceptance by the panel.

Technically speaking, the tobacco industry won. The Geneva panel agreed that Thailand's ban on imported cigarettes violated the General Agreement on Tariffs and Trade (GATT), and Bangkok voluntarily lifted the ban on foreign brands in 1990.

But in practical terms, Thailand won an enormous victory. Today it boasts some of the strongest anti-smoking laws in the world. And imported cigarettes still account for less than 3 percent of the legal Thai market, a far cry from the 25 percent anticipated by U.S. firms. Big Tobacco's dreams for Thailand never came true.

Thailand's resistance campaign played a crucial role in creating the anti-smoking movements that are taking root today throughout Asia. Countries as diverse as China, Japan, Taiwan, Mongolia and South Korea are adopting tough tobacco control laws that restrict advertising and sales of cigarettes, although sales for the most part are still increasing. And the Thai case also led to the first break in solidarity between U.S. trade officials and American cigarette exporters.

Still, Asian public health activists contend that even under the Clinton administration Washington remains a reluctant ally of the tobacco industry when it comes to foreign markets (see story on Page A15). In recent years, U.S. officials retarded efforts to ban cigarette advertising in Taiwan and South Korea and opposed Thailand's attempt to require manufacturers to disclose the ingredients they use in their brands.

Despite the progress the anti-smoking movement has made in Asia, the tobacco industry still predicts its sales will increase through the turn of the century on much of the continent. Public health activists say they are up against not just American companies but a socioeconomic wave of modernization, urbanization and growing affluence that has given Asian women and young people more independence, more money and more impetus to smoke. In many ways, activists are struggling against history. But it was in Thailand that health advocates proved Big Tobacco was not infallible.

"I don't think the companies expected any real opposition," said Judith Mackay, a Hong Kong-based anti-smoking campaigner. "They thought they could come in and have a free ride. But in the end the 301 cases [cases threatening trade retaliation under the U.S. Trade Act's Section 301] probably did quite a lot of good because they galvanized people. They united people in Asia in outrage. And Thailand was the key."

The Campaign Begins

Prakit Vateesatokit was 45 years old in 1989, a man with a quick, wide grin and long, jet-black hair that made him look far younger. But the smile was deceptive. Behind it was a deep reservoir of anger and disgust, all of it focused on one subject: the damage done to the human lung by the act of smoking.

Trained in Bangkok and at the New Jersey College of Medicine in Newark, Prakit specialized in chest and lung diseases, chairing the department of medicine at Ramathibodi Hospital and medical school here and operating his own private practice as well. Most of his patients were heavy smokers, many of them suffering from chronic emphysema, a slow ticket to the grave. Each night Prakit would go home to his wife and three sons for dinner, then drive to nearby Hyathai Hospital to look in on his stricken patients.

"With lung cancer at least they go quickly," he said as he toured the hospital on a steamy Bangkok night recently. "But most of my patients stay in the hospital for years and years on the ventilator, and they die very, very slowly. There came a point when I began to feel it was all very stupid, very unnecessary, and that my work as a doctor trying to help these people was totally useless."

In the early 1980s, Prakit became involved in Thailand's fledgling tobacco control movement. He helped push public efforts to require health warnings on cigarette packs and restrict smoking in public places. But when the Ramathibodi medical school dean asked him to organize a new anti-smoking campaign in 1986, he was reluctant.

"I had worked in tobacco control on and off for 10 years and nothing much had happened," he recalled. "But my dean said this time it will be different. He said I'd get a secretary and some funding. He would not allow me to say no."

Prakit's new office opened its doors at a pivotal moment. The U.S. Cigarette Export Association -- which represents the three largest American tobacco companies -- was pressing the U.S. government to turn its attention to Thailand. The Royal Kingdom operated a typical, state-protected cigarette industry. Lurking behind high tariff walls, the Thai Tobacco Monopoly was run directly by the Finance Ministry, and its profits and revenues provided a substantial part of the government's annual budget.

The monopoly did not have to advertise or work hard for market share -- indeed, in 1988 at the urging of Prakit's organization, the government banned all advertising of tobacco products. More than 60 percent of Thai men and just 6 percent of Thai women smoked. They were in effect a captive market. There was a substantial black market in Marlboros and other foreign brands, but the state monopoly dominated.

For Smith, a veteran trade lawyer for Philip Morris who served as president of the export association, Thailand was an irresistible target. In 1985 the country began a remarkable decade of double-digit economic growth that remains among the world's highest. American franchises such as McDonald's, Baskin-Robbins and Radio Shack all established beachheads. Still, their products were a drop in the trade bucket. Thailand, with its cheap textiles, jewelry, processed food and electronic components, had a $2 billion annual trade surplus with the United States. And the Americans were keen to get some of it back.

Smith saw a sleepy, bloated state tobacco monopoly ripe for challenge. As it had in the past, his association turned to the Office of the U.S. Trade Representative (USTR) for help. Thailand "didn't have a case and they didn't have any justification" for keeping out American cigarettes, he said.

In March 1989, Hatai, then deputy permanent secretary in the Thai Public Health Ministry, was tipped off by a friend in the Finance Ministry about an impending deal with U.S. officials. Hatai, who was trained as a neurologist, had developed a hatred of tobacco in his job as a public health official. Hatai's cabinet minister was away in London, but rather than wait, he decided to act on his own, denouncing "tobacco colonialism" at a news conference. Within days, Prakit and other anti-smoking activists had joined in protest, along with tobacco farmers and cigarette factory workers.

Bowing to pressure, the finance minister put the deal on hold. Shortly after, Smith's association filed an unfair trade practices complaint with USTR. In the petition, the companies demanded the right to import, sell and distribute cigarettes in Thailand. They also insisted that Bangkok lift its advertising ban so they could promote their products "in order to overcome years of exclusion from the market." The petition said the ad ban was motivated not by health considerations but by a need "to put imported products at a competitive disadvantage." Smith held a news conference in Washington at which he lumped Thailand with Syria and Iran as the only three noncommunist countries that banned U.S. imports.

Carla Hills agreed with Smith's argument. Like her predecessor, Clayton Yeutter, the new head of USTR was a nonsmoker; indeed, one of her first acts was to declare the Winder Building, USTR's Civil War-era headquarters on 17th Street NW, a no-smoking zone. But Hills believed that Thailand was shutting out foreign cigarettes merely to shelter its own state-run monopoly. Her stance was endorsed by a coalition of tobacco and farm state senators in a letter signed by Jesse Helms, Robert J. Dole, Al Gore and 16 others.

"I do believe there are health problems with cigarettes, but I'm not [the Food and Drug Administration]," Hills said in a recent interview. "My job was to enforce statutory requirements for USTR and remove trade barriers. Any market that wants to declare a ban against cigarettes, that's great, but countries that have their own industries should treat foreign companies no different than domestic ones."

In April 1989 Hills accepted the case under Section 301, a provision that gave Thailand a year to comply or face retaliatory sanctions. USTR officials quickly began drawing up lists of Thai products to target. Spokesmen for those products -- jewelry, textiles, furniture and processed food -- met with Thai trade officials to plead for a peaceful resolution. But a phalanx of Thai public health officials and representatives of the tobacco monopoly, in an opportunistic marriage of interests, stood fast in opposition. The Bangkok government, which two years earlier had been forced to resign over trade issues, was not prepared to defy this coalition.

A Veteran Joins the Fight

A few weeks after the complaint was filed, Prakit traveled to Taiwan to attend the first meeting of the Asia-Pacific Association for Control of Tobacco. There he met a number of veteran anti-smoking activists for the first time, including Gregory Connolly, head of the Massachusetts Tobacco Control Program and a representative of the American Public Health Association, who had become an avowed enemy of the tobacco industry after his sister died of lung cancer.

Connolly listened to Prakit describe Thailand's struggles with the 301 complaint and pleaded with him to hang tough. "Whatever you do," he told Prakit, "don't let the Americans in. They'll launch an incredible advertising campaign, and they'll get Thai women and children to smoke."

Under Connolly's tutelage, Prakit received a crash course in the international politics of tobacco. Soon the lone fax machine at Ramathibodi Hospital was humming with newspaper articles, reports and ideas. Connolly persuaded Prakit to apply to USTR for a public hearing, something the agency had not held in any previous 301 case. Connolly also helped form a Thailand task force in Washington that included representatives of various American anti-smoking groups, which began pressuring USTR for the hearing.

Prakit used personal connections with the Commerce Ministry to get himself appointed to the official Thai delegation for the first session with USTR negotiators in late July 1989. Although Peter Collins, the head of the U.S. delegation, insisted in his opening remarks that the issue was strictly a matter of trade, not health, he reluctantly agreed to allow Prakit to participate.

The atmosphere was tense. The USTR delegation was so afraid of public protests that Collins insisted on holding the sessions in the town of Pattyar, a two-hour drive from Bangkok, and Thai officials say he refused to allow local television crews to film the opening of the meeting. At the first session, USTR asked a series of questions on how the state tobacco monopoly was run and how taxes were collected. Then Prakit gave a history of the Thai anti-smoking movement and the cigarette ad ban.

Prakit was not informed of later negotiating sessions, and a Thai official told him that the USTR team had insisted he be dropped from the delegation. At around this time he also stopped receiving invitations to attend social events at the U.S. Embassy in Bangkok.

A few weeks later, Prakit received a letter from USTR granting a public hearing and inviting him to appear. Connolly was delighted. He saw the hearings as a golden opportunity for the anti-smoking movement to make its case. But Prakit was terrified at the notion of being interrogated by lawyers in public. "In Thailand the patient never sues," he said. "The whole idea of a public hearing was very scary to me."

The hearing, held in September 1989, was a turning point. Hills and USTR, usually lauded in the press, suddenly found themselves portrayed as handmaidens of Big Tobacco. No USTR witnesses appeared at the session. Instead the agency was defended by Philip Morris's Smith and a handful of tobacco state lawmakers. They were opposed by a parade of advocates from every major American public health group as well as former surgeon general C. Everett Koop and congressional critics. "It is my firm belief that America's dark secret of cigarette promotion overseas cannot survive in the sunshine of public scrutiny," testified Rep. Chester G. Atkins (D-Mass.).

Prakit testified that the Thai government was opposing imported cigarettes not merely at the bidding of the state tobacco monopoly. Using slides and reading a text in English, he sought to convince the panel that an authentic anti-smoking movement existed in Thailand.

Faced with growing pressure and working for George Bush, a president who seemed less inclined than Ronald Reagan to go all out for tobacco, Hills broke precedent. She suspended the 301 procedure and referred the Thailand case to the WTO in Geneva for adjudication under the provisions of GATT.

Smith opposed the move -- he feared the process could be time-consuming and knew the industry would have little or no leverage over the GATT hearing's panel. In a pointed letter to USTR, Smith's association called Hills's decision "unnecessary, unprecedented, unsuccessful and against the interests of United States exporters."

Hills did not budge. "I believed that where you have an international rule that governs trade you ought first to use it before you apply unilateral sanctions," she recalled. It was the first clear break between Washington and the tobacco industry on a cigarette trade issue.

Still, the industry saw no reason to panic. Article XI of GATT unequivocably prohibited signatory countries from banning or discriminating against other countries' products and gave the panel the power to order changes in governmental policies. The United States argued that Thailand's import licensing restrictions and discriminatory taxes amounted to an improper restraint of trade. And because Thailand exported cigarettes elsewhere in Asia, the U.S. brief dismissed the health argument as incongruous.

Prakit had never heard of GATT before Hills announced her decision. But he and Hatai, his colleague, wrangled appointments to the official Thai delegation in Geneva. In February 1990 they took an all-night flight from Bangkok. Prakit had borrowed a copy of the GATT treaty from a friend, and when they arrived at the Rome airport at 5 a.m. for a two-hour layover, he began reading. His tired eyes were blurry, but he came upon a clause in the preamble that woke him up. It summed up the reasons for the agreement: " . . . recognizing that their relations in the field of trade and economic endeavor should be conducted with a view to raising standards of living, ensuring full employment and . . . developing the full use of the resources of the world."

In other words, as he read it, the purpose of GATT was to promote health and welfare. Yet cigarettes undermined both.

"I think we've got something to argue," he told the leader of the delegation.

The U.S. delegation had not enlisted a health expert for its team; instead, it marshaled the tobacco industry's standard arguments -- claiming, for example, that American cigarettes were healthier than Thai products because they contained less tar.

Connolly, serving as an expert witness for the World Health Organization, replied, "It's like jumping from the 10th floor versus the seventh floor. At the end, all cigarettes, in any way, shape or form, will eventually kill you."

In November 1990 the GATT panel concluded that Thailand's failure to allow imported cigarettes was indeed a clear violation of Article XI. At the same time, however, the panel ruled that smoking constituted such a serious health risk that Thailand justifiably could restrict cigarette sales and ban advertising, as long as it applied the rules equally to both domestics and imports. The health testimony proved decisive: The panel's report included four pages of Connolly's testimony virtually verbatim.

Hills and USTR declared the GATT decision a victory. But they also quietly dropped their demand that Thailand allow cigarette ads. The two governments reached an agreement two days before the Nov. 25 deadline set by the 301 complaint.

Prakit and Hatai were advised in advance by friends in the Commerce Ministry to prepare a new tobacco control law to cushion the public health impact. With help from Connolly and other American activists, they drafted one of the world's strictest anti-smoking codes.

The Tobacco Products Control Act bans all cigarette advertising, as well as sales to young people. No cigarette promotions or free samples are allowed. Cigarette packs must prominently display one of 10 health warnings. Another provision requires companies to disclose to the Public Health Ministry the ingredients and additives in each of their brands.

A second law, the Non-Smokers Health Protection Act, bans smoking in most public places. In effect, the new laws meant that while American tobacco companies were allowed to enter Thailand, they were denied the tools they traditionally use to attract new customers.

Smith was philosophical about the outcome of the Thailand case. "It's a little bit like making sausage," he said in a recent interview. "No result of a trade negotiation is likely to be perfect."

Hatai still wages a one-man campaign against new incursions. When Japan Tobacco introduced cigarette cartons and packs with pictures of Thai Buddhist shrines, Hatai led a protest at the Japanese Embassy. The shrine photos quickly were withdrawn. Hatai personally patrols restaurants and tobacco shops, confiscating ashtrays, napkins and anything else that displays the trademarks and logos of cigarette brands.

Nonetheless, Hatai has a folder full of charts and statistics suggesting that after a decade of fervent tobacco control efforts, smoking is increasing among Thai teenagers. "I still don't think we are winning this war," he said.

"It's not like fighting tuberculosis. There you know if you have a good antibiotic you have won more than half the battle. But in tobacco control there's no antibiotic. Once you have the tobacco companies inside your country, you have to fight them all the way and all the time. It never ends," Hatai added.

Thailand's success reverberated throughout Asia.

Asian Backlash

Led by a handful of activists in each country, the anti-smoking movement began to push for higher tobacco taxes, warning labels on cigarette packs, disclosure of tar and nicotine data, as well as restrictions on cigarette advertising and promotion, sales to young people and smoking in public places. By 1995, 33 of 35 Asian countries had tobacco control laws on their books, according to Mackay, the Hong Kong-based anti-smoking campaigner.

Those laws were prompted not just by health concerns but by a sense of righteous Asian nationalism. According to a widespread conviction, the United States and Europe were seeking to inflict death and addiction on Asia in a replay of the opium wars of the 19th century.

"America has given us so many good things over the years," said David Yen, a Taiwanese businessman who founded the John Tung Foundation in Taipei after his own brush with cancer cost him a lung and caused him to quit his two-pack-a-day habit. "We think it's a pity that with so many wonderful products to sell, you have insisted on pushing disease instead."

Japan, South Korea and Taiwan all had signed binding 301 agreements with the United States that not only allowed American brands into their markets but permitted certain forms of advertising and set tax limits. Now they pressed for Washington's consent in amending the pacts. But U.S. trade officials again sided with the industry, delaying or defeating tobacco control measures in all three countries.

For example, when Taiwanese health officials sought a total advertising ban to counteract an alarming increase in high school smoking rates after American brands entered the country in 1988, USTR officials objected. Reciting the industry's arguments, U.S. officials argued that such a ban would not reduce cigarette consumption and did not qualify as a health measure. Officials also again raised the threat of opposing Taiwan's application to join GATT. The proposed ban has since been bottled up by pro-tobacco forces in the Taiwanese parliament.

While Asia remains a market of great promise for international tobacco companies, their growth is being challenged at every step by increasingly aggressive and self-assured tobacco control campaigners. By contrast, there is another region where public health movements are frail and where governments are not just willing but desperately eager for the industry, its brands and its money.

With the fall of the Soviet Union and the collapse of communism, Eastern Europe put out the welcome mat for Western products, technology and investment capital. While other Western companies hung back, wary of the risks involved in entering the ruined economic landscape, the tobacco industry moved swiftly and boldly through the newly opened door.