Linking a tobacco buyout with Food and Drug Administration regulation of cigarettes is the best bet for its passage in Congress, but the tobacco landscape after the buyout can't include price supports, says the nation's largest cigarette manufacturer.
At a news conference in Raleigh, N.C., Philip Morris officials began the push for passage of tobacco buyout legislation sponsored by U.S. Reps. Mike McIntyre (D-N.C.) and Tom Davis (R-Va.) PM has also met with its contract growers in Virginia, North Carolina, Georgia, Tennessee and Kentucky, drumming up support for a quota buyout linked to “meaningful and effective” FDA regulation. The McInytre-Davis bill provides $8 for quota owners, $4 for growers who continue and $2 for those who exit the industry. The bill also authorizes FDA regulation of cigarettes. It would eliminate price supports.
John F. Scruggs, vice president of government affairs for Altria Group, PM's parent company, said exchanging the current price support system for a licensing system after a buyout would be similar to “selling your truck and then driving it home.”
Lollilard, the nation's fourth-largest cigarette manufacturer, has proposed a licensing system for growers who continue tobacco production after a buyout. “The proposal is unrealistic,” Scruggs says.
Buyout proposals in Congress, such as one sponsored by Ernie Fletcher (R-Ky.) include a “safety net” for growers after a buyout.
Such a move could push United States' subsidy levels beyond the $19.1 billion cap under World Trade Organization rules, says Scruggs and Larry M. Sykes, PM's director of agricultural programs. A licensing program that involved rents or other payments might be considered an additional subsidy and put all U.S. commodities at risk.
Other tobacco companies oppose linking FDA regulation to a tobacco buyout on grounds that it would lock in PM's already-dominate position in the marketplace. Scruggs doesn't see opposition among tobacco companies over the issue as an obstacle to passage of a buyout.
PM believes linking the two issues — a buyout with FDA regulation of cigarettes — gives congressmen outside tobacco-growing regions a reason to get on board. Public-health advocates also support FDA regulation, which would address definitions for “light” and “ultra-light” cigarettes. FDA regulation would only apply to cigarette manufacturers and not to the farm, Scruggs says.
The time is now for a buyout, Scruggs says, because 2004 is an election year.
A grower representative at the news conference says a buyout is a matter of survival for tobacco producers. “Tobacco growers not only have their backs against the wall, it's through it,” says Graham Boyd, executive vice president of the Tobacco Growers Association of North Carolina.
“I wouldn't say growers are for FDA regulation of cigarettes per se, but if that's what it takes to get a buyout passed, then we'll accept it,” Boyd says.
“I think growers are prepared to accept FDA regulation of manufacturers,” Scruggs says. “I think they understand that all the legislative proposals will explicitly keep FDA off the farm.”