Dr Eric Crampton is Chief Economist of The New Zealand Initiative.
OPINION: Budget 2022 allocated just over $2.5 million per year, over four years, to the Customs Service to help it stop cigarette smuggling.
I wonder if that will be enough. Prohibition is expensive to enforce, and the legislation that is making its way through Parliament will bring us awfully close to prohibition.
It is kind of a shame. There are far better ways to encourage harm reduction if that were still the goal of tobacco policy.
* Low-nicotine cigarettes could significantly reduce smoking
* How can so many New Zealanders still smoke?
* Vapers tend to return to cigarettes because they miss the real thing – research
At the end of June, the government introduced the Smoke-Free Environments and Regulated Products (Smoked Tobacco) Amendment Bill.
The bill requires the government to establish regulations, within 21 months, limiting the amount of nicotine allowed in any smoked tobacco product.
Nicotine is the least harmful part of smoked tobacco. The by-products of combustion are, in the long run, deadly: the “tar” contained in cigarette smoke. Nicotine is an addictive stimulant, but that’s not what causes cancer.
If future regulations prohibit high nicotine cigarettes, some smokers will simply respond by smoking more, which will increase the harm caused by cigarette smoke.
Work published in the American Economic Review in 2006 showed that when tobacco excise taxes increased, smokers responded by pulling harder on fewer cigarettes – and getting more bad things out of each.
It would be a bit like heavy drinkers responding to a 6% alcohol limit on beer by drinking more 5% beer.
But if the regulations instead push for very low nicotine content, as some members of the anti-tobacco movement have advocated, that would instead be tantamount to setting an alcohol content limit of 0.5% on beer, which would equate to a prohibition.
Remember that the American liquor ban experiment allowed the sale of quasi-beers containing less than 0.5% alcohol.
It would be difficult to drink enough 0.5% alcohol beer to reach any level of intoxication. Water poisoning might strike first.
Quasi-beers were therefore not particularly popular during Prohibition.
And few cigarette smokers have been fans of the very low nicotine cigarettes that have hitherto been marketed.
Vector Tobacco marketed the Quest line of low-nicotine cigarettes in America in the 2000s. The company’s 2009 annual report showed that low-nicotine cigarette revenues grew from $3.7 million in 2007 to $1.5 million in 2009 when the product was discontinued.
The company had spent more on research and development than it earned in sales in each of those years. Other low nicotine cigarettes have not proven to be much more effective.
If regulations within two years effectively banned cigarettes by setting a very low nicotine craving, would current smokers be more likely to finally switch to vaping? Or will they be more likely to turn to illicit tobacco?
The government is making a pretty big bet here. I hope the customs office will be ready. The regulatory impact statement notes that “the illicit market has increased and the recommended policy changes are likely to worsen this situation”.
He also commendably notes that the ministry will commission research into the size of the illicit market and attempt to track any changes.
If the regulations impose a de facto ban, the rest of the legislation will not matter much. If medium-strength cigarettes remain legal, the other parts of the legislation are worth considering.
The law prohibits the sale of tobacco to anyone born after January 1, 2009. By 2029, the minimum age for the purchase of tobacco will be 20 years. By 2039, it will be 30 years. More likely, by the late 2030s, the impracticality and stupidity of banning a 28-year-old but not a 29-year-old from smoking will lead to pressure for change.
In the meantime, before tobacco is banned altogether, a drop cap on the retail sale of tobacco will apply. Retailers will be permitted to reduce the number of outlets. The Director General of Health will be empowered to “fix a maximum number of commercial premises authorized in a certain area”.
If private retailers conspire to keep competitors away, the Commerce Commission could throw them in jail. If the Chief Health Officer provides cartel profits to privileged retailers through a legislated regulatory scheme, the Commerce Commission has no jurisdiction.
This all seems over the top and too punitive, as a tobacco endgame. Smoking rates have dropped as more smokers and would-be smokers choose vaping instead. Very few young people smoke now. Professor Rob Beaglehole of Action on Smoking and Health noted that young people are already “nearly smoke-free”.
Strengthening the black market would be a mistake.
Making a greater distinction between vaping and smoking, allowing vaping in more places where smoking is currently prohibited, at the discretion of the location, would be helpful. Professor Beaglehole also recommends increased support for those trying to switch from smoking to vaping.
Snus, a low-risk oral tobacco product that has been shown to be remarkably effective in helping Scandinavian smokers quit, could be an additional useful alternative, if legalized. Vaping hasn’t worked for everyone.
Prohibitionist approaches do not have a great track record. They are unlikely to do better for tobacco.
Dr Eric Crampton is Chief Economist of The New Zealand Initiative. The NZ Initiative is a research group funded by a range of companies, universities and other organisations, including British American Tobacco (BAT). You can view the full list of his supporters here.
Where does this statement come from and does it add up?