2 years) the average value of EC imports of U.S. 

 flue-cured strips, which accounted for 35 percent 

 of total U.S. exports to the enlarged EC in 1971, 

 will move from the 14 to 17 cent per pound 

 tariff category to the 21 to 35 U.S. cents clas- 

 sification by 1974. By 1983 the average value of 

 U.S. flue-cured strips could be at the maximum 

 rate of 35 U.S. cents per pound. This would have 

 a severely damaging effect on U.S. tobacco exports 

 unless this discriminatory feature of the CXT is 

 abolished. 



A significant impact on U.S. tobacco exports 

 resulting from EC accession by these three coun- 

 tries could be caused by harmonization of the 

 excise tax system. The United Kingdom and Ire- 

 land both have a 100-percent specific tax based on a 

 specified sum of money per pound of tobacco 

 regardless of the value of the tobacco. Denmark has 

 an excise tax which accounts for about 70 percent of 

 the retail price of a pack of cigarettes. It has a specific 

 component, based on numbers of cigarettes, which 

 accounts for about one-third of the total excise and 

 an ad valorem component, based on value, which 

 accounts for the remainder. Harmonization of these 

 tax systems, especially the two which are 100 percent 

 specific, to a system which has a liigh ad valorem 

 component would make cigarettes containing high- 

 quality, more costly U.S. tobacco substantially more 

 expensive than those containing lower priced leaf 



(Senate Hearing^ and Table 3, Appendix C). This 

 would have a very definite adverse effect on U.S. 

 tobacco sales in these countries. 



The third factor which may severely restrict sales 

 of U.S. tobacco in these three markets results from 

 continuafion of monopoly control over tobacco 

 retailing in Italy and France. Unless current regula- 

 tions are changed, tobacco industries in these three 

 countries will be restricted in their ability to market 

 their cigarettes in Italy and France, while the monop- 

 olies in those countries vwll have complete freedom to 

 market their cheaper cigarettes containing mostly 

 dark tobaccos in the three new EC members. 



The monopolies in these two countries must give 

 up their exclusive rights to import and wholesale 

 tobacco products in their respective countries by 

 January 1, 1976. However, unless existing regulations 

 are changed, they will continue to license retailers 

 after that date. This will give them effective control 

 over what types of cigarettes are sold in their 

 markets. Thus, they will be able to effectively control 

 sales of imported cigarettes. 



Hearings before the Subcommittee on Agricultural Ex- 

 ports of the Committee on Agriculture and Forestry, U.S. 

 Senate, Ninety-Second Congress, Second Session, on The 

 Implications of the Common Agricultural Policy of the 

 European Community on U.S. Tobacco Exports, Feb- 

 ruary 22 and 23, 1972. 



APPENDIX A 



Countries Specified in Annex VI 

 of the Treaty of Accession 



All countries Usted below are members of the 

 Commonwealth and have had Commonwealth pref- 

 erence from the United Kingdom. Tanzania, Kenya, 

 and Uganda are also partners to the Arusha Agree- 

 ment. 



Barbados 



Kenya 



Botswana 



Lesotho 



Fiji 



Malawi 



The Gambia 



Mauritius 



Ghana 



Nigeria 



Guyana 



Sierra Leone 



Jamaica 



Swaziland 



Tanzania 



Tonga 



Trinidad and Tobago 



Uganda 



Western Samoa 

 Zambia 



The European Community (EC) has offered to 

 these "independent Commonwealth countries" as- 

 sociate status similar to that now held by the 

 Yaounde and Arusha countries, Greece, and Turkey. 

 This means that these countries also could have 

 duty-free access for their tobacco exports to the 

 enlarged EC. 



The EC has requested that these countries take a 

 position with regard to its offer by August 1, 1973. 

 In the meantime, these countries will continue to get 

 preferential treatment for tobacco exports to the 

 United Kingdom. 



