Make VNP a Reality
Written by Dr. Carmelo Ferlito, CEO of Center for Market Education
First published in Property Rights Alliance on 20 May 2022
In the Philippines the current regulation on the consumption of nicotine-related products does not distinguish between traditional methods such as cigarettes and alternatives like heated tobacco products (HTPs) and e-cigarettes. Only in January 2022, lawmakers in the Philippines finally passed a comprehensive set of rules to regulate the sale and use of nicotine alternatives – under the vaporized nicotine product (VNP) bill; for an effective harm-reduction strategy, it is important for this bill to become effective.
It is comforting to see the great scientific and political support that bill obtained, marking a change in pace in the harm reduction strategy: Philippines will join countries such as the United States, the United Kingdom Sweden and New Zealand, who brought down the smoking rate thanks to innovation rather than prohibition.
After having been received with mixed reaction, the VNP bill path needs to be accelerated. With Ferdinand Marcos, Jr. and Sara Duterte winning the presidency and vice presidency respectively, becoming the first presidential and vice-presidential candidates to be elected by a majority since 1986, hopes are increasing that a strong political majority can further push forward the fate of the very much needed legislation.
The 2015 Global Adult Tobacco Survey showed there are 16 million smokers in the Philippines, including 76.7 percent who planned or thought about quitting, but only 4 percent were able to do so. The vape bill hopes to make e-cigarettes and HTPs available to help smokers quit.
In fact, the traditional way to conceive harm-reduction strategies – based on taxation and prohibition – has been proved ineffective under many perspectives, and in particular three aspects have to be emphasized:
- A tobacco-related taxation violates both vertical and horizontal fiscal equity;
- Taxing pleasure-related products is regressive;
- Taxing and prohibiting the consumption of pleasure-related products creates space for illicit trade to thrive.
It has to be added that taxation and prohibition, even if in certain circumstances can drive to a reduction in the consumption of “sinful” products, violate the principle of freedom of choice and take an approach to externalities which pretends to defend only one of the parts involved, by harming the second one (the smoker).
The VNP bill, instead, walks on a different path. While not denying the harmful effects of nicotine consumption, it tries to respect the “pleasure-seeking” behaviour of the consumer while giving a preferential way to those products which have been proved less harmful: the point is thus not to eliminate consumption, but to direct that consumption toward less harmful products, preserving the right of the consumer to choose to enjoy the pleasure induced by nicotine. In particular, the VNP bill paves the way for an increased consumption of alternative products, such as e-cigarettes.
The VNP bill, furthermore, marks a change in pace because it recognizes that people choose to smoke and any policy which aims to achieve a realistic target must consider this “pleasure-seeking” components. Freedom of choice and the respect for the pleasure sensation needs to be the pillars of an effective harm reduction strategy.
But for these alternatives to effectively emerge in the mark, an institutional framework conducive to innovation is necessary; and liberty is the most important institutional arrangement that can allow innovation and growth, and – with them – human progress to happen.
Experimentation and innovation thrive, then, where they are welcomed, encourage, and incentivized. And innovation (providing alternatives) is the key element to make freedom of choice, pleasure and harm reduction walk together. This is possible only if policymakers would start to approach the issue with the necessary humility dictated by the acknowledgement of the fact that policymaking does generate unintended consequences.
This is what the VNP bill seeks to establish. The bill’s clear and comprehensive regulations provide the institutional structure that will allow enterprises the space to innovate and produce more groundbreaking products.
Small businesses like retailers who can comply with the bill’s requirements will thrive and boost the domestic economy reeling from the devastating effects of the pandemic. And by ensuring that only registered and tax-paid products can be sold in the market, the illicit trade of the covered products will be minimized, and proper taxes will be collected.
Overall, the bill will encourage investments and safeguard employment in the legal market. In fact, marketing and production liberalizations are introduced, that may facilitate the path for local businesses to successfully embark in HTPs production and promotion, while the domestic tobacco industry can at the same time benefit from the new regulation.
It is important now for the VNP to find its way to full implementation, allowing the Philippines to enter the “club” of those countries that successfully reduced smoking without banning pleasure-seeking but orienting it toward better alternatives thanks to the proper institutional arrangements.