Zimbabwe Tobacco Exports (ZIMTOBAC Case)

     CASE NUMBER:   281
     CASE MNEMONIC: ZIMTOBAC
     CASE NAME:     Zimbabwe Tobacco Export and US

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I. IDENTIFICATION

1. The Issue

     Zimbabwe has become the world's biggest tobacco exporter, and
tobacco is the country's biggest foreign-currency earner, bringing
in some $430 million in 1994. However, farmers are worried about
the anti-smoking trend in America and Western Europe because most
southern African economies are still dependent on a narrow range of
exports that make them extremely vulnerable to market forces.
Therefore anti-smoking trend brings a great shock to Zimbabwe's
economy. Moreover, the United States decided to impose tariffs on
imported tobacco. As a result, Zimbabwe is now suffering from a
loss of international trade. In addition, after U.S. tobacco
industries lost market in their country they started to seek new
markets especially in developing countries.  Developing countries
have few regulations concerning tobacco imports. As a result the
number of smokers have gradually increased in the world. This is
the case in Africa. The anti-smoking trend is also becoming an
issue related to health in Africa. Furthermore, the condition of 
Zimbabwe's economy is getting worse. 
     
2. Description

     Tobacco is now one of biggest industries in the world. 
Tobacco was discovered by Native Americans, and has been
described as their revenge.  The addictive leaves were smoked in 
pipes, called tobaccos, which gave the plant its European name.  
Early explorers introduced tobacco to the rest of the world.  No 
country has ever been able to rid itself of tobacco -- even when 
tobacco use has been a capital crime. With widespread smoking of 
cigarettes (today's preferred spelling of "cigarettes"),
ultra-rare diseases such as lung cancer and emphysema became 
common.  Cigarette smoking is now a major problem both in
industrial societies and in developing countries.  
     
     Tobacco smoke is the most widespread of known pollutants. In
developed countries, ethanol and tobacco are the two principal
causes of avoidable death. Tobacco smoking kills 1000 people in the
US each day.  Mortality rates for young and  middle-aged cigarette
smokers is 1.7 times that of nonsmokers.  By taking up smoking, a
person cuts his or her life expectancy by 15 years; the estimate of
"5 minutes of life lost for every cigarette" is probably low.

     Tobacco smoke is a complex mixture that contains nicotine 
(the addictive component) and many other harmful substances, 
including carbon monoxide, benzopyrene, nickel, polonium, and 
radon. "Low-tar" and "low nicotine" cigarettes are not
measurably less dangerous than the regular kind.  Smoking
without inhaling (pipes, cigars) is less addictive and easier on 
the lungs, but the risk of mouth and throat cancer is high.  
"Smokeless tobacco" is as addictive as cigarettes and causes  mouth
cancer; the average age at which an American begins using  "chewing
tobacco" is now ten.

      After high serum cholesterol, cigarette smoking is the most 
important risk factor for coronary heart disease. Chronic
bronchitis and emphysema  kill 150,000 people in the US each  year. 
Lung cancer kills 140,000 people in the US each year.   Cures are
rare.  The vast majority of these cancers are caused  by cigarette
smoking.  Mouth cancer, throat cancer, larynx  cancer, and
esophageal cancer are all strongly associated with  tobacco
smoking. Consumption of cigarettes is declining in the  U. S.-from
a peak of 41 percent to its current level of about 25  percent
(Scientific America May 1995). This anti-smoking trend   is
spreading over the world. The trend caused  the collapse of  world
prices of tobacco in 1993. Moreover, U. S. decided to  impose
tariffs on tobacco. Today the anti-smoking trend  is  threatening
Zimbabwe,  one of the biggest tobacco exporters to  the U. S. and
Europe and  Zimbabwe relies heavily on the tobacco-export income.
The reason Zimbabwe has become one of biggest Tobacco exporter is
related to the structural adjustment policies promoted by World
bank and  the International Monetary Fund (IMF).    

     Throughout the 1980s, lending agencies such as the U. S. 
Agency for International Development (USAID), World Bank, and IMF
have proposed export-led growth, generally combined with demands
for economic liberalization and substantial reduction of state
intervention. Zimbabwe has small population (9.5 million) but has
the most diversified economy of 10 members of Southern Africa
Development Community (SADC). A combination of factors,  including
rising government deficit -- due in part to the continuing cost of
assisting Mozambique against South African destabilization and
recurrent drought (1980-81, 1983-85, 1987-88, 1990-91, 1991-92),
lack of foreign investment or reinvestment, and high unemployment
rates caused a shift in government policy in late 1990 toward
export-led growth, promoted by package of structural adjustment 
policies, including trade liberalization.

     Zimbabwe became independent in 1980 with a distorted economy
highly dependent on  South Africa, after 15 years of international
economic sanctions. The new government proposed its broad economic
strategy in 1981 to transform colonial economic structures and 
reduce extreme inequities through economic growth. Since tobacco 
is a potential cash crop for precious foreign exchange and  fits 
Zimbabwe's tropical weather, it has become a major product for 
export.

     U.S. tobacco companies are advancing into developing
countries as they abandon attempts to expand their markets in 
their own country. If they are not restricted by the law of a  host
country, U.S. manufacturers are currently permitted to  export
cigarettes to less-developed countries without any warning labels,
even though they are required to place such labels on the same
packages for sale in the United States.  Tobacco advertising is
pursued aggressively in less-developed countries, with the
advertising budget for a given country at times surpassing its
national budget for health research.  African countries are also
their targets. Their marketing power has had a great effect
especially on young people's health in African countries. 

     The All Africa Conference on Tobacco and Health decided to 
control tobacco in 1993 since the effect of cigarettes on health 
became a serious matter. Then other African countries, which are 
also importers of tobacco, started to impose taxes and restrict 
advertising. Zimbabwe exports 99 percent of what it grows and is 
facing a serious problem that is related to their economic  health
and the country's future.
     
3. Related Cases


PHILSUG case
COFFEE case
INDIATEA case
EVER case
BANANA case
CIGAR case

Keyword Clusters

     1.Trade Product=TOBACCO
     2.Bio-geography=TROP
     3.Environmental Problem=POLA

4. Draft Author: Yasuko Mita (May, 1996)

II. LEGAL Clusters

5. Discourse and Status: DISagreement and ALLEGE  

6. Forum and Scope: Zimbabwe and Unilateral

     
7. Decision Breadth: 2 (Zimbabwe and the United States)

8. Legal Standing: Law

     U. S. Tariffs on the imported tobacco.
     All African Conference agreement.

III. GEOGRAPHIC Cluster

9. Geographic Locations

     1. Geographic Domain: Africa

     2. Geographic Site: South Africa

     3. Geographic Impact:  United States

10. Sub-National Factors: NO

11. Type of Habitat: TROPical

IV. TRADE Clusters

12. Type of Measure: IMTAX

13. Direct vs. Indirect Impacts: Direct

14. Relation of Measure to Environmental Impact

     1. Directly Related:          Yes Tobacco
     2. Indirectly Related:        No
     3. Not Related:               No
     4. Process Related:           Yes Habitat loss

15. Trade Product Identification: Tobacco

16. Economic Data
 
     Table 1.
                Zimbabwe Industry Output ($)
                        
                    1994      1991
                    430m      more than 500m 
     
               Unemployment: At least 35 % (1993 est.) 
     
     Agriculture employs three-fourths of the labor force and 
supplies almost 40% of exports. The manufacturing sector, based  on
agriculture and mining, produces a variety of goods and 
contributes 35% to GDP. Mining accounts for only 5% of both GDP and
employment. Helped by an IMF/World Bank structural adjustment
program, output rose 3.5%in 1991.  (Tobacco farmers' shift to rose
export resulted from the circumstances of the tobacco industry)


Table 2.
     Zimbabwe Export Commodities: 1993
     
     Tobacco 20%
     Other 15%
     Manufactures 20%
     Gold 10%
     Ferrochrome 10%
     Cotton 5%

     
Table 3.
     Tobacco Refuse Imports from Zimbabwe (Thousand US $): 1993 

     Canada       253         NETHERLAND           1653
     USA         4426         PORTUGAL              296          
     JAPAN       1981         UNITED KINGDOM       3303
     BELGIUM      611         AUSTRIA               326
     DENMARK       57         SWEDEN                331
     FRANCE       248         SWITZERLAND            85
     GERMANY     2081         NEW ZEALAND            79
     GREECE       498         IRELAND                87     
      
     U. S. cigarette exportation climbed from 8 percent of
production in 1984 to 30 percent in 1994.  Because of growing 
cigarette consumption in developing nations, world wide
cigarette production is projected to escalate by 2.9 percent a  
year in the 1990s, with China leading the way with increases  near
11 percent per year in tobacco consumption.

17. Degree of Competitive Impact: High

18. Industry Sector: Agriculture [TOBAC]

19. Exporter and Importer: Zimbabwe and USA

V. ENVIRONMENT Clusters

20. Environmental Problem Type: Habitat loss. 
     
      A 1992 Environmental Protection Agency report emphasized  the
dangers, especially of sidestream smoke. This type of smoke 
contains more particles of smaller diameter and is therefore  more
likely to be deposited deep in the lung. On the basis of  this
report, the EPA has classified environmental tobacco smoke  as a
"group A" carcinogen, to which radon, asbestos, arsenic and 
benzene belong.

21. Species Information 

22. Impact and Effect: HIGH AND PRODUCT

23. Urgency and Lifetime: LOW AND 100s of Years

24. Substitutes: REHABILITATION

VI. OTHER Factors

25. Culture: NO

26. Human Rights: NO 

27. Trans-Border: NO

28. Relevant Literature

"A leaf one day, a petal the next," The Economist, March1995. "An
Unhealthy Trade," World Press Review, July 1988.

Bartecchi, Carl E., Mackenzie, Tomas D. and Shrier Robert W. "The 
Global tobacco Epidemic," Scientific American, May 1995. 

"Dumping Health Risks on Developing Nations," USA Today: The     
magazine of the American Scene, April 1993.

Ecenberger, William. "America's newest merchants of death,"       
Readers Digest (US Edition), April 1993.

Gazette, Daily "Lighting Up the Third World," World Press Review, 
November 1994.

Reddy, Marlita A. edit. Statistical Abstract of the World 1994,  
An International Thomson Publishing Company.

The World Factbook 1994, Central Intelligence Agency (CIA)

Watts, Ronald. "Make or Break Season," African Business,
July/August  1994.