So why is Ukraine, of all countries, taking Australia to the World Trade Organisation over our plain packaging laws?

It’s not exactly a high point in Canberra-Kyiv relations, but then we don’t have much in the way of relations in the first place. Our trade with Ukraine is minimal — just $35 million worth on imports in 2009, according to DFAT, “mainly fertilisers and electrical circuits equipment”.

But Ukraine also has a long and complex history with Big Tobacco. In an excellent 2009 article, the Centre for Public Integrity’s Vlad Lavrov explained how the world’s biggest tobacco companies took over former Soviet-era cigarette production facilities and the country became a key source of smuggled cigarettes for the rest of Europe.

As recently as 2008, Philip Morris International, Japan Tobacco International, Imperial Tobacco and BAT produced 30% more cigarettes in Ukraine than were consumed domestically. A small proportion are legally exported; the remainder find their way into the rest of Europe — sometimes by methods as innovative as hang-gliders — despite the companies’ insistence they are doing all they can to combat smuggling.

Indeed, even as the Ukraine’s very high rates of smoking have declined, cigarette production has increased significantly.

It’s a trade worth an estimated US$2 billion a year. There’s also a thriving online trade in cheap Ukrainian cigarettes, with Ukrainian-produced “Marlboro” lauded as better than the variety available in the US and Australia.

The tobacco lobby has also been enormously influential. Attempts to introduce graphic warning advertisements on cigarette packaging have been defeated. Advertising in broadcast media was banned in the 1990s but attempts to ban print and billboard advertising failed repeatedly, sometimes via presidential veto.

Until this month.

In what turns out to be very interesting timing, on Tuesday this week, Ukrainian President Viktor Yanukovych finally signed a law passed by the Ukrainian parliament last September banning outdoor and print advertising of tobacco, with the law to come into effect in six months.

Ukraine’s WTO case against Australia’s plain packaging laws, foreshadowed since last year, was filed on the same day.

In other words, the WTO case is quid pro quo to Big Tobacco by the Ukrainian government, to offset the entry of the country into the late 20th century with respect to cigarette advertising. Ukraine has no cigarette trade with Australia to protect, beyond that provided by the internet.

As is well known, the tobacco industry is terrified of Labor’s plain packaging laws for their demonstration effect to other countries. The industry is devoting massive resources to trying to overturn the laws both through the Australian legal system and internationally, with the laws’ implications for intellectual property rights already discussed in the WTO.

As William New of IPWatch pointed out, there’s irony in Ukraine launching action on an intellectual property matter: the country has long been the subject of US concerns about its own protection of intellectual property.

Ukraine is also one of the most corrupt countries in the world. Last year, it slipped from 134th to 152nd on Transparency International’s Corruption Perceptions Index.

Peter Fray

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