1. 1 The Role of Economic Research in Accelerating Tobacco Control Teh-wei Hu Professor Emeritus of Health Economics University of California, Berkeley To be presented at Tobacco Control Research in China Symposium October 19-21, 2011 Lijiang, Yunnan, China

2. 2 Overview Goal of the WHO Framework Convention on tobacco control How can economic research be used for tobacco control Future topics of economic research can accelerate tobacco control The way forward

3. 3 Goals of the WHO Framework Convention on Tobacco Control -Interpreted in Economics- To reduce the demand and supply of tobacco products through government intervention

4. 4 How Can Economic Research be Used for Tobacco Control? To justify government intervention on tobacco control To reduce the demand for cigarettes To reduce the supply of tobacco products

5. 5 To Justify Government Intervention Economic cost of smoking Effective tobacco tax schemes Earmark part of tax revenue for tobacco control/health promotion

6. 6 Economic Cost of Smoking (in 2008 price) Cost Estimate% of 2000 2000: RMB 50 billion (US$7.2 billion) 2003:RMB 119 billion (US$17.1 billion)137% 2008:RMB 200 billion (US$ 28.9 billion)300% Yang, Sung, Mao, Hu (2011)

7. 7 Effective Tobacco Tax Scheme Specific excise tax is the most effective measure for tobacco control (avoid tax evasion and avoidance) China has only 0.06 RMB per pack 2009 tax adjustment only changed ad valorem tax rate at producer/wholesale price level WHO (2010), Hi, Mao, Shi (2010)

8. 8 Earmark Part of Tax Revenue for Tobacco Control on Health Care More benefit than cost for tobacco control and improve equity for low income smokers Recent examples in Thailand, US, Australia, New Zealand, and HK (SAR)

9. 9 To Reduce the Demand for Cigarettes Through price (and tax) and quantitative relationships to predict cigarette consumption (and quantity) Predict government revenue changes Mao, Hu, Sung (2008)

10. 10 Through Price (and tax) and Quantitative Relationships to Predict Cigarette Consumption Change Price elasticity of the demand for cigarettes between -0.15 to -0.50 (one third responded to quitting and two thirds responded to the amount of reduction) Mao, Hu, Sung (2008)

11. 11 Predict Government Revenue Change Increase RMB 1 per pack, government would increase 86 billion RMB (price elasticity at 0.15) 65 billion RMB (price elasticity at 0.50) Hu, Mao, Shi, Chen (2008)

12. 12 To Reduce the Supply of Tobacco Help farmers to understand the costs and economic returns of alternative crops versus tobacco leaf Revenue cost ratio: Tobacco 0.99 Mulberry4.00 Fruit2.00 Vegetable Oil1.70 Hu, Mao, Jiang, et al (2007)

13. 13 Future Topics of Economic Research that could Accelerate Tobacco Control Study tobacco control on regional impact Study the impact of separating the China National Tobacco Company from the government ownership

14. 14 The Way Forward Translate economic research findings to top government policy makers Communicate findings to media professions If national tobacco tax reform is not possible, pilot tax experiments might be considered