Historic, archived document Do not assume content reflects current scientific knowledge, policies, or practices. 7 _ : i + - > me > : U iy - ft 5 : = Cen a ez. Reserve Implications of European Community Enlargement for US. Tobacco Exports. U.S. Dep mart Tn Re KECE One ae ~ 1973 PROC CUP Pete ei NIM Vere ToT SERIAL pe -VTIO AL RECORD Ss N _ February 1973 FAS M-251,, 15 \\.S. Foreign Agricultural Service - U.S. Department of Agriculture 401804. FOREWORD The United Kingdom, Ireland, and Denmark became European Community (EC) members January 1, 1973. As such, they must adopt the EC’s tobacco policies. These now include a Common Agricultural Policy (CAP) for tobacco, a common external tariff (CXT) on tobacco and tobacco products, preferential tariff treatment on tobacco imports from associated countries, provisions for harmonization of the excise tax on tobacco products by stages, and continua- tion of monopoly control over tobacco products retailing in Italy and France. The EC, in mid-1970, adopted a Common Agricultural Policy for tobacco. The CAP provides: Guaranteed high prices with no automatic production controls; a lucrative buyer’s premium for purchasers of EC leaf; an export subsidy; and limitations on imports by a safeguard clause. The CAP is expected to encourage tobacco production in the six EC countries, especially in Italy, the largest producer. The EC at present has a common external tariff (CXT) which discriminates against high-quality leaf such as that imported from the United States. The new members will soon begin phasing in this CXT on tobacco imports from outside the EC and reducing to zero their tariffs on tobacco imports from other EC partners and from countries receiving preferential treatment for tobacco exports to the EC. The latter countries include such important tobacco exporters as Greece, Turkey, and Tanzania. By July 1, 1977, the United States will be facing the CXT for tobacco exports to these three members while tobacco from countries which produce about | billion pounds is expected to be duty-free. The EC now grants duty-free treatment for tobacco imports from the Associated African and Malagasy States, the Overseas Countries and Territories, and the East African countries (Tanzania, Kenya, and Uganda). Greece and Turkey, as associate EC members also get duty-free treatment for their tobacco exports to the Community. Three of these (Tanzania, Kenya, and Uganda) already receive preferential treatment for tobacco exports to the United Kingdom and all may eventually receive duty-free treatment in each of the other two new members. In addition, the United Kingdom plans to bring in a number of Commonwealth members to which it now gives preferential treatment for tobacco imports and which eventually may , punod zed €T°oT$SN 40 Oge*hH Fz ‘esreyo TeoSsTI oyuy JO,, Peet pTMoYys sUTT Paty, ‘yderSered puooag = G azeg ISe-W SV ,Sptodxy Oooeqoy, *S°n Ios queueszetug Aqtumumop ueedomyg jo suotyzeot{dut,, IRC 10h gly lyfe tS he a OSzog °O°d ‘NOLDNIHSVM AOLANAS IVIALIAOIMOVY NOLAYOA FUNLINOIMOV JO LNW Vdad SELVES CELINA receive preferential treatment in each of the other eight EC partners. The member states of the European Community intend to move by stages to a harmonized excise tax on cigarettes consisting of an ad valorem element and a specific element. An ad valorem tax will adversely affect the sale of cigarettes containing high-quality, high-priced tobaccos such as those exported by the United States. An EC directive adopted by the Council of Foreign Ministers December 1972 requires that during the first stage of harmonization, July 1, 1973 to July 1, 1975, the specific portion of the excise tax in each member state must be between 5 and 75 percent of the excise tax applied to retail prices of most popular brands of cigarettes. The United Kingdom and Ireland are not. required to comply with the provisions of this Directive until January 1, 1978. Denmark’s excise tax apparently already complies with the Directive. An earlier Council resolution made a similar proposal for the six original members, and Germany now has a tax with an ad valorem element of 25 percent, and the other original members have a tax 95 percent ad valorem. The tobacco monopolies in Italy and France may have unrestricted access to the tobacco markets in the three new members for their cigarettes made with low-cost tobacco while these three countries will be restricted in marketing their cigarettes, made with expensive, high-quality U.S. and other tobaccos, in Italy and France. A council resolution provides that exclusive right of importation and wholesale marketing must be abolished by January 1, 1976. This action represents little reform in monopoly operations, however, for as long as the monopolies can license retailers and thus control retail trade, access for outside tobacco products will remain limited. These policies are discriminatory to high-quality tobacco such as that exported by the United States, and unless eliminated or substantially modified, can be expected to have a strong adverse effect on U.S. tobacco exports to the three new members. This report discusses the present magnitude of these tobacco markets and analyzes the possible effects of EC accession on U.S. tobacco exports to these markets. Hugh C. Kiger, Director Tobacco Division CONTENTS Market Harmonization’: ..2.5.<.06 26 «ate ee ee ee Stee ete BURT Loves 1 Harmonization of Common External Tanff< 3. 5 <2 2]. ee ee 1 Preferences: f 3 30.2. tc Os he Pee Re Se TE 3 OE AI dee mien oy ee ale oe D Excise fax Harmonization. c/s) koe oc eed AUR Oe ee ee ee 3 Value-Added! Tax Harmonization, $2 2'.6 5.08 See, cs Se eee 3 United Kinedom 34:2 .ars ee eee oe cae ee retary. cee One Se toe ae, recy nane COnSUMB HON: cf ets 20S Wieeeanae Wie eee re eet re oy ace eee Cigarétte Retail Prices © “Sac swud ages oye ee eee ss eee oes UK. Tax, Structure 2058 3.5 ke So et oP ee en Eee ‘Taritt Harmonization’ 2-8. 29 oc ee ace eee En eee Excise Tax:Harmonization®® <) 3:4 tifo-35 Se cies es ee eee eee AnnpA AH A Helland). se oS ees SOS eS ae Swe AS eee Sa eet Se ee ene cea CONSUM PON” 22.0 a Mianase a ee aes ans Sie ee Be eee eee ia Cigaretie- Retail Paces.” ate Sat cee ca ee pee 2 Oe oa rere Lantt Harmonizanon’ pet tec see 2 ae ee ee ae ee NNNNDNN Denmark: 2s Salhes Saucy a sney et cee eee ices eae ce ee ee ee CONSUIMPHOM, sixties ann Ps 2 Cs oe DE Se a eS ee es Soe ee Cisarette Retail Prices? ¢5°)s eet cwe oss ogre oe ee eee ee ee Retail Price. Controls™ 2S ne se ne ee OE oe Fant Harmonization) 42%; 2 Ais 2 Gas ee ae ee: Cone ae ee ee NSINNNN ODD Eifect-on U.S; Tobacco Exports 244 f4ha' sce Rhh ae oe ee eee 7 Mppengie Re © cu gh Leet we dk Selon Bee aera, ee eee ee 9 APPEL B, As acca. sawsec enh olen sack Pew ate eae 10 Appendix © : 4 S.53 bart. tens bee oo hat Saute ee eee 1] Pe fF ei) “ IMPLICATIONS OF EUROPEAN COMMUNITY ENLARGEMENT FOR U.S. TOBACCO EXPORTS , 5. Sent By Robert W. J ohnson , The European Community (EC) is the world’s largest market for U.S. tobacco exports. The EC-6 took 30 percent of U.S. unmanufactured tobacco exports during the S-year period ending June.30, 1972. The EC-6, plus the United Kingdom, Ireland, and Denmark (which became EC members January 1, 1973) took 58 percent of U.S. exports of unmanu- factured tobacco during that period. None of the three new members produces tobacco while the original six countries are about one-third self- sufficient and are encouraging domestic production through a Common Agricultural Policy (CAP) which provides high price supports and premiums to buyers of EC leaf. The original six EC members have eliminated tariffs among themselves so that tobacco and to- bacco products produced in any one may move duty free to any of the others. (Excise tax systems for tobacco products still differ however, and this has some restrictive effect’on trade.) The major tobacco producers are Italy and France (Table 1, Appendix C). The three new members will progressively lower their duties on imports from the other members so that by July 1, 1977, there will be no duty on raw tobacco imported from EC producers and probably from some, if not all, countries which receive preferences on tobacco in the EC. These include such important tobacco exporters as Greece, Turkey, and Tanzania. The three also will eliminate by July 1, 1977, duties on tobacco product imports from each other and from the other mem- bers. The EC has adopted a common external tariff (CXT) on tobacco and tobacco product imports from outside the EC preferential trade area. This CXT provides for a much higher tariff rate for leaf tobacco valued over about $1.42 per pound c.i.f. Some highly processed U.S. leaf is beginning to reach this level now. All three new members will adopt, over a period of time, the EC’s CXT on tobacco and tobacco product imports from outside the EC preferential trade area. The EC’s CAP, which encourages domestic produc- tion through high price supports, and which en- courages consumption of this tobacco through premiums paid to buyers of EC leaf, has been the subject of complaints by all segments of the U.S. tobacco economy and the U.S. Government. Other issues about which the United States has complained are continuation of monopoly control over tobacco retailing in Italy and France; excise tax harmoniza- tion based on high ad valorem rates which could adversely affect high-quality U.S. tobacco; sub- stantially higher CXT tariff rates for more expensive tobacco, which also adversely affects high quality, and especially strips or stemmed U.S. cigarette tobacco; and tariff preferences given to low cost producers associated with the EC. (Foreign Agri- culture, Nov. 2, 1970; Aug. 30, 1971; Dec. 6, 1971; April 3, 1972; and October 2, 1972.) MARKET HARMONIZATION The EC intends, eventually, to completely har- monize its tobacco leaf and tobacco products market. This will include harmonization of excise taxes in each country in addition to elimination of tariffs on intra-EC trade in tobacco and tobacco products and adoption of a common external tariff. It also will include adoption of a value-added tax which initially may be at a different level in each country but the rate of which must eventually be harmonized to a common level. All nine countries are expected to adopt a value-added tax by mid-1973. Elimination of intra-EC tariffs, and adoption by the new members of a common external tariff will have been completed by July 1, 1977. Harmonization of excise taxes may extend beyond mid-1977, but the only important barrier left to the free internal movement of tobacco products after that date will be continuation of monopoly control of retailing in Italy and France. Unless present regulations are changed, monopolies in those countries will continue to license retailers. This gives them effective control over retail sales of imported tobacco products. Harmonization of Common External Tariff The EC’s CXT for leaf tobacco, which each of the new members must adopt, is denominated in terms of units of account (U.A.) It is: (1) For leaf valued at less than 280 U.A. per 100 kilograms, 23 percent but not less than 28 U.A. and not more than 33 U.A. per 100 kilograms. (2) For leaf valued at 280 U.A. per 100 kilograms or more, 15 percent but not more than 70 U.A. per 100 kilograms. These tariffs are paid in the currencies of each of the member countries. For example, a German tobacco importer would pay the tariff at the rate of 3.66 Deutschmarks per unit of account, the official rate of exchange between Deutschmarks and units of account. The tariffs may then be converted to U.S. dollar equivalent at the market rate for converting Deutschmarks to dollars (approximately 3.22 Deutschmarks per dollar for early 1973). The dollar equivalent of this tariff for a German importer then would be: (1) For leaf valued at less than US$1.44 per pound, 23 percent but not less than 14 U.S. cents per pound and not more than 17 U.S. cents per pound. (2) For leaf valued at US$1.44 per pound or more, 15 percent but not more than 36 U.S. cents per pound. The dollar equivalents of the tariff for other members of the EC-6 are shown in Table 2, Ap- pendix C. As of January 1973, official rates for converting units of account to the currencies of the three applicants had not been established. The schedule for adoption of the CXT by the applicants and the zero internal tariff is as fol- lows: The CXT will be adopted for both leaf and products by eliminating, on January 1, 1974, 40 percent of the difference between the present duty and the CXT. An additional 20 percent will be eliminated January 1, 1975; another 20 percent January 1, 1976, and the final 20 percent July 1, 1977. The tariff on imports from other members will be reduced to zero by eliminating 20 percent of the tariff on July 1, 1973, for leaf tobacco, and on April 1, 1973, for tobacco products. The balance of the tariff for both leaf and products will be elim- inated in steps of 20 percent each on January 1, of 1974, 1975, and 1976, and July 1, 1977. This is illustrated in tabular form as follows: Schedule for hedule Schedule for eliminating eliminating difference present tariff Date between present tariff 1 ence Products Percent Percent Percent April 1, 1973. . -- -- -20 July 1,1973.. -- -20 -- Jani.5.2974: 3s —40 -20 -20 Jan.1,1975 .. -20 -20 -20 Jan. 1, 1976 .. -20 -20 -20 July 1, 19775.+. -20 -—20 -20 ’ Bath leaf and products. The United Kingdom will follow this schedule both for leaf tobacco and tobacco products. The United Kingdom will phase in the zero duty on leaf imports from Greece and Turkey at the same time it phases in the zero duty from other EC countries. Tobacco from some Commonwealth countries (Ap- pendix A) began entering the United Kingdom duty free on January 1, 1973. Some other Commonwealth countries and some countries receiving Common- wealth preferences will be treated as third countries by the United Kingdom and the CXT will be harmonized for them according to the above sched- ule. (See section on the United Kingdom.) Ireland changed its revenue or “customs duty” on leaf tobacco to an’ excise tax January 1, 1973. For harmonization purposes, Ireland will have near zero duty from that date.’ Ireland will phase its near zero or US$0.0048 per pound duty to zero for leaf tobacco imports from the EC and, probably, from countries whose leaf tobacco now enters the EC duty free. Otherwise Ireland will follow the schedule for phasing its near zero duty to the CXT for leaf imports from outside the EC and EC preference area and for adopting the CXT for tobacco products. Denmark, prior to becoming an EC member, had no duty on leaf imports from any source. Denmark will continue from January 1, 1973, with zero duty on leaf tobacco imports from the EC and probably from those countries whose leaf tobacco enters the EC duty free. Denmark also has zero duty on tobacco product imports from European Free Trade Associa- tion (EFTA) countries. This will continue in effect for the United Kingdom. But Denmark will adopt the CXT for leaf and product imports from outside the EC and EC preference area and will gradually reduce its duty on tobacco products to zero for other EC members. Preferences The EC-6 countries presently grant duty-free treatment to unmanufactured tobacco imports from Greece, Turkey, 18 Associated African States (Yaounde Agreement), and three countries of the Arusha Convention (Appendix B). Preferential duty treatment is also given to leaf tobacco and tobacco product imports from a number of minor producers such as Algeria and the Associated Overseas States and Territories (St. Pierre, and Miquelon, Comoran The “duty” is actually the difference between the preferential rate on imports from the United Kingdom and the most-favored-nation (MFN) rate. This difference is only Irish £0.002 or US$0.0048 per pound for stemmed to- bacco and zero for unstemmed tobacco. The former duty was £4.416 for unstemmed leaf from all sources and £4.416 for stemmed leaf from the United Kingdom and Northern Ireland and £4.418 for stemmed leaf from other MFN sources, Archipel, French Somalia, New Caledonia and Terri- tories, Wallis and Futuna Islands, French Polynesia, Southern (Australian) and Antarctic Territories, Surinam, and the Netherlands Antilles). Tunisia, Morocco, Spain, Malta, and Israel also enjoy preferen- tial treatment for tobacco products. The United Kingdom is expected to maintain duty-free treatment for unmanufactured tobacco imports from 20 independent Commonwealth coun- tries (the Annex VI countries) including such im- portant tobacco exporters as Malawi, Tanzania, and Zambia (Appendix A). The three new EC members are expected to extend preferences to the over 23 countries now receiving preferential treatment for tobacco exports to the EC-6, and all of the other members may extend duty-free treatment to tobacco exports from the 20 countries receiving preferential treatment in the United Kingdom. Negotiations on the latter action are expected to begin by August 1, 1973. The countries which now have duty-free access to the tobacco market of the EC-6—Greece, Turkey, and the Yaounde and Arusha countries—have a combined tobacco production of about 600 million pounds. The Commonwealth countries which might be given access to the tobacco market of the EC-9, the Annex VI countries, less the Arusha countries, which are specified in Annex VI but which already have duty-free access to the EC-6 and to the United Kingdom, have a combined production of about 130 million pounds. The EC itself produces about 300 million pounds. Adding all of this production to- gether, countries which produce about 1 billion pounds of tobacco may have duty-free access to the tobacco market of the nine countries of the expanded EC. Excise Tax Harmonization The EC eventually plans to harmonize its excise taxes on cigarettes to a common level which would consist of an ad valorem component and a specific component. If a high ad valorem component is adopted, it will adversely affect the sale of cigarettes containing high-quality, high-priced tobaccos such as those exported by the United States. An EC council directive on tax harmonization was adopted by the Council of Ministers December 18 and 19, 1972. This directive requires that during the first stage of harmonization, July 1, 1973 to July 1, 1975, each Member State must have an excise tax with a specific and a proportional (ad valorem) component. The specific component may not be lower than 5 percent or higher than 75 percent of the total tax. An earlier EC council resolution proposed that during a planned first stage of harmonization, July 1, 1971 to the end of 1973, the specific portion of the excise tax in each Member State would be between 5 and 75 percent of the excise tax applied at retail prices of cigarettes most in demand. As a result of this original proposal, Germany now has a tax with an ad valorem component of 25 percent. The other five original members now have a tax with a 95 percent ad valorem component. Italy did not have to comply with the first stage resolution until January 1, 1973, which means that during that period Italy still maintained its 100-percent ad valorem tax. The United Kingdom and Ireland both have traditionally had a 100 percent specific? fiscal charge. A part of the fiscal charge became a 100 percent specific excise tax for Ireland January 1, 1973. The United Kingdom will change part of its fiscal charge to a 100 percent specific excise tax April 1, 1973. Neither of these countries is required to comply with the December 18 directive until January 1, 1978, thus they may maintain their 100 percent specific excise tax until that time. About two-thirds of Denmark’s excise tax revenue is based on an ad valorem tax and one-third is based on a spe- cific tax. Value-Added Tax Harmonization Five of the six EC countries have a value-added tax (VAT) which applies to tobacco, as well as to other products. Italy did not adopt this tax until January 1973. Each of the three new members also must adopt a VAT. Denmark already has a VAT which applies to tobacco products. The level is 15 percent. Ireland adopted a VAT November 1, 1972. The level for cigarettes is 5.26 percent. The United Kingdom will adopt a VAT April 1, 1973. Initially the level of the tax may be different in each of the nine members but, eventually, the level of the tax is to be harmonized at the same percentage rate in all nine countries. An unsettled question is whether or not the VAT will be included as a part of the ad valorem component of the excise tax. A decision to apply it on top of the excise tax rather than including it as a part of the ad valorem component would widen the spread between ciga- rettes made from high-priced leaf and those of lower quality. It would, thus, create a disadvantage to consumers who smoke high-quality cigarettes and it would be disadvantageous to countries which export, and to firms which use, high-priced, high-quality leaf. 2No part of the tax is ad valorem. UNITED KINGDOM The United Kingdom is the world’s largest tobacco importer and is traditionally the largest importer of U.S. tobacco. Imports from the United States in- creased substantially after the 1965 embargo on trade with Rhodesia, but the U.S. share of the U.K. market has declined since 1968. This decline reflects: (1) In- creased competition from low-cost producers such as South Korea, Tanzania, and Brazil which have stepped up production in order to fill the gap left by Rhodesia; (2) a Commonwealth preference of 18 U.S. cents per pound provided to a number of major suppliers; (3) high hopes, in 1971, that trade would be resumed with Rhodesia; (4) anticipation that the United Kingdom might enter the EC and consequent uncertainty as to what effect this might have in shifting to other sources of supply; and, (5)a smoking and health campaign. The U.S. share of the U.K. tobacco market was 32 percent in 1965. It jumped to 51 percent in 1966 and stayed at about that level for the next 2 years. It dropped to 44 percent in 1969, 41 percent in 1970, and 36 percent in 1971. The traditional U.K. cigarette is made with all flue-cured tobacco containing no additives. About 95 percent of the United Kingdom’s total tobacco imports are of the flue-cured type. Because of the no-additive rule, the flue-cured tobacco used must be of high quality. The average value of 1971 total imports of all types was 89 U.S. cents per pound. The average value of imports from the United States was $1.10. One reason for the especially high value of imports from the United States is that a high proportion of the US. leaf is stemmed. U.S. exports of stemmed leaf (“lamina”) accounted for 77 percent of total U.S. exports to the United Kingdom in 1971. The average value of these lamina exports was $1.27 per pound. Unstemmed leaf accounted for 4 percent of these exports with an average value of US$1.11 per pound. The balance was made up of stems, trim- mings, and scraps with an average value of 9 U.S. cents per pound. Consumption The United Kingdom is the second largest user of leaf tobacco in the EC-9. Utilization averaged 302.6 million pounds during the past 5 years, compared with 321.4 million pounds for West Germany (Table 3, Appendix C). On a per capita basis, for persons 15 years and over, utilization in 1970 was 8.1 pounds, below the 9.2 pounds for the United States, but well above the 6.6-pound average for the nine countries of the enlarged EC (Table 4, Appendix C). Utilization in 1971 dropped 5 percent from the 1970 devel. The decline was mostly the result of a smoking and health campaign which brought about a 4.5 percent drop in the number of cigarettes smoked. But it was also partly the result of a continuation of the trend toward utilization of less leaf per 1,000 cigarettes. U.K. cigarettes are generally smaller than those of other countries and require only an average of 1.67 pounds of redried tobacco per 1,000 ciga- rettes, compared with 1.92 pounds per 1,000 in the United States, and over 2 pounds in many countries. Partly as a result of this small size, average U.K. cigarette consumption for persons 15 years old and above is 3,400, the highest level in the enlarged EC. Cigar consumption, at 26 pieces per person 15 years and over, is only about half the average for the enlarged EC (Table 4, Appendix C). Cigarettes account for about 90 percent of total U.K. tobacco utilization. Virtually all of this is flue-cured tobacco, traditionally the type used for British cigarettes. About 20 billion (16 percent) of the some 140 billion cigarettes produced in the United Kingdom are exported. About 1 billion are imported (Table 5, Appendix C). No additives are now permitted in U.K. cigarettes except on an experimental basis. This means that all of the flavor must come from the tobacco itself. As a consequence, the U.K. industry buys primarily ex- pensive, flavorful tobacco. The EC likely will insist that the no-additive rule, be defined as a nontariff barrier and be eliminated after the United Kingdom enters the EC. Cigarette Retail Prices The most popular brand of cigarette in the United Kingdom retails for the equivalent of 51 U.S. cents per pack of 20. This cigarette is 65 mm. long including the filter. An 83 mm. (including filter) cigarette retails for 78 U.S. cents per pack of 20. The components of the retail price of a package of 20 cigarettes are: Fiscal charge 66 percent, trade margin 11 percent, and manufacturer’s cost and profit 23 percent. There are no retail price controls on cigarettes in the United Kingdom. Manufacturers suggest retail prices which are adopted by most retailers. U.K. Tax Structure The U.K. tax on leaf tobacco is largely a revenue duty or fiscal charge. It is £5.041 (US$12.10)? for stemmed or unstemmed leaf containing 10 percent or more moisture from MFN countries and £4.964 (US $11.92) for the same categories of Commonwealth 3 At the mid-October 1972 rate of US $2.40 per pound. leaf.4 After April 1, 1973 the general rate of £5.041 will be separated into three components: 1) an excise tax of £4.220 (U.S. $10.13), 2) a value added tax of £0.736 (U.S. $1.77), and a duty of £0.085 (20 U.S. cents). The Commonwealth rate of £4.964 also will be separated into the excise tax of £4.220 and value added tax of £0.736, leaving a margin of £0.008 (2 U.S. cents). This margin will be subject to alignment to the CXT and to the zero duty rate. Tariff Harmonization The U.K. duty of £0.085 on leaf tobacco from outside the Commonwealth must be reduced to zero for tobacco produced in the EC, Greece, and Turkey. The £0.008 margin for Commonwealth leaf will become zero for some Commonwealth countries specified in Annex VI of the Treaty (Appendix A.) It will be increased to the CXT for certain Common- wealth countries such as Canada, Australia, and probably India, and for some non-Commonwealth countries which now receive Commonwealth pref- erences, for example, South Africa. The major to- bacco exporters included in Annex VI are Malawi, Zambia, and Tanzania. The 18 Yaounde countries whose tobacco now enters the EC duty free (Appendix B) also may eventually receive preferential treatment by the United Kingdom, but this is a matter for future negotiation. The United Kingdom, as a former member of EFTA, has no duty on tobacco product imports from _other EFTA countries. There will continue to be no duty on tobacco products imported from Denmark, the other EFTA partner which is now an EC member. The tariff on tobacco product imports will be reduced to zero for EC partners according to the schedule provided in the Treaty of Accession. It will be harmonized with the CXT for other countries including nonacceding EFTA partners. The CXT for cigarettes is 90 percent ad valorem. Excise Tax Harmonization The EC Council Directive adopted Decem- ber 18-19, 1972, provides that the excise tax portion of the fiscal charge, £4.964 or US $11.92 per pound, may remain in effect until January 1, 1978. At that time it must be harmonized with whatever common level of excise tax has been decided upon by the EC members. This provision was made because of the technical difficulty, and the possible effect on British revenue, of shifting from the present tax based on the weight of tobacco leaf to a tax based on numbers of cigarettes. The fiscal charge, prior to April 1, 1973, was wholly specific. That is, the tax was the same regardless of the value of the tobacco. A shift from this system to one based largely on the value of the manufactured product, an ad valorem tax, would be a drastic change and could have quite an adverse effect on high-quality tobacco such as that imported from the United States. Value-Added Tax Harmonization The level of the value-added tax initially may be different in each of the EC members but, eventually, this too must be harmonized so that the level will be the same in each EC country. IRELAND Ireland imported 11.7 million pounds of tobacco in 1971, of which 6.8 million pounds, or 58 percent came from the United States. Other important suppliers were the Republic of Korea, India, and South Africa. The average value of all imports was 97 U.S. cents per pound. The average value of imports from the United States was $1.11 per pound. 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In thousands of dollars} COUNTRY OF BELGIUM- : WEST L: EC and ORIGIN LUXEMBOURG NETHERLANDS FRANCE Genes ITALY TOTAL EC DENMARK IRELAND HUNTED SO eee NORTH AMERICA Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity “Value Quantity Value Quantity Value Quantity Value Quantity Value United States .....- 14,505 12,424 32,890 27,057 8,343" 4,259 102,777 100,336 19,533 19,589 178,048 163,665 15,979 14,692 6,779 7,554 97,675 107,897 298,481 293,808 Canadayrayeyajserunia: 853 479 464 75 1,265 738 2,582 1,292 1,100 607 496 438 $1,560 47,964 55,738 50,301 TOTAL 14,505 12,424 33,743 27,536 8,807 4,334 104,042 101,074 19,533 19,588 180,630 164,957 17,079 15,299 7,275 7,992 149,235 155,861 354,219 344,109 LATIN AMERICA: IMCXICOT nveenatts fenuie 417 227 100 3 6,681 3,847 7,198 4,077 209 114 7,407 4,191 El'Salvador. 2... 2. 39 15 39 1S Guatemala ........ 86 53 755 509 841 562 841 562 Cuba é 1,850 767 2,179 541 1,072 383 5,101 1,691 282 139 5,383 1,830 Dominican Republic, . 3,315 1,675 55 19 1,605 622 4975 2,316 62 26 5,037 2,342 Jamaica . 401 331 401 331 40) 331 West Indies........ 143 14 143 14 143 14 Argentino ........ 141 33 24,480 5,509 6,150 2,165 30,771 8,157 1SS 104 30,926 8,261 LiViboaodasanooa 3,340 1,242° 11,270 4,732 19,359 5,131 18,841 7,659 52,810 18,764 6,671 3,496 335 232 5,580 2,726 65,396 25,218 Colombia ........ 84 56 5,381 1,444 4,321 2,326 9,786 3,826 1 1 9,787 3,827 Paraguay.......... 1,038 269 10,648 2,301 1,912 362 13,598 2,932 5 1 13,603 2,933 RIM Say deaadeosr 31 8 4) 10 72 18 72 18 VACATE 6 duo nin aos 95 23 9S 23 95 23 TOTAL 6,655 2,917 15,437 6,510 62,321 14,951 41,378 18,333 125,791 42,711 7,424 3,896 335 232 5,580 2,726 139,130 49,565 EUROPE WEST:- EG: Belgium-Luxembourg . 625 24 275 90 900 114 620 334 1,520 448 branceWevacrtaveree rare 968 680 1,146 1,219 74 45 2,188 1,944 2,188 1,944 West Germany. ..... 15,767 12,827 10,677 396 26,444 13,223 26,444 13,223 (Ee Shi coaroneod 23 45 3,671 2,466 2,612 727 18,035 9,026 24,341 12,264 68 23 24,409 12,287 Netherlands ...... 11,844 10,470 3,232 400 15,076 10,870 3,534 3,662 18,610 14,532 TOTAL 12,835 11,195 20,584 16,512 17,146 1,547 18,384 9,161 68,949 38,415 68 23 4.154 3,996 73,171 42,434 Denmark ........ 83 1 34 19 117 20 117 20 Trelandsfarahectatsve peers 490 17 490 17 9,177 6,725 9,667 6,742 United Kingdom ae 185 268 337 183 7,604 264 101 234 8,227 949 8,227 949 TOTAL... 13,020 11,463 20,921 16,695 25,323 1,829 18,519 9414 77,783 39,401 68 23 13,331 10,721 91,182 50,145 PAUSttialitenratsransayevar 458 16 458 16 458 16 Rortupalterveteveieveierete 265 200 265 200 265 200 STG abarsonses 403 229 403 229 403 229 Switzerland. ....... 1,173 863 230 21 5,521 6,121 6,924 7,005 6,924 7,005 TOTAL 13,020 11,463 22,497 17,787 26,276 2,066 18,519 9.414 53521 46121 85,833 46,85] 68 23 13.331 10,721 99232: 57,595 Greece merit teretetates= 3,209 1,940 2535/7) + 15099, 11,493 5,403 47,119 32,243 2,732 2,368 66,910 43,053 258 275 67,168 43,328 INCGY eoosocenod 4,401 1,944 1,790 680 17,127 4,449 35,004 18,259 1,028 1,080 59,350 26,412 873 698 60,223 27,110 AFRICA:- Angola .......... 90 27 90 27 56 48 146 7S Cameroon .......- 81 149 73 31 1,625 901 593 376 2,372 1,457 16] 385 2,533 1,842 Central Africa Rep 1,371 937 1,371 937 1,371 937 Congo (Brazz.)...... 1,268 670 29 33 1,297 703 1,297 703 Dahomey ........ 170 46 170 46 170 46 Bibetialientrenieie tres 33 i 33 7 33 ui Malagasy Republic 1,226 559 3,342 1,496 66 25 4,634 2,080 4,634 2,080 Malawi .......... 4,425 1,718 1,895 809 858 490 7,178 3,017 1,173 718 258 193 18,080 13,766 26,689 17,694 Mozambique ...... 6,002 2,618 13,109 4,507 1,423 691 2,295 1,217 22,829 9,033 1,136 428 74 40 24,039 9,501 Niperiaieyatietany-ster: 9 3 9 3) 5 16 14 19 Sierre Leone ...... Sli 10 31 10 51 10 South Africa ...... 1,784 793 17,070 6,653 2,048 940 20,902 8,386 886 303 479 333)" 1IFSI'S 6,946 33,782 15,968 Tanzania ......... 1,865 799 85 35 1,950 834 172 113 216 211 7,838 5,059 10,176 6,217 Upandalaper-ta-gei-1 1-1. 66 26 119 $2 185 78 28 14 1,891 1,404 2,104 1,496 Zaire, Republic of 40 47 40 47 40 47 Zambia .......... 73 38 126 12 89 37 606 313 894 400 234 173 3 2 1,131 S75 TOTAL 7,867 3,560 38,090 14,378 11,220 5,562 6,222 3,252 606 313 64,005 27,065 3,767 2,136 1114 841 39,324 27,175 108,210 57,217 Continued— 2A TABLE 8.-UNMANUFACTURED TOBACCO - IMPORTS BY EC AND ENLARGED EC, 1971—CONTINUED {In thousands of pounds; In thousands of dollars] COUNTRY OF BELGIUM- evWERLAND: me WEST UNITED TOTAL: EC and ne LUXEMBOURG NETHERLANDS RANCE aE ANY ITALY TOTAL EC DENMARK IRELAND KINGDOM _ ENLARGEMENT Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value ASIA:- China, Mainland... . 1,045 242 1,127 193 2,172 435 147 47 100 43 2,419 525 China, Republic of. . 1,243 462 1,243 462 fi} 12 101 62 1,351 536 Geylon jseessiecees 1,538 1,236 1,538 1,236 Indlaists er os o02% 1,571 517 2,502 641 4490 441 61 27 8,624 1,626 85 101 736 630 37,774 24,346 = 47,219 26,703 Indonesia - 4,232 1,682 417173 2,270 709 -—-12,246 =~ 8,640 19,165 11,204 2,822 6,449 eC) eC) 21,987 17,653 Wapanisisre Seccreatie.c are 29 5 426 14. 6,790 5,605 7,245 5,624 1,290 1,090 8.535 6.714 Korea, North .-...- 339 245 339 245 Korea, South . : 816314 34‘) 1,519 746 2,369 1,060 359 213° «1,342 11,046 = 7,795 4,790 11,865 7,109 Pakisians 5.0.0 nee = 80 44 2,791 1,601 2,871 1,645 Philippines ...-... 1,466 489 2,224 582.6141 2,063 9,831 3,134 83 31 12 9 9,926 3.194 Thailand’ sca: vas 1,195 448 1,110 98 7,780 3,489 10,085 4,035 68 29 256 200 3,240». 2,316 ~—:13,649 6,580 Middle East- CY PMS; ere oc.s75 en 44 27 41 29 85 56 5 ) 90 59 Lebanon 708 97 769 354 147 94 1,624 $45 1,624 545 Syria 1,055 572 1,055 572 1 8 1,066 580 5,803 2,199 8,222 2.436 12,450 2,391 37,023 21,727 63,498 28,753 3,582 6,910 2,971 2,282 54,428 35,379 124,479 73,324 EUROPE, EAST:- ; Albania .........- 341 103 341 103 341 103 Bulgaria... .. aoc 562 214 8,806 3,687 11,237 5,349 20,605 9,250 38 19 20,643 9,269 Germany, East...... 956 217 956 217 956 217) Hungary... 22.2... 90 31 2,269 467 880 354 3,239 852 3,239 852 Poland 201 57 73 13° 15,637 6,492 15,911 6,562 15,911 6,562 U.S.S.R. 13 5 299 172 312 177 312 177 Rumania. . . . 51 12 5,911 1,191 82 17 6,044 1,220 6,044 1,220 Yugoslavia 351 145 2,730 1,373 3,081 1,518 3,081 1,518 TOTAL . 917 319 -—«:18,707 5,823 30,865 13,757 50,489 19,899 38 19 50,527 19,918 Other Countries ...... 18.102 8.222 164 266 92 22 20,663. «6,311 ~=—7,284 3.442 46,305 18,263 6 6 1 1 6,688 6,074 ~—- 53,000 24,344 GRAND TOTAL.. 73,562 44,669 123,217 71,011 168,493 45,001 340,835 224,370 36,704 32,913 742,811 417,964 33,095 29,262 11,696 11,348 268,586 237,936 1,056,188 696,510 ' Less than 500. Av. price per pound 6l¢ 58¢ 27¢ 66¢ 90¢ S6¢ B8¢ 97¢ 89¢ 66¢ (for 1971, EC & Appl.) Source:- Official Trade Books 22 TABLE 9.-EUROPEAN COMMUNITY STANDARD AND INTERVENTION PRICES AND BUYERS’ PREMIUMS FOR THE 1970 AND 1971 CROPS OF LEAF TOBACCO’ [In U.S. cents per pound] Buyer’s Country and variety Standard Intervention Buyet’s premium as price price premium percentage of standard price Germany: 1. Badischer Geudertheimer (cigar) .......... 82.8 74.5 57.5 69 2. Badischer Burley E (burley) ............ 100.0 90.0 54.5 55 Ss MViTreinis © Rahue—cured) ity caeaietnen clay cies oe 92.4 83.2 44.3 48 France: 4. Paraguay Dragon Vert (air—cured),......... 63.5 Syed 43.3 68 So INbiode (kid BD) 3 og Bg ola Goo 6 600 ao ols 67.1 60.4 45.0 67 GsBurleya(burleyaandtBel) mame eucte ea eee ei TES 69.7 32.2 42 em Misioneroy,(darkgain)imaswenn en eee ie see eee 58.2 52.4 41.0 71 8. Philippin Peit Grammont (dark air) ........ 46.8 42.1 21S 59 Belgium: G), KSTOB GHIA, | oobeadodndon co coo 55-5 49.9 33.7 61 Italy: LOMBrights(lue=cured) firs rte) a) ilerrsesi rel to oem) ols 75.5 66.6 33.8 45 1S Burley=Marylandi(burley)), 2. 2 se ok ee 64.8 58.3 30.5 47 12. Kentucky Moro di Cori (fire—cured) ........ 62.7 56.5 17.5 28 lS eeNostranol(datksait) ia ess le ee) esse 62.4 56.1 45.3 73 4 Beneventanoi(dark-air)). 2.256 2 be ee ee 49.5 44.6 30.8 62 Seexanti—avakar(oriental)iy: 44-5 sees ee eek s 96.6 86.0 54.1 56 NGwPerustitzai(orientall) waits eis oie eet ee ele 88.8 79.9 $1.3 58 17, Erzegovina (semioriental) .............. 79.5 AES 48.6 61 18. Round Tip Scafati (Sumatra cigar),......... 404.4 364.0 226.5 56 LOS BrasileSelvaggioi(darkiain)i) <3). ies eso a ele 40.0 36.0 8.0 20 1 Standard and intervention prices were the same for the 1970 and 1971 crops. The buyer’s premiums shown are for the 1970 crop. The buyer’s premiums for the 1971 crop were changed as follows: (1) Type 11, Italian burley decreased by 1.4 cents per pound and (2) Type 10, Italian flue—cured increased by 6.4 cents per pound. 23 TABLE 10.-EUROPEAN COMMUNITY: STANDARD AND INTERVENTION PRICES AND BUYERS’ PREMIUMS FOR THE 1972 CROP OF LEAF TOBACCO! [In U.S. cents per pound] Z Buyer’s : Standard Intervention Buyer’s premium as Country and variety price price premium percentage of standard price Germany: 1. Badischer Geudertheimer (cigar) ........... 98.3 88.5 68.4 70 2., Badischer Burley Ex(burléy) 295: 2) °o 3 ee exe 118.7 106.9 68.1 57 3. Virgin SCR: (Glue—cured)). su5;.2.¢.ale oe sess eles 111.8 100.7 60.1 54 France: 4. Paraguay Dragon Vert (air—cured)........... 74.7 67.2 SANS 69 Sag Nijkerk (dark ain)! ecs 2c, 3. i805 Bo Me i cere 78.9 71.0 5526 70 6;, Burley (burley and Bel)... c.. 8 Sees eee ee 89.3 80.4 45.3 51 d= Misionero. (dark alr) ¥oc5,, cio 3) oof Gh ar Bisce we seta 68.4 61.6 49.8 73 8. Philippin Peit Grammont (dark air) ......... 55.5 49.9 34.6 62 Belgium: O. (Semis (dark air). c05.00shsciene el Oo Ooi os ee a ee 66.7 60.1 43.7 66 Italy: 1O2-Brighti@ilue=cured)i & & a nits: ee otis Soe) Be acer ane 87.6 78.8 SS 61 Dt: SBurley 1) tare coxen te ba a revedetene! Sten ar eye! Bue ae 70.9 63.9 33.6 47 Maryland 26,6 Ao% 6 Saku dee se Seed waa es 5 1501 67.6 40.6 54 12. Kentucky Moro di Cori (fire—cured) ......... 121 65.5 25.9 36 13. Nostrano (darkiain)i 6 was ha soes os Gels wad 71.6 64.5 55.1 78 14: Beneventano (dark air) 65: eas 6 ea ose re aoa 56.9 ode 38.7 68 15. Xanti= Yaka (oriental). 2.6 6 RS 2 wa ee, we 105.8 95.2 70.0 66 és Perustitza (oriental) 24545. sso & ene ee eke ater 99.1 89.2 64.8 65 17. Erzegovina (semioriental) ..............- 88.8 79.9 57.8 65 18. Round Tip Scafati (Sumatra (cigar) ......... 468.9 422.0 272 58 19), Brasile:Selvagsio (dark-ait) ¥ 2-5. 9.5 36 Soe ee es 43.8 39.4 10.7 24 1 Farm sales weight basis, ? Based on the following exchange rates: 1 unit of account = 3.66 DM, 5.55419 French francs, 50.0 Belgium francs, and 625 Italian lira. US $1.00 = 3.20 DM, 5.00 French francs, 44.8 Belgium francs and 581 Italian lira. 24 TABLE 11.-EUROPEAN COMMUNITY: STANDARD AND INTERVENTION PRICES AND BUYERS’ PREMIUMS FOR THE 1972 CROP OF LEAF TOBACCO! [In dollars per kilogram ] 2 Buyer’s Count eniee Standard Intervention Buyer’s premium as Sey ene ae ty price price premium: percentage of standard price Germany: 1. Badischer Geudertheimer (cigar) .......... 2.167 1.951 1.509 710 2. Badischer Burley E (burley) ............ 2.618 2.356 1.501 57 Ba aVirgin:SGRa(flue=cured) i iene a ols en se ec cite 2.465 2.219 1.324 54 France: 4, Paraguay Dragon Vert (air—cured).......... 1.646 1.482 1.136 69 SUNijkerka(darktain) ines tcusstcne) circiol silelbetccn sles venesare 1.739 1.565 1.225 710 6s Burleya(burleydandiBel)ii 5 cus a ccc oneualenenee 1.969 Lei2 999 51 feeMisionero)(darkiair) arenes elie ees cite siicuie cl ene 1.507 1.357 1.098 73 8. Philippin Peit Grammont (dark air). ........ 1.223 1.101 .762 62 Belgium: OR Semoisi(darktain) Mewes) apouen sl cllevevieeueieuelonels 1.471 1.324 .963 66 Italy: OM Brights (tHuc=cured) le 4 eee, eerie. eee wus 1.931 1.738 1.183 61 Abe BUTLe Val Ge ey w eet cy Niretieusiemerrer ene. Gul Byguicl a wetaroe 1.564 1.408 -740 47 Marylan diene nusecuroitensiseney cite. nr faiitrrcs iste, etereucetlel vs 1.656 1.491 .896 54 12. Kentucky Moro di Cori (fire—cured) ........ 1.603 1.443 571 36 1SSNostrano;(darksain)iis snes eeiciecl oe sewer ce. ose es 1.579 1.421 1.227 78 (4°mBeneventano;(darkiain)) ico). ss sleet ee 1.254 1.128 853 68 lSexantim vakar(oriental) aon pike wets eleven «sel e) le 2.332 2.098 1.544 66 Gn Perustitzai(oriental) mia sc ces eee coe ee la cee 2.185 1.966 1.429 65 17, Erzegovina (semioriental) .............. 1.957 1.761 1.274 65 18. Round Tip Scafati (Sumatra cigar)... ........ 10.337 9.304 5.980 58 19. Brasile Selvaggio (dark air). ............4. .966 .869 .236 24 1 Farm sales weight basis, Based on the following exchange rates: 1 unit of account = 3.66 DM, 5.55419 French francs, 50.0 Belgium francs, and 625 Italian lira. US $1.00 = 3.20 DM, 5.00 French francs, 44.8 Belgium francs, and 581 Italian lira. 25 ue Sey Use es} ai ; nee dhe en ; ) wlan oat Ge . tyes - - ir Fs TRE on NY a, as eae isi) Reo rah age ee a ee = oa _ aS Al , Fat (AA G (ety (Oe yaar hing j <7 Pon na om Aa a Wis “3s go on” ' " - any 7 - * UNITED STATES DEPARTMENT OF AGRICULTURE WASHINGTON, D. C. 20280 OFFICIAL BUSINESS PENALTY FOR PRIVATE USE, $300 If you no longer need this publication, check here and return this sheet and/or envelope in which it was mailed and your name will be dropped from mailing list. If your address should be changed PRINT OR TYPE the new address, including ZIP CODE and return the whole sheet and/or envelope to: FOREIGN AGRICULTURAL SERVICE, Room 5918 So. U. S. Department of Agriculture Washington, D. C. 20250 FAS M 251 POSTAGE AND FEES PAID U.S. DEPARTMENT OF AGRICULTURE AGR 101 FIRST CLASS a