News Backgrounder

March 6, 2001

Ten Reasons Why governments should say no to tobacco farmers' demands for further subsidies.

Canadian tobacco farmers have approached the Ontario and federal governments with a demand for $20 million from each level government to pay for new equipment to cure tobacco. The farmers say tobacco companies are insisting that the tobacco curing process be changed to reduce the levels of tobacco-specific nitrosamines (TSNAs are among the many cancer-causing chemicals found in cigarette smoke). The farmers are asking governments to pay for half the cost of converting their kilns. Giving in to this demand would go against good health policy and good economic policy. Here's why governments should say "no."

The companies have given no evidence that reducing tobacco nitrosamines will make cigarettes any safer.

Like the 'light' cigarettes of the 1970s, nitrosamine-reduced tobacco is being covertly promoted as a benefit to smoker's health. But there is no evidence that the life of even one smoker will be extended if nitrosamine levels are lowered. 

Nitrosamines are only one of dozens of cancer-causing substances in tobacco smoke. Forty- three cancer-causing substances have been identified in tobacco smoke [1] and it contains at least 103  chemicals known to be poisonous to humans [2]. 

Much, much more radical changes would have to be made to tobacco products to make them safer, or even somewhat less hazardous. 

When pushed, even the tobacco companies admit the health benefit is not established. "There's no evidence low (nitrosamine) levels in tobacco produces less of a health risk," CTMC president told the Simcoe Reformer. [3]  RJ Reynolds conducted biological tests of both low and normal-nitrosamine cigarettes and found "there is no difference in the toxicity of 'tar' produced by low-TSNA cigarettes compared to the 'tar' of cigarettes made with direct-fire cured tobacco." [4]

We need science, not subsidies, to develop a 'safer' cigarette.

Health Canada established an expert panel to review ways of making cigarettes less harmful, and invited tobacco industry scientists to participate. Although the scientists attended the meetings, they shared no evidence with health scientists about their biological tests of tobacco from which harmful substances (like nitrosamines) had been removed. The federal government has the authority to set standards for cigarettes (including levels of nitrosamines and other carcinogens and poisons), but the science to set these standards has not yet been established. Nor have the tobacco companies once made their biological research public.

 The U.S. National Academy of Sciences' Institute of Medicine (IOM) recently reviewed the science base for tobacco harm reduction and concluded that "Without intensive study, it is not possible to say whether these products (risk-reducing tobacco or other products) reduce risk to the individual or actually increase the likelihood of harm." The IOM recommended increased research and regulation over tobacco products. [5]

There are no proven health benefits of nitrosamine-reduced tobacco. Even RJ Reynolds agrees. Giving a $40 million hand-out to unproven schemes would open the door to future demands from the tobacco industry to give piece-meal funding to future product modification.[6]

Subsidizing tobacco farming conflicts with government policy to reduce tobacco use.

Federal and provincial governments have worked for decades to slow the progress of the tobacco epidemic. Federal and provincial governments have agreed on a national strategy to "align policies" across departments like agriculture and trade to support reduced tobacco use. [7] Investing public money in tobacco curing kilns undermines this policy.

Subsidizing tobacco farming conflicts with Canada's health policy at the international level.

Together with other nations, Canada is negotiating a new tobacco control treaty, the Framework Convention on Tobacco Control. [8] As co-chair of the group looking at agricultural transition issues, Canada has a special role in finding ways to get farmers out of the tobacco business. One of the goals of this treaty is to end all subsidies to tobacco farmers. Canada's effectiveness in negotiating this treaty will be compromised if Canada is seen to be increasing (not removing) tobacco farm subsidies. Canada's credibility has already been undermined by its recent decision to include tobacco farmers on its trade mission to China.

Governments have paid farmers to get out of tobacco growing. Now's not the time to change direction.

As part of a comprehensive program to reduce smoking, in the late 1980s the government began paying tobacco farmers to help them get out of the tobacco growing business. Payments continued to the mid-1990s and totalled over $100 million.[9] Supporting tobacco growing by subsidizing kiln-conversions flies in the face of government policy and bad money after good. [10]

Canadian tobacco farmers (and exports of Canadian tobacco) are highly subsidized by tobacco companies .

Over the last decade, tobacco manufacturers have paid over $650 million to tobacco farmers in make-up [11] payments of roughly 30% above market prices. 

The make-up payments are over and above the actual price paid for tobacco leaf at auction, and are issued at the end of the season to farmers. The make-up payments work out to about half a million dollars per tobacco farmer over the ten years 1991-2000. 

It is not clear why the tobacco manufacturers have chosen to pay so much more for Canadian tobacco instead of buying tobacco from other countries. It could be that they don't want to take the risk that Canadian smokers will reject the taste of tobacco from other countries. It could be that they want to make sure they have allies with government. It could be that they don't want to take the political fall-out of abandoning Canadian farmers. 

This subsidy is only possible because of the government decision to have a marketing board for tobacco. Like government subsidies, however, this private subsidy works to distort the market. In effect, it means that Canadian tobacco is being dumped on the world market at less than the cost of production.

If the tobacco companies want tobacco to be cured differently, they can afford to pay the cost of converting the kilns.

The tobacco farmers say that they need to convert their kilns because the CTMC companies are requiring them to do so. In that case, the companies, not the taxpayer, should be paying for these costs. 

Certainly the tobacco companies can afford it. They make an estimated $1 billion per year in profits in Canada (Imperial Tobacco alone made $871 million in 1999). 

Canada is the most profitable region to sell cigarettes for BAT, which sells 70% of the cigarettes in Canada and the world's second largest private tobacco company. BAT's profit rate in Canada is 5 times greater than it is in Europe.[12]

Canadian tobacco farmers are doing very well, thank you.

Compared to other farmers, Canadian tobacco farmers do relatively well. Statistics Canada reports that there are only two types of farms that have operating revenues of more than 20¢ per dollar of revenue, dairy farms (25.9¢) and tobacco farms (20.8¢). Poultry and egg farms had the highest average farm income in 1997 ($78,246) followed closely by tobacco farms ($76,491). 

It is interesting to note that the make-up payments, the private subsidy received from manufacturers, amounted to about half of tobacco farm income in 1997, and, based on preliminary data, probably reached three-quarters of tobacco farm income by 2000.

The tobacco farmers want to be paid to stop blowing furnace exhaust on their tobacco.

The Ontario Flue-Cured Tobacco Growers' Marketing Board explains that the reason they must change their kilns is because they currently vent the heating exhaust directly onto the tobacco. As they describe the current practice: 

"In order to maximize energy efficiency and reduce the cost of curing, the furnaces are vented directly into the kiln and as a result the tobacco is exposed to the products of combustion." 

The tobacco farmers have been saving money for years by deliberately blowing exhaust from natural gas curing fires on a product destined for human consumption. This exhaust is laden with oxides of nitrogen and promotes the formation of cancer-causing tobacco-specific nitrosamines. 

The farmers are now asking for a government handout to correct a manufacturing operation that common sense should have told them to be unwise. Governments should suggest that the farmers apply the money saved by using this less healthy technology towards the cost of converting their kilns. (Better yet, perhaps it's time that tobacco curing was regulated by health authorities!)

The request is for double current federal spending to reduce tobacco use.

There are many worthwhile health and agricultural projects that would benefit from the $40 million injection of public money now demanded by Canadian tobacco farmers.

As a health measure, it would make a great deal more sense to spend the money on reducing the disease and death caused by tobacco use. Currently, the Ontario and federal governments spend less than the $40 million hand-out demanded by the farmers. (Health Canada spends $20 million on measures to reduce smoking, and the Ontario government spends approximately $19 million). [13]  The US Center for Disease Control recommends that governments should spend at least $240 million in a country the size of Canada on tobacco control measures. [14]

Tobacco subsidies are bad economic policy, says a World Bank study.[15]  It estimates that each 1,000 tonnes of tobacco smoked drains the global economy $39 million as a result of early mortality and disability. 

As an agricultural policy, it would make a great deal more sense to spend the money investing in supporting agriculture which improves health and the economy, or supporting farmers who are in genuine need.

[1] Tobacco Smoking. IARC Monographs on the Evaluation of Carcinogenic Risk to Humans, Volume 38, (Lyon: International Agency for Research on Cancer, 1986), Appendix 2.

[2] James Repace,  “Can Ventilation Control Second-hand Smoke in the Hospitality Industry?,” June 2000, http://www.dhs.ca.gov/tobacco/documents/FedOHSHAets.pdf.

[3] Kiln change won't make smoking healthier: manufacturers.  Daniel Pearce, Simcoe Reformer,  February 12, 2001.

[4] Low nitrosamine cigarettes not shown to be safer in tests conducted by RJ Reynolds Tobacco Company. RJ Reynolds Press Release 2000-36, September 22, 2000.

[5] Clearing the Smoke:  Assessing the Science Base for Tobacco Harm Reduction, Institute of Medicine, 2001.

[6] In 1999, two UK health groups, the Imperial Cancer Research Fund and Action on Smoking and Health, published a report detailing 57 tobacco industry patents for product modifications that might reduce the deadliness of cigarettes.  See htt;://www.ash.org.uk/?patent.

[7] New Directions for Tobacco Control in Canada - A National Strategy prepared by the Steering Committee of the National Strategy to Reduce Tobacco Use in partnership with the Advisory Committee on Population Health. http://www.hc-sc.gc.ca/hppb/tobaccoreduction/pdf/new_ directions_en.pdf.

[8] Letter from Celso Amorim, Chair, Intergovernmental Negotiating Body, Document # A/FCTC/INB2/DIV/1, (Geneva: World Health Organization, 10 January 2001),  http://www.who.int/wha-1998/Tobacco/INB2/anglaisINB2.htm

[9] Agriculture Canada,  “Evaluation of the Tobacco Diversification Plan (Tobacco Transition Adjustment Initiative and Alternative Enterprise Initiative) Executive Report,” (Ottawa: Agriculture Canada, Audit and Evaluation Branch, Program Evaluation Division, 1990).

[10] Tobacco farmers benefit from government agricultural policy. The Ontario Flue-Cured Tobacco Growers’ Marketing Board owes its existence to provincial marketing board legislation. Like all farmers, tobacco farmers can benefit from a variety of agricultural assistance programs operated by both the federal and Ontario governments. The services of agricultural extension workers, government agronomists, trade experts and others are made available to tobacco farmers.  They can benefit from assistance in export market development and have most recently joined the Team Canada trade mission to China.  Tobacco farmers can also benefit from a variety of soft loans and other forms of financial assistance from governments including advance payments for crops, job creation programs, capital investment programs and other rural development programs.

[11] Ontario Flue-Cured Tobacco Growers’ Marketing Board Annual Reports, 1991-2000, Delhi and Tillsonburg, Ontario, Canada.

[12]  Director's Report 1999, British American Tobacco.  www.bat.com/annualreport/region_c.htm

[13] Information provided by Ontario Campaign for Action on Tobacco, 2000.

[14] Investment in Tobacco Control - State Highlights 2001.  Center for Disease Control Office on Smoking and Health, 2001.

[15] Howard Barnum "The Economic Burden of the Global Trade in Tobacco," Tobacco Control, 1994: 3: 358-361.