Tobacco Industry, Under The Monopoly Control

This thesis is dedicated to the study of issues on the government control and reform of the monopoly system in the tobacco industry. Nevertheless the tobacco industry is, for a long time, the one greatly influenced by the government control everywhere in the world, the previous study by the Chinese scholars focused on those "fundamental departments", e.g. telecommunication, aviation, railway, electric power, and other natural monopoly industries. It can, at the preset time, be held that the domain of the tobacco industry and monopoly system is a less-touched virgin land in China's academic study. 10 years for establishment and enforcement of the tobacco monopoly system witnessed China's dramatic changes in the economic system, evolving from the traditional plan economy to the market economy in the direction of constructing the socialist market economy system phase by phase. Under the micro-environment of the market economy, the question how to integrate the tobacco monopoly system and the market economy is vital to the tobacco industry, the proper solution of which will trigger further impact on the overall development of the tobacco industry in China. In consideration of the foreign enforcement of the monopoly system, there were 71 countries in the world that enforced such system in 1991 when the Law of the People's Republic of China on Tobacco Monopoly was promulgated, and, by contract, there were less than 20 countries and regions that continued the enforcement of such system according to the statistics updated to 2001, which is, undoubtedly, worth our study whereof. The overseas academic theories and scholars all the way along paid much attention to the administration model of the tobacco industry. They carried out much research efforts in terms of both theory and example verification from the angle of the public health economics, control economy, institutional economics, etc. In comparison, a lack of the theoretical literature that is dedicated to the systematic study of the China's tobacco industry and the tobacco monopoly system from the perspective of the economics exists in China. Many of those articles are discussions or probes at the surface of government policies only. Even if some of theoretical issues necessary for solutions are involved wherein, such involvement is inevitable in terms of logic in their studies. As a matter of fact, after China's entry into the WTO, many concerns are given to the strike of China's tobaccomonopoly system because speeding-up the reform paces and integrating itself into the grand circular flow of the international tobacco economy is the tendency bound to happen free from people's will. As a result, participation is far more important than use for reference, and thus, participation means the study of adapting ourselves to the worldwide practices is a must. In this sense, the government control activities since the time where the monopoly was enforced in China's tobacco industry shall studies from a special status.Under the above background, by applying the theoretical framework and methodology of the industry's control economics and institutional economics, adopting the approaches of analysis, comparison, and example verification, and taking the review of China's tobacco monopoly system as the cut-in point, this thesis is designed to analyze the status quo and existing problems from the basic view of the functional transformation of the government control and evolvement and reconstruction of the monopoly system, probe into the development path whereof under the brand-new situation, and, by the international comparison of different countries on the issue of the tobacco industry control, endeavours to bring forward the policy proposal on the institutional evolvement from both layers of the industry itself and the external environment.This thesis is composed of eleven chapters. The first chapter is the introduction. It starts from the nail-down of the issues to be studied and the significance of this selected topic. Then an analysis is conducted in the view of the economics towards the theoretical interpretation of the existence of the monopoly system, and the important role played by the tobacco industry in the national economy. Further upon discussion of the theoretical definition of the basic economic concepts such as "monopoly" and "monopoly sales" in the academic circle, the detailed and clear definitions of both monopoly control and government monopoly sales enforced in the tobacco industry referred in this thesis are advocated, and the study scope and approached adopted in this thesis are introduced as well.Following above, Chapter Two brings forward a preliminary analysis framework of the government control and institutional reform carried out in the tobacco industry, which paves the way for following chapters to apply this analysis framework into discussion of some fundamental issues of China's tobacco industry in the monopoly system. This chapter, by using the theory of public interests of the government control, control-capture theory, the theoretical model of the government control, the minimumgovernment control theory construed the basic contents covered by the government control, and discussed the interactivity and the nonnegligible effects of the government control and the industrial development model. Theses theories provide the convictive constructions to some practical economic problems that cannot be satisfactorily constructed by the traditional economic theories. Thus it makes possible for us to look on the reasons for control rules formulated by the government and some other institutional problems in the industrial evolvement, and analyze the costs of the government control and the restrictive factors and significances of the institutional changes whereof in a never-before-used angle.Then, Chapter Three is, from the external visual angle and by using the method of costs analysis, going to analyze and estimate the social cost losses of the state and consumers due to tobacco smoking, and comprehensively review difficulties confronted by enforcement of smoking control measures in China as well as importance and urgency of the tobacco monopoly system vs. the state's overall economic interests in consideration of the economic benefits offered by tobacco. Approaches like the attribution analysis and total cost are adopted in this chapter to analyze the medical costs, losses of the social productivity, and external costs caused by smoking with indication of the tremendous economic and social values provided by the tobacco industry at the same time. The view point intended in this chapter is that the negative effects of tobacco is due to not only the consumption whereof but the inefficient control whereof. Consequently, the problems existing in the tobacco control and how to internalize the tobacco's external costs shall be paid certain attention to.Chapter Four of this thesis conducts an overall review of the market structure, industrial performance and manufacturers' activities of China's tobacco industry under the monopoly control by applying the structure, activity and performance analysis framework in the theory of the industrial organization. It draws the support from combination of the table, block diagram or other graphic design and text expression to strive for a more accurate and illustrative analysis and induction of quantity wherein in a subjective manner. This chapter well demonstrates some of general problems of the tobacco industry under the monopoly control, and indicates the fact that the superficial resplendence whereof cannot cover the consequently attendant internal contradiction of the industry due to the dual-layer dissymmetry of monopoly vs. market and government vs. enterprises existing in the administrativesystem. Of course, the causes, manifestations, restrictive factors, and coordination of such contradiction are also analyzed.Discussion of the role played by the government in the monopoly control from the perspective of the government behaviour is made in fifth chapter. The reason to take the government as an independent study object differentiated from the whole industry lies in the fact that there is the fundamental difference between its behaviour and the market development of the tobacco industry itself. Such difference is characterized the role of "administrator", i.e. the government commands and controls any and all of the upper- and lower-reaches activities of the value chain of the tobacco monopoly. As a result, the performance of China's tobacco industry since enforcement of monopoly closely links the government behaviours. This chapter elaborates the analysis of the case of the control inefficiency of the central government to the local administrative authorities as well as the market disorder due to the different objective function implemented by the central government and the local administrative authorities in terms of the tobacco monopoly policy, and outlines the negative impacts of the "localism" on the monopoly sales system and the institutional causes that causes such negative impacts.Since 1994, China began her financial control system of tax division between central and local governments. Under the overall frame of such system, the tobacco financial and tax policies are made the corresponding re-designs and re-adjustment. With regard to the issue of the tobacco tax, formed is the special financial distribution relation between the central and local governments, and the governments and enterprises/other interested parties. That is the topic stated in Chapter Six which treats the significant measures in the reform of the system of tax division between central and local governments as the basic clue, studies the progress and effects of the tax system reform, and pointed out that the replacement of manufacturers and the state of "the weak powerhouse" existing in this industry due to the state taxation is not the result of market competition but the result of the administrative protection. Accordingly unveiled are the inherent contradictions and systematic defects seen in the existing tobacco tax system and contained within the reform efforts whereof.With regard to the control issue from the aspect of the political science, Chapter Seven takes the relationship between farmers of China's southwest region and the local government as the subject investigated, discussed the contradictions, conflicts and even intensification of interests occurred during the time of the tobacco monopolycontrol, and touches many incredible inharmonic phenomena occurred under the background of the monopoly control by the central government even in the undeveloped countryside. Such inharmonic phenomena made, of course, farmers who planted and/or sold tobacco be in hot water, which led to the economic rational resistance against the behaviours of the local government that made people work hard and wasted money for nothing.Chapter Eight is a comparison of and reference to the international lessons of the tobacco control in the sense of globalization. It stared its words by firstly introducing the worldwide background of the tobacco control issue, including the impacts of the anti-smoking movement on the global tobacco control. Then it continue its statements of various lobbying campaigns launched by many transnational companies to dodge such control and some of new cases and trends emerging from the today's control. Supported by the above introduction and statements, this author raises examples of the EU, the US, Canada, Japan and other countries as well and conducts discussion on the issue of control. In consideration of the de facto situation, theories on the tobacco control of the above countries have deeply footprinted in the control practice. Problems they faced, are facing and will face may occur in our country someday in the future. Therefore, their solutions and lessons are, undoubtedly, presenting the reference and ideas valuable to China's future reform in the tobacco monopoly system.Chapter Nine discusses the issue how China's tobacco industry responds the challenges resulted from China's entry into the WTO under the background of the WTO entry and influences and binds by the international conventions and agreements. In a worldwide view, there are the tobacco-related Uruguay Agriculture Agreement and other multilateral rules and measures related to the tobacco trade. Most of discussion of impacts from the WTO entry is carried out based upon such impacts on all of fundamental elements within this industry, e.g. the tobacco planting, production and business operation of tobacco enterprises, products' structure, cigarette brands, quality technology, and foreign trade. Taking such impacts as the ground, it is the hope of this author that some valuable information on the expected changes in China's tobacco market can be further predicted.A theoretical probe to and analysis of options in the reform of China's future tobacco monopoly system that is the dual concern of the relevant domestic and overseas enterprises is made in Chapter Ten upon the system reform theory of the...