Friday 31 July 2020

E-cigarette regulation - money talks

An interesting article in the Economist tells us a lot about e-cigarettes. In China, the world's biggest cigarette market, smokers are increasingly switching to e-cigarettes. The state-owned tobacco monopoly is not happy about it.

Investor optimism derives in large part from the prospect of rapid growth in China, where just 10m people were regular users of e-cigarettes at the end of last year. But dig a little deeper and the outlook darkens. A powerful state-owned cigarette monopoly, China Tobacco, will not cede ground to a rival product without a fight.

Regulators have already intervened on behalf of China Tobacco, which paid 1.2trn yuan in taxes last year, accounting for 6% of government revenues. In November the authorities banned online sales of e-cigarettes (ostensibly to prevent minors from buying them). Now they can be bought only at physical outlets like convenience stores and karaoke bars. In recent months editorials in state-owned newspapers have claimed (falsely) that vaping is more harmful than conventional cigarettes. A spokesman for the Electronic Cigarette Industry Committee of China, a trade body, blames the online ban for a wave of bankruptcies among smaller firms.

It is obvious what China Tobacco's motivation is. They fear missing out on cigarette sales if people switch to vaping. The Chinese government, insofar as it can be distinguished from the tobacco monopoly, doesn't want to miss out on tax revenue. More vapers means fewer smokers, hence the online sales ban and scare stories.

Does this sound familiar? The United States has been awash with scare stories about e-cigarettes for several years, culminating in the 'EVALI' panic last year. A ban on online sales (disingenuously titled the Preventing Online Sales of E-Cigarettes to Children Act) passed the Senate earlier this month and will be voted on in the House any day now.

The only difference is that China Tobacco doesn't have the 'public health' lobby cheering it on.

American 'public health' campaigners argue that e-cigarettes don't help smokers quit and act as a gateway to tobacco for young people. China Tobacco obviously doesn't agree.

Who is most likely to be right - a bunch of moral entrepreneurs who have never seen a ban they didn't like, or some hard-nosed businessman who have skin the game?

Americans are smoking more during the coronavirus pandemic because they are spending less on travel and entertainment and have more opportunities to light up. They are also switching back to traditional cigarettes from vaping devices in the wake of federal restrictions on e-cigarette flavors.

Malice, corruption or unbelievable incompetence? You decide.

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