Tobacco

In June 1997, the nation's largest tobacco companies and 40 state attorneys general who had filed suit against the industry agreed on a settlement that, if implemented, would significantly change the way that tobacco products are manufactured, marketed, and distributed in the United States. Under the proposed agreement, the industry would pay $368.5 billion over 25 years, accept the Food and Drug Administration's authority to regulate tobacco products, restrict the advertising of its products, and release internal research papers. In return, the settlement would resolve the present actions by the 40 state attorneys general, drop all punitive damages claims for past conduct, and grant the tobacco industry immunity from future class-action lawsuits. This report (1) identifies tobacco-related industries and summarizes existing studies that assess the national and regional economic impacts of the tobacco industry, (2) examines smoking trends for U.S. and Canadian youths, (3) estimates the potential effect of a settlement on state revenues from cigarette excise taxes, and (4) investigates the extent of interstate and international cigarette smuggling affecting the United States.

GAO noted that: (1) according to recent studies, from 353,000 to 555,000 jobs are directly related to the tobacco industry nationwide, including jobs in the tobacco growing, warehousing, manufacturing, wholesaling, and retailing industries; (2) according to these studies, an additional 653,000 to over 2.3 million jobs nationwide are estimated to be indirectly related to the tobacco industry; (3) this additional employment includes jobs associated with the producers that supply materials and services to the tobacco industry and jobs associated with the industries that provide goods and services to the employees of the tobacco industry and its suppliers; (4) two of the studies estimated that declining tobacco consumption--that would occur, for example, as a result of an increase in the price of a pack of cigarettes--would likely result in job losses in the tobacco growing and manufacturing industries; (5) however, it must be recognized that the money previously spent on tobacco products would not simply disappear from the nation's economy; rather it would be reallocated to other goods and services; and (6) these studies indicate that this reallocation could have little effect on national employment, although the Southeast Tobacco Region could experience job losses.