Tobacco buyout gaining momentum

The tobacco buyout is gaining momentum in Congress. Tobacco state senators reached consensus on a buyout bill and the House held hearings in late July.

The bill introduced by U.S. Sens. Mitch McConnell, (R-Ky.), and Elizabeth Dole, (R-N.C.), would pay farmers $13 billion over six years. Thirteen tobacco-state senators, including Senate Majority Leader Bill Frist of Tennessee, sponsored the legislation. Most senators and observers in the industry agree that a buyout will have to be linked to a forthcoming bill giving the Food and Drug Administration authority to regulate tobacco products.

Growers and tobacco-state lawmakers have historically been opposed to FDA regulation, but say it's needed in order to forge an alliance with public health advocates.

“We support reasonable FDA legislation that will be a part and parcel of making this tobacco buyout a reality,” says Larry Wooten, president of the North Carolina Farm Bureau. “I applaud the bold move by Senators Dole and McConnell in introducing the Tobacco Marketing Transition Act of 2003. This is the best move and best vehicle in which to stabilize the economies of rural North Carolina and the rural Southeast. It is now time for action.”

Philip Morris USA, the nation's largest cigarette maker, supports a buyout linked to FDA regulation. Other tobacco companies have expressed concern about the cost of a buyout and fear FDA regulation would be too burdensome.

At the House Ag Committee hearing, Philip Morris CEO Michael Szymanczyk reiterated his company's support for a buyout and FDA regulation.

Philip Morris supports H.R. 140, a bill introduced by U.S. Reps. Mike McIntyre, D-N.C., and Tom Davis, R-Davis. Szymanczyk called the bill “the middle ground of the debate” that some say would cost between $13 billion and $20 billion.

Szymanczyk said the bill would provide fair compensation for quota holders and active growers. He said Philip supports a reason, equitable manufacturers user fee to fund the buyout, a true buyout rather than a subsidy, a politically realistic overall package and “meaningful” FDA regulation of tobacco products.

Tobacco growers have faced a quota reduction of more than 50 percent over the past several years and have also seen demand for their product decline. Growers see a buyout as the best vehicle to stem the tide and revitalize the industry and their rural communities.

Disagreement exists, however, between growers and manufacturers as to the particulars of a buyout.

David Winkles, president of the South Carolina Farm Bureau, testified that the American Farm Bureau supports a bill introduced by U.S. Rep. Ernie Fletcher, (R-Ky.). H.R. 245 carries the $8 and $4 that has been the hallmark of the tobacco buyout discussion, but also sets up a licensing system post-buyout, as well as a $2 per pound payment for producers who want to stop growing tobacco. Philip Morris, in interviews and in testimony at the hearing, said replacing the old system with a new one could have trade implications. At a news conference the day before the hearing, Mark Berlind, vice president of Phillip Morris, said the Fletcher proposal was “too unrealistic to stand much of a chance passing Congress.”

David Chappell, a burley tobacco grower in Owenton, Ky., said a buyout was “imperative to recreating a healthy farm economy in Kentucky.” He supports the Fletcher bill, but also said, “most would not oppose FDA regulation.”

Among cigarette manufacturers, and some growers, however, FDA regulation is a sticking point. Brennan Dawson, vice president of Brown and Williamson Tobacco Corp., said the current FDA proposals “would put B&W at a competitive disadvantage.” She said her company didn't have the funds to pay for a buyout because of the $206 billion settlement with states over health care costs in 1998 and increasing competition from discount cigarette brands. Other tobacco companies, such as RJ Reynolds, are on record against FDA regulation.

Philip Morris reiterated its support for “meaningful” FDA regulation, saying linking the two issues is the only way a tobacco buyout will pass.

A day before the hearing, the nation's largest cigarette manufacturer held a news conference with much of the country's top newspapers, including The Wall Street Journal, USA Today and the Washington Post. The Southeast Farm Press was among the top agricultural publications attending the news conference via conference call.

At the hearing, Matt Myers, president of Tobacco-Free Kids, said his group supported both the buyout and “effective” FDA regulation. “It may surprise some that representatives of the public health community are concerned about the plight of tobacco farmers and their communities, but we are,” Myers told the committee. “Tobacco farmers are not the problem.”

Myers, who was co-chairman of the President's Commission on Tobacco, which made its report at the end of the Clinton Administration, said that “sadly, more than two years later, nothing has changed,” or moved forward in regard to a tobacco buyout. He says the current tobacco program needs to be “significantly restructured, but not eliminated. His group supports a licensing system after a buyout. They also support financing the buyout with a user fee.

Myers urged the legislators to reach agreement before moving legislation through the House and the Senate. “We support good buyout legislation married to FDA authority,” Myers said.

Myers lamented the fact that “with very few exceptions, the necessary dialogue between members of Congress to make all of this happen has not even begun.”

On the grower side of the equation, Billy Carter, the past president of the Tobacco Growers Association of North Carolina, said it best. “The future of the U.S. tobacco farmers depends on the success of adequate legislation to provide the buyout this committee is considering. Any other effort will fall short of the mark. Drowning is inevitable when trying to bail a sinking ship.

“I can think of no single thing that would revitalize the rural economy of tobacco than a buyout,” Carter says.

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