W

hen Indonesia’s trade minister met his Australian counterpart last year, he made a light-hearted suggestion: Jakarta could impose plain packaging on wines from Down Under, and maybe even, gasp, insist that wines obtain Islamic-permissible certification for food and beverages.

The comments, said the minister, are a joke. But he added that they were “an expression of my resentment”.

This anecdote hints at what could head our way after a landmark World Trade Organization (WTO) ruling expected later this year. It comes some five years following a complaint filed by Indonesia and three other countries against Australia’s plain packaging policy for tobacco products. Under this policy, tobacco products are now wrapped in plain, neutral packaging and without brand logos or trademarks.

The move to plain packaging shocked Jakarta. As the fifth-largest tobacco leaf producer in the world, and with a workforce of 6 million people in the tobacco trade, Indonesia believes the branding ban is an illegal barrier to trade.

While the WTO has not released the findings of the dispute settlement panel, it has been reported that Australia has triumphed. But this decision marks only the halfway point in the battle. The decision will almost certainly be appealed. With approximately 70 percent of appeals successful at the Appellate Body, we are some months away from a final ruling in the case. Until that time, uncertainty remains. The final decision will be important and have repercussions for other products such as alcohol and snacks. Here are four global implications:

As the Indonesian minister hinted, retaliation is one of the weapons the country could use to strike back at Australia. Indonesia has a history of firing back to protect global sales of domestic products. In November last year, the same trade minister urged palm oil stakeholders to fight the European Union’s negative campaign against palm oil-based products ostensibly for environmental and health concerns.

Indonesia counts palm oil as a crucial commodity, and the minister said the country would place barriers on a host of imports from Europe, such as milk powder, if the EU disrupts palm oil production.

Again, his comments could have been lighthearted or made in jest. But such rhetoric amid a surge in anti-trade protectionist talk around the world raises uncertainties that a trade war is more likely than not. And one thing is for sure: there are no winners in a trade war. Each cycle of retaliation would only shrink global trade, making the world poorer.

Since Australia implemented plain packaging for tobacco products in 2012, other countries — including France, United Kingdom and Ireland — have followed suit and others such as Canada and Singapore are considering its adoption. For lobbyists across the world, the adoption of plain packaging of tobacco is a green light to campaign for tighter branding laws for other products, such as for alcohol, snacks and sweets.

To curb obesity rate, Chile has clamped down on the marketing of sugary foods to children by doing away with brand characters, toys, giveaways, and child-targeted imagery. Kinder Surprise, a chocolate egg that comes with a hidden toy, is now banned from the country, while Kellogg’s has had to remove cartoon characters from its cereal boxes.

Last year, police in Thailand started a campaign to monitor people who promote alcoholic beverages on social media. Such posts encourage others to consume booze, the police said.

This is how regulations move nearer and nearer towards plain packaging. Imagine a world where the shelves are full of products where all logos, fonts, colors and images are banned. If Australia triumphs at the WTO, this extreme version of the Nanny state is one step closer to reality.

A good brand is a company’s most valuable asset. On the mention of Kit Kat, one thinks of the classic twin wafer bars and its unique flavors. But as sugar becomes a new public health enemy, governments have been toying with plain packaging in the candy and confectionary industry. If implemented, Kit Kat would no longer be able to distinguish itself in its present way. Ditto for other chocolate snacks like Kinder Bueno and Snickers.

Think of the effect this has on businesses. When their most valuable asset is removed and is no longer a marketing strength, companies no longer see a need to invest in product innovation. Why pump money to develop new flavors or improvements to nutritional content, and build a premium brand position when consumers will not get to know about it?

That leaves products fighting a price war, luring consumers who are loyal only to the lowest price tag. In a bid to be that cheapest item, quality is compromised. Consumers end up paying less but for an inferior product.

For counterfeiting syndicates, plain packaging makes it much easier to produce fake items. Since the brand has been dumbed down visually, it takes little effort to reproduce to a high standard. Consumers might easily be duped into buying fake products, since it would be harder to tell a real item apart from a fake when all brand elements have been removed.

Data from Australia showed an uptick in the illegal tobacco market since plain packaging was implemented, and last year, the Australian government reported that the number of smokers increased for the first time since the country ramped up its anti-smoking campaign decades ago. This is astonishing and worth repeating — far from reducing smoking, smoking rates have increased with the introduction of plain packaging.

As plain packaging becomes increasingly normalized, it is a matter of time before the legislation creeps into even more product categories.

But how helpful or effective is a law like plain packaging? Does it target communities that need support, or is it just penalizing the marketing and advertising industry and harming consumer choice?

Instead of draconian measures such as a blanket ban on branding and advertising, more targeted public health education for at-risk groups such as obese young children or adolescent smokers would seem a better way to achieve improved health outcomes.
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The writer is a professor of law at the Chinese University of Hong Kong specializing in global trade law and policy, the World Trade Organization and intellectual property rights.