INTERNATIONAL MARKETING

EXPORTS OF TOBACCO
Prepared by :
Florencia Irena
Hanny Mulyawan
Maya Lisa
Popy Bonanza
Sherly Fen
Shinta

Tobacco
United States is fourth behind China, Brazil, and India in tobacco world production, and second behind Brazil in exports.

In 2001, tobacco had a farm value of $1.9 billion, making it the United States eight largest cash crop.

In 1964, The Surgeon General’s Report documented the adverse health effects of smoking.

Today the World Health Organization (WHO) attributes about 4 million deaths a year to tobacco use, a figure expected to rise to about 10 million deaths a year by 2030.

As a result of increased awareness of the consequences of smoking and other factors such as higher cigarette prices, steeper federal and local taxes, and governmental restrictions on smoking in public places also contributed to this decline nearly 25 percent.



The Importance of Tobacco for the U.S. Economy
As the number of smokers has declined, the government has raised the cigarette tax in order to preserve the level of tax revenues from smoking.

Cigarette tax was raised
1951 – 1982 : 8 cents/pack
1983 – 1990 : 16 cents/pack
2002 : 34 cents/pack

Developing countries are the home to most of the world’s smoker.

In the peak year of 1996, the U.S. tobacco industry produced 754 billion pieces of cigarette and export 241 billion but in 2002 tobacco industry produce declined by 1 – 2% to 570 billion pieces and export fell by 3%.

In 2002, the leading destination for U.S. exports were Belgium Luxemburg (form there cigarettes are distributed to individual countries like Japan, Saudi Arabia, South Korea, Lebanon, and Israel).


U.S. Trade Policy
But Japan together with South Korea, Thailand, and Taiwan Joining.
In GATT (General Agreement on Tariffs and Trade), these countries violated the free trade principles they had agreed to respect under the GATT.

In September 1985, the while house filed a complaint against Japanese restrictions on the sale of cigarettes. After a series of negotiations and mounting pressure from the U.S. cigarettes. Japan gave in and allowed imports U.S. cigarette.

Eventually cigarettes raise from the fortieth to second most advertised product in Tokyo Television.

U.S tobacco manufactures found new opportunities for expansion. With 60% of their populations smoking, Hungary, Poland, Bulgaria, the former Yugoslav Republics, the Czech Republic, and Slovakia are among the top ten nations in per capita cigarette consumption.

Unlike Asia in 1980s, U.S. companies are welcomed here as contributors of new technology and scarce investment funds.


Government Support of the Tobacco Industry
The U.S. Department of Agriculture (USDA) administers laws to stabilize tobacco production and prices.

According to the Tobacco Institute, without this regulation, more tobacco would be produced and prices would be lower.

In 2000, the Commodity Credit Corporation made new loans to tobacco farmers of an estimated $395 billion.

Until the late 1980s, the U.S. government was in strong support of the tobacco industry. It funded 3 export promotion programs : The Foreign Market Development Program, The Targeted Export Assistance Program, and The Export Credit Guarantee Programs.

During the Clinton administration, the U.S. government discontinued all export programs related to tobacco and tobacco manufacturers.

Under the Bush administration, the U.S. government’s anti-tobacco stance has softened.


Conflicting Objectives
The U.S. is a strong supporter of worldwide antismoking movement.

The Department of Health and Human Service serves as a collaborating headquarters for the United Nations World Health Organization (WHO) and maintains close relationships with other health organizations around the world in sharing information on the detrimental health effects of smoking.

The National Bureau of Economic Research estimated that U.S. entry in the 1980s into countries previously closed to cigarette imports pushed up the average per capita cigarette consumption by almost 10% in the targeted countries.

This occurred due to increased advertising and price competition caused by the entry of U.S. products. This situation reflects a conflict between morality and economics.

STEEPLE
- Social and cultural

- Technological and product innovation

- Economic and market competition

- Education, training and employment

- Political

- Legal

- Environmental protection
Question for Discussion
1. Should U.S. export of tobacco products be permitted in light of the domestic campaign against smoking?

2. Should export promotion support be provided to U.S. tobacco producers?