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Australia in a fog over ban on branded cigarettes

By Jane Wardell

SYDNEY (Reuters) - More than a year after Australia became the first country to introduce plain packaging for cigarettes, there is little hard evidence to prove the trailblazing move is worth emulating.

Challenges to the stringent laws remain bogged down in the World Trade Organization (WTO) and the tobacco lobby is taking control of a debate characterized by a paucity of data.

At the King of the Pack tobacconist in central Sydney, James Yu shakes his head despondently as he says his cigarette sales volumes have plummeted 30 percent over the past year.

Yu's sliding sales should be music to the ears of the Australian government, a vindication of laws introduced in December, 2012, that forced tobacco companies to replace logos and branding with graphic images of smoking-related diseases on an olive green background.

Cigarette sales in supermarkets, which account for a large portion of the market, shrank 0.9 percent overall by volume in 2013, according to the latest data available from Retail World, but there is no clear link to the plain packaging laws.

The Retail World supermarket sales data also showed that while sales volumes of "mainstream" and "premium" cigarettes fell by 8-9 percent, "value" brand sales rose 12.9 percent, a jump Big Tobacco has seized on as supporting the theory that smokers are trading down in response to the legislation.

For his part, Yu says his business has been slowed not by the new packs but by old-fashioned monetary deterrents - a 12.5 percent rise in tobacco excise at the end of 2013 that increased pack prices from an average A$17.50 to A$19.70.

"Smokers don't mind plain packaging actually, the critical thing is the price hike," Yu says from his cramped booth, a view that is supported by other sellers polled by Reuters.

With the tax rise appearing to pack a bigger punch than the costly introduction of plain packaging a year earlier, the Australian government has been accused of not doing enough to defend its legislation, presenting a potential stumbling block for other countries looking to follow in its footsteps.

New Zealand, France, India, South Africa and Britain are all considering adopting standardized packaging on tobacco products.

On Thursday, Britain said it was minded to force tobacco firms to sell cigarettes in plain standardized packaging and would hold a short consultation which could result in new regulations entering into force before May 2015.

Jane Ellison, a minister in Britain's Department of Health, cited what she called a "compelling" review commissioned by the government which she said had shown plain packaging would improve public health and cut the number of child smokers.

The Australian government says the key objective of the policy is to reduce the attractiveness of tobacco products to consumers, particularly young people.

The goal of reducing smoking rates, it says, is a long-term measure and it is too early properly to judge plain packaging a success or failure on those grounds.

Still, the lack of data is frustrating the anti-smoking lobby and allowing Big Tobacco to step into the void and dominate the debate.

DATA GAPS

A raft of international studies has given some contradictory findings on the potential impact of plain packaging and on the recorded impact of graphic health warnings.

A 2013 study by the U.S. Centers for Disease Control and Prevention said an estimated 1.6 million Americans tried to quit as a result of graphic anti-smoking ads, but a 2010 report in the American Journal of Public Health found that industry anti-smoking ads designed to discourage young people from picking up the habit had the opposite effect.

"It's very difficult to quantify the impact of plain packaging in isolation," said Alan Lopez, a University of Melbourne professor currently working at the Institute for Health Metrics and Evaluation in Seattle. "It's part of a cocktail of intervention carried out by Australia, although it's clear that taxation on tobacco products is absolutely the most effective way to cut smoking."

The Australian government does not publicly release retail sales data on the basis that the market, which is dominated by Imperial, Philip Morris International and British American Tobacco, is so tightly held that doing so would reveal sensitive commercial information.

Official data has been restricted to a survey conducted in late 2012 during the pack changeover, when smokers reported more of an inclination to quit, and a report at the start of 2013 from the smoking cessation helpline, Quitline, showing a 78 percent surge in calls associated with plain packaging.

A monthly tracking survey of smokers and recent quitters to gauge the effect of the legislation since it came into force on December 1, 2012, is due for release later this year.

"The tobacco plain packaging measure is an investment in the long term health of Australians and the full effects of the measure will be seen over the long term," Kay McNiece, spokeswoman for the Department of Health, said in an email.

"However, based on recently published independent, peer-reviewed research, early indications are that the tobacco plain packaging measure is having an effect."

Critics, however, say that the government-sponsored research is self-reported by smokers, a notoriously unreliable measure.

"The government now has 12 months of data. Why is the government withholding data?" said Simon Chapman, professor of public health at the University of Sydney.

McNiece said the Health Department does not have access to official sales data and declined to comment on whether it was looking at measures other than self-reported activity.

Industry sales figures released by Marlboro maker Philip Morris last month showed a 0.3 percent increase in deliveries of tobacco to retailers last year - the first rise in at least five years.

That data made headlines but lacked detail and failed to take into account a likely bump from restocking with new packs in 2013, said Mike Daube, a professor of health policy at Curtin University in Perth.

"To make claims of this kind without providing any evidence is clearly a desperate attempt to influence the UK report."

Clayton Ford, a spokesman for Philip Morris in Australia, said the U.S. company recorded steady sales by both volume and value last year even as it announced this week it was ending production here after 60 years.

The decision to close its factory in Victoria state had "absolutely no impact from plain packaging", and was instead a result of government restrictions on manufacturing that impeded its exports to Asia, Ford said.

LEGAL CHALLENGES

Philip Morris is challenging the plain packaging laws under Australia's Bilateral Investment Treaty with Hong Kong, arguing that it is being deprived of its intellectual property rights.

The legislation is also bogged down in the WTO where a case launched by Ukraine - and later joined by Indonesia, Cuba, Honduras and the Dominican Republic - to overturn the law, funded at least in part by one or more tobacco firms, has been running for more than 2 years.

Frustrated at the glacial pace of the complaints, Australia last month took the unusual step of speeding up one of the complaints against itself.

"All of those delays are in the industry's favor," said Tania Voon, a professor at the University of Melbourne law school. "It knows that as long as the cases go on without a resolution, other countries are less likely to follow."

Australia wants to cut the number of people who smoke from around 15 percent of the population to 10 percent by 2018. Health authorities say smoking kills 15,000 Australians each year with social and health costs of around A$32 billion.

(Additional reporting by Maggie Lu YueYang in SYDNEY and William James in LONDON; Editing by Mike Collett-White)

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