Aaland
- posted by Jim Leitzel @ 11:09 PM

The introduction of smokeless tobacco snus, a popular product in Sweden and Norway, into US markets is proceeding apace. Snus isn't very popular in the rest of Europe -- or at least any notional popularity is ineffectual -- because sales of it are banned in the EU (excepting Sweden). [Surely we all recall that Norway is not in the EU.] Two years ago Vice Squad noted how snus was certain to doom the EU, thanks to Finland's Aaland archipelago -- historically, culturally, and linguistically Swedish, Aaland is none too pleased at not being allowed to sell snus, because of Finland's membership in the EU. And none of those Finnish EU parliamentarians represent Aaland.

Aaland is currently reflecting its sense of abuse over snus by threatening to vote against the EU's Lisbon treaty. (Recall Vice Squad's post from late March.) That alone would not keep the treaty from entering into force, as long as EU-member Finland (and all other EU members) do ratify the treaty. An Aaland rejection, though, would complicate internal Finnish politics, as it would have to be settled to what extent EU rules would apply in Aaland. Here's an article with some helpful background, suggesting that Aaland's principled position is one of opposition to prohibition (of snus) without (EU) representation.

Labels: EU, federalism, Finland, snus

 
Aaland to Opt Out of EU Reform?
- posted by Jim Leitzel @ 10:07 PM

Ever since Vice Squad raised the alarm in February 2006, European Unionphiles have not been sleeping soundly for fear that the smokeless tobacco snus could lead to the unravelling of the EU. Sure, the signing of the Treaty of Lisbon (the watered-down replacement for the twice-popularly rejected European Constitution) in December of 2007 heartened the Unionists. But what will Aaland say? The semi-autonomous archipelago, officially part of Finland, though Swedish (and hence snusish) in culture, might choose not to ratify the Lisbon Reform Treaty! A treaty rejection in Aaland would not consign the Lisbon Treaty to a place next to its Constitutional predecessor on the ignominious trash heap of failed international agreements. As long as Finland and all the other state members of the EU ratify Lisbon, it will go into effect. But if Aaland opts against ratification, the treaty would not apply to Aaland, even as it would apply to the rest of Finland. Aaland would essentially be out of the EU, despite being part of a state that is (otherwise) an EU member. What discord follows?

Labels: EU, federalism, Finland, snus, Sweden

 
Finland Backing Off Warning Labels on Alcohol
- posted by Jim Leitzel @ 9:34 AM

Alcohol-related problems are severe in Finland, and became more so when the effective price of alcohol fell around the time of Estonia's EU accession and Finland's pre-emptive alcohol tax cut. The recent Finnish campaign to reduce the social costs of alcohol consumption has included higher taxes and a ban on volume discounts -- this latter measure not working out as planned. Also slated is a mandate that warning labels be placed on all alcohol containers. The labels would say, in Finnish and Swedish: "WARNING: Alcohol is hazardous to the development of the fetus and to your health". In the wake of some issues with the EU, however, the Finnish health minister wants to abandon the mandated warnings. Turns out, she never really thought that the warnings would be beneficial in the first place. And not just her -- it seems as if the parliamentarians who voted for the warning labels by and large didn't think they would work, either (though they were pretty into the "no volume discounts" provision).

My quick perusal of the evidence suggests that warning labels are not particularly good ways to reduce the social costs of alcohol; like the Finnish health minister says, taxes would be more effective. But warning labels are probably not completely futile, either. Here's a summary from one review of the relevant research*:

Taken together, the research on the design and content of warning label factors as well as on audience factors indicates that the effectiveness of warning labels on drinking behavior depends on how these factors initially impact underlying cognitive and affective processes. First, design factors influence whether warning labels are even initially noticed. Second, the specific content of warning labels could influence the labels' potential for evoking visceral avoidance responses. Third, audience factors predict differential memory for, processing of, and reactions to alcohol warning labels. These audience effects can then modify drinking behavior.

*"Alcohol counter-advertising and the media: a review of recent research." Alcohol Research & Health, Wntr, 2002, by Gina Agostinelli and Joel W. Grube.

Labels: alcohol, Finland

 
Outlawing Volume Discounts For Alcohol
- posted by Jim Leitzel @ 5:28 PM

A few years ago, the impending entry of Estonia into the European Union led Finland to pre-emptively lower its traditionally high alcohol taxes. One result was a sharp rise in alcohol-related problems. This year, Estonia raised its own alcohol taxes, so Finland felt that it had scope to do the same thing. When the tax rise went into effect on January 1, other new alcohol rules also were adopted, including the abolition of cheaper per-unit prices for larger purchases of alcohol (so that a bottle of wine cannot sell at a restaurant for less than the equivalent amount of per-glass purchases). Vice Squad had suggested months ago that the response to such a rule might be a fall in the price of the smaller units, instead of a rise in the price of the larger units -- and that is what seems to have happened:

In an effort to raise the prices of beer sold in crates and cardboard packs, the government introduced a regulation at the beginning of the year saying the price of a bottle or can of beer sold as part of such a pack could not be lower than that of cans or bottles sold singly.

The result was a fall in the price of beer sold by the bottle and can.

So the Finns are talking about raising the beer tax some more, to make sure that effective retail prices are higher, not lower, than before the no-volume-discount regulation.

Labels: alcohol, Finland, taxes

 
Mischievous Aaland
- posted by Jim Leitzel @ 11:10 PM

Never trust an archipelago. Aaland is an autonomous part of Finland that is culturally and linguistically Swedish. Smokeless tobacco snus can be sold legally in Sweden, but nowhere else in the European Union -- and Finland, including semi-autonomous Aaland, is part of the EU. Ferries out of Aaland had been selling snus, so the EU took the semi-Swedish snus-sellers to court, leading Vice Squad to speculate that Aaland might choose to leave the EU rather than give up snus. Well, Aaland lost the court case, but dropped its talk of EU secession. Vice Squad was duped into thinking that Aaland had fallen into line, and even committed that view to print. But tonight we learn that Aaland hasn't actually bothered to comply with the court order by curtailing snus sales. The EU is playing hardball: "The European Commission decided on Tuesday to impose a significant fine on the province." The fine is at 2 million euros, and rising, and that semi-autonomous status also applies to EU fines, for which Aaland, and not Finland more generally, is responsible.

Labels: EU, Finland, snus, Sweden

 
Estonia to Raise Alcohol Taxes
- posted by Jim Leitzel @ 9:27 AM

OK, I recognize that if you haven't been following this issue for years, the title of this post does not promise much excitement to follow. And your suspicion, alas, would be correct. But for the interested Vice Squad reader, this BBC News article will prove informative.

The Estonian tax rise will hold repercussions for Finland, which felt compelled to decrease its high alcohol taxes prior to Estonian entry into the EU. The tax rise from Tallinn will probably engender an alcohol tax increase in Finland, too; Finland has seen a significant increase in alcohol-related problems since the tax cut, though perhaps the worst is behind them.

The linked BBC article contains a quote from someone at the Finnish health ministry that employs two frequent Vice Squad tropes, that of alcohol (and vice goods more generally) not being "ordinary" commodities and a comparison with one specific ordinary commodity, ketchup. Warms my heart:

At the Finnish health ministry Ismo Tuominen, in charge of devising new alcohol legislation, says the 2004 tax cut was a mistake - but that Finland is helpless to tackle its growing alcohol consumption.

"EU legislation is at the root of our problems," he says. "They treat alcohol like an ordinary product, like tomato ketchup or milk. They have to allow us to develop a health-based policy on alcohol - so we can limit the now limitless possibilities to bring alcohol in from other EU member states."

These comments are in league with the points recently raised by Dani Rodrik and Vice Squad.

The blog Finland for Thought currently sports a cornucopia of vice-policy-related posts. (First I wrote that the blog "currently hosts" those posts, but I found the rhyme to be troubling.)

Labels: alcohol, Estonia, EU, Finland, Rodrik, taxes

 
Trading Vice and Income Taxes
- posted by Jim Leitzel @ 12:06 AM

Estonia has elected to increase its taxes on alcohol and tobacco (and fuel), while decreasing the income tax rate from 22 to 18 percent. Given the low levels of vice taxes that already exist in Estonia, and the high likelihood that the alcohol tax, in particular, does not fully account for external costs, this sounds like a good trade-off to me. Even if the externalities were accounted for, the "welfare costs" of taxing income (and thereby dissuading work in the official sector) might well be higher than the inefficiencies brought about by taxing alcohol, when it comes to raising a fixed amount of revenue.*

In any event, the tax hike comes as good news to Finland, which reluctantly felt compelled to lower its own alcohol tax upon the impending accession of Estonia to the European Union; since then, alcohol-related problems in Finland have increased. The prospect of higher alcohol prices in Estonia has the Finns thinking of re-raising domestic alcohol taxes.

*For an argument along these lines, see Larry G. Sgontz, “Optimal Taxation: The Mix of Alcohol and Other Taxes.” Public Finance Quarterly 21(3): 260-275, July 1993.

Labels: alcohol, Estonia, EU, Finland, free trade, taxes

 
Khat in Finland
- posted by Jim Leitzel @ 11:25 PM

Of the twenty drugs assessed in The Lancet's recent review of potential harms from drug abuse (see the Vice Squad post from March 25, 2007), the least harmful drug was khat. The relative safety of khat, however, does not prevent it from being illegal in the United States and most of Europe -- though khat is legal in Britain and the Netherlands. Khat is most popular, of course, with Somalians and other East Africans.

One place that has seen a large increase in seizures of illegal khat imports in recent years is, curiously enough, Finland. Why does Finnish customs seize so much more khat than does Sweden, or France? One reason noted in the linked article is that Finland cares more than other countries do about reducing khat smuggling. But why care, why view khat as a problem? The answer from the linked article: "Finnish customs considers khat smuggling to be a problem because it diverts resources that could be used for investigating more serious crimes." So the Finns put resources into fighting khat because fighting khat diverts crime-fighting resources away from serious crimes. Got it.

To be fair (or at least more fair), there is something that I find almost charming in the Finnish approach. When they catch a khat courier at the airport, they impose (but do not collect) a fine, and return the smuggler the same day. No languishing in jail for these dangerous drug criminals. A crime investigator for Finnish Customs is quoted in the linked article explaining why harsher sanctions are not imposed: 'The use of tough coercive measures would be unreasonable, because the couriers are usually foreigners who have been deceived into the activity, to some extent.' This is the same approach used in the US by the DEA, right?

Labels: Finland, khat

 
Moderate Drinkers and Social Costs
- posted by Jim Leitzel @ 4:34 PM

About 1/3 of American adults don't drink alcohol in any given year. Of those who do drink, their consumption varies markedly. In particular, heavy drinkers are hugely important customers for alcohol sellers: more than half of the alcohol consumed is drunk by the heaviest 10 percent of the drinking population. (See Philip J. Cook and Michael J. Moore, "The Economics of Alcohol Abuse and Alcohol-Control Policies," Health Affairs 21(2): 120-133, 2002.) Does this mean that most of the social harms associated with alcohol consumption also can be traced to the biggest drinkers? In a word, no. Light and moderate drinkers are probably responsible for more than half of all alcohol-related problems.

Some of the most recent evidence on this phenomenon appears in the April, 2007 edition of the journal Addiction. Actually, the evidence dates from 1969 to 1992, but the analysis has just been provided. The data concern adult Finns who drink, and the problems that were studied were of three types: self-reported alcohol problems, alcohol-related hospital admissions, and alcohol-related deaths. The authors -- Kari Poikolainen, Tapio Paljärvi, and Pia Mäkelä -- divided the drinkers into the heaviest ten percent, and everyone else. For the Finnish men in the sample, the heaviest drinking ten percent consumed just less than half of the alcohol consumed by men; for women, the top ten percent drank slightly more than half of all alcohol consumed by women. Here is an excerpt of the results:

Seventy per cent of all self-reported problems, 70% of alcohol-related hospitalizations, 64% of alcohol-related deaths and 64% of the premature life-years lost before the age of 65 occurred among the 90% of men consuming less. The respective figures for women were 64%, 60%, 93% and 98%. Drinking five or more drinks per occasion was related to more harm than not drinking that much.

So there is a strong case to be made that public policy should target all drinkers, especially all binge drinkers, and not just those who are very heavy drinkers. One policy that does this is the alcohol excise tax, of course.

Labels: alcohol, Cook, Finland, taxes

 
Finland, Alcohol, and Adam Smith
- posted by Jim Leitzel @ 6:04 PM

Finland rightly feared cheap booze from Estonia, and countered with a significant cut in the domestic alcohol tax. The cheaper alcohol (which would have occurred in any case, either through domestic sales or from Estonian imports) brought more alcohol-related problems. But is this a temporary phenomenon, a binge when the price of alcohol falls, followed by the re-imposition of the previous level of sobriety, such as it was? "Finns drank less alcohol on average last year for the first time in a decade, as the novelty of Baltic 'booze-cruises' to buy cheaper liquor abroad faded..." Don't get too excited: Finns still drink 11 percent more alcohol than they did before Estonia joined the EU.

Adam Smith would have predicted the binge and the sobering, perhaps even a more widespread sobriety, judging from his words in Book IV, Chapter III, Part II, of the Wealth of Nations:

...if we consult experience, the cheapness of wine seems to be a cause, not of drunkenness, but of sobriety. The inhabitants of the wine countries are in general the soberest people in Europe; witness the Spaniards, the Italians, and the inhabitants of the southern provinces of France.... When a French regiment comes from some of the northern provinces of France, where wine is somewhat dear, to be quartered in the southern, where it is very cheap, the soldiers, I have frequently heard it observed are at first debauched by the cheapness and novelty of good wine; but after a few months residence, the greater part of them become as sober as the rest of the inhabitants. Were the duties upon foreign wines, and the excises upon malt, beer, and ale to be taken away all at once, it might, in the same manner, occasion in Great Britain a pretty general and temporary drunkenness among the middling and inferior ranks of people, which would probably be soon followed by a permanent and almost universal sobriety.

Labels: alcohol, Estonia, Finland, Smith, taxes

 
Sobering Results of the Finnish Alcohol Tax Cut
- posted by Jim Leitzel @ 6:20 PM

The EU decided that individuals could carry as much alcohol as they wanted across internal borders, as long as the alcohol was intended for their personal use. When this regulation became binding upon Finland at the beginning of 2004, it provided a relatively easy channel for Finns to legally avoid their very high domestic alcohol taxes while continuing to drink. The high-tax regime was slated to be put under further pressure in May, 2004, when Estonia, easily accessible from Helsinki and with very low cost alcohol, would join the EU. So Finnish authorities took a pre-emptive move, lowering their own alcohol taxes on March 1, 2004.

Alcohol sales from the Finnish state retail monopoly subsequently went up, though not enough to compensate (in terms of tax revenue) for the lowered rates. But did cheaper alcohol lead to any problems in Finland?

It looks now as if the answer is yes. The March issue of Addiction contains a study by Anna Koski et al. that finds that:

...the alcohol tax cuts had a significant and abrupt impact on the number of alcohol-positive deaths. The estimated effect was approximately eight additional alcohol-positive deaths per week starting from March 2004, which is a 17% increase compared with the weekly average of 2003. This result is completely in line with the fact that there was a sharp increase in the domestic alcohol sales after this date, suggesting that the increase in alcohol consumption has led to more sudden deaths. Removing restrictions on traveller's allowances had no effect, nor did Estonia joining the EU, although it has to be noted that the three measures occurred relatively closely in time, and therefore it is possible that the impact of the tax cuts might tend to obscure other changes.

Furthermore, there was an 11 percent increase between 2003 and 2004 in the number of drunks arrested. Wow.

One year after the tax decrease, Vice Squad noted that alcohol consumption had increased in Finland.

Labels: alcohol, Estonia, EU, Finland, taxes

 
Cheaper by the Twelve-Pack? Not in Finland
- posted by Jim Leitzel @ 6:57 PM

The Finnish Parliament has adopted some new controls on alcohol labelling and marketing, including a measure prohibiting volume discounts. It cannot be cheaper, on a per-beer basis, to buy a 12-pack than to buy a single beer, and Finnish restaurants cannot sell bottles of wine more cheaply than the equivalent per-glass price. It is possible that this new law will serve to reduce the price of a glass of wine in restaurants, of course.

Labels: alcohol, Europe, Finland, marketing

 
Will Vice Policy Break Up the EU?
- posted by Jim Leitzel @ 3:30 PM

Two traditional Vice Squad preoccupations, snus and international organizations (like the World Trade Organization and the European Union), are coming together in an unexpected fashion. Snus is that Swedish smokless tobacco that is illegal in the rest of the European Union, even though snus is almost surely much safer than cigarettes, which are a legal product throughout the EU. The internal free trade that the EU requires on alcohol and tobacco products threatens the established vice policies of some of the member states -- most particularly, the high-tax alcohol regime in Sweden and (formerly) in Denmark. It is this loss of control over internal vice policies that I think represents a threat to the long-term stability of both the EU and the WTO.

But more or less the opposite problem (oops -- OK, it's the same problem of vice policies threatening stability...) could lead to an EU break-up, of sorts. Aaland is a Swedish-speaking island in Finland, but it is semi-autonomous. Ferries from Aaland to elsewhere in the EU sell snus! The EU says that snus is illegal except for in Sweden, and Aaland is not in Sweden, but is in the EU. There will be a court case, but Aaland will be represented by Finland -- and Finland isn't really on Aaland's side in this controversy. So Aaland is talking about leaving the EU.

Folks, you heard it at Vice Squad first: this snus flap is the start of something much bigger. (Was this an economist making a prediction? Feel free to ignore that last bit.)

Labels: EU, Finland, snus, Sweden, WTO

 
Simpsons Not Yet Banned in Russia
- posted by Jim Leitzel @ 5:11 PM

In Kansas, legal proceedings involve watching pornographic movies. In Moscow, a court invested a few days watching episodes of The Simpsons. A man was suing a Russian TV station for showing The Simpsons and The Family Guy, on the grounds that the shows had "gotten his 6-year-old son interested in drugs and prompted him to call his mother a 'toad.'" The case was thrown out.

Thanks to Finland for Thought for the pointer. Finland for Thought is an interesting blog based in, uh, Finland run by an American who has the good taste to be from Baltimore. Here's his post on how a Baltimore-area man found himself arrested, with the Secret Service called in, because he paid for his $114 stereo at Best Buy with perfectly legal two-dollar bills.

Labels: Finland, obscenity, pornography, Russia

 
The Finnish Alcohol Tax Cut
- posted by Jim Leitzel @ 7:00 PM

Nearly one year ago Finland embarked on a new alcohol control regime, one featuring much lower taxes. The idea was that the anticipated accession of Estonia to the EU would create lower effective prices for alcohol in any case, so that lowering domestic prices would at least keep some of the tax revenue inside the country. Commenting on the tax fall last February, Vice Squad noted that "if the usual elasticities apply, we should see a surge in drinking in Finland."

And now we have. The linked article notes that the only surprise has been that there was a sort of price war among beer sellers; as a result, "[p]rices of medium strength beer have plummeted."

Labels: alcohol, EU, Finland, taxes

 
Contest: What to do with 192-proof Alcohol -- Lots of It
- posted by Jim Leitzel @ 5:59 PM

23,000 litres, to be precise. Finnish customs picked up the Vietnamese consignment, which was cunningly though inadequately disguised as soy sauce, more than a year ago. If there was just a little bit of the stuff, they would simply pour the high-test hooch down the drain, but that option taps out at about 200 litres. So the fellow in charge of the customs post is appealing for suggestions -- consumption is ruled out, as denaturing of the alcohol is part of the plan. Beyond that, however, don't feel constrained in coming up with some wacky alcohol-disposal idea: 'Even silly proposals are worth exploring,' according to the customs agent.

Labels: alcohol, Finland

 
A Boon to Finnish Bloggers
- posted by Jim Leitzel @ 6:50 PM

The story is now a few months old, but in case you missed it, the Finnish military sends home recruits who are shown to be addicted....to the internet. "Doctors have found the young men miss their computers too much to cope with their compulsory six months in the forces." So if you are thinking about attacking Finland, hoping that their army will be distracted by web games, think again.

Labels: addiction, Finland, military

 
Swedish Alcohol Tax Decline Makes More Headway
- posted by Jim Leitzel @ 6:54 PM

Sweden's state-owned monopoly seller of alcohol has seen a fall in sales of more than 13 percent this year. Meanwhile, alcohol consumption in Sweden has increased. The disconnect comes from the eased conditions within the EU with respect to importing alcohol for personal use from other, sometimes low cost, EU member countries. Now a Swedish government commission has recommended that Sweden follow the lead of Finland and Denmark, by severely cutting alcohol taxes:

Sweden should slash its traditionally high taxes on hard liquor by 40 percent to get Swedes to purchase more of their booze at home where the government can keep tabs on their drinking habits, a government commissioned report recommended on Monday.

"To break the pattern of the strong increase in travel-imports of spirits and to strengthen the Swedish alcohol policy's legitimacy, we suggest that the tax on hard liquor be lowered by 40 percent starting on January 1, 2005," head of the study Kent Haerstedt said in a statement.

Vice Squad has been tracking the Finnish and Swedish alcohol tax developments, most recently on August 9.

Apologies for the blogging hiatus. My out-of-town visitors are now gone, however, and I hope to be back to my dull everyday existence, er, I mean, my "regular blogging schedule."

Labels: alcohol, Finland, Sweden, taxes

 
Finland's Alcohol Tax Cut Update
- posted by Jim Leitzel @ 7:01 PM

Vice Squad can't just let this one alone, it seems. Finland's alcohol tax revenues have been falling since it cut its taxes some 30 to 40 percent at the beginning of March -- while sales at the state alcohol stores are up, the increase does not offset the decreased tax revenue per sale. (Imports from Estonia are presumably way up, too.) A majority of Finns, it seems, supports the lower alcohol taxes, though a significant minority thinks that the price of alcohol is now too low. [Here's another news story on the revenue fall.]

Here's a Vice Squad post on the Finnish situation as of early June; Sweden has not cut its alcohol taxes, but its tax revenues are way down, as Vice Squad mentioned last week. So with the new EU rules regarding personal imports, it looks as if high tax countries will see their alcohol tax revenues fall whether or not they choose to lower their alcohol levies.

Labels: alcohol, Finland, taxes

 
Finnish Alcohol Experiment Update
- posted by Jim Leitzel @ 1:33 PM

The Financial Times provides an article today discussing the decreased alcohol prices in Finland -- a story that Vice Squad has been trying to track since the tax-change-induced price decline of early March. The FT notes the increased consumption and the resultant problems: "Sales at the state monopoly stores have risen by 22 per cent. Hospitals and police forces have reported increased workloads and the number of cases of drink-driving has risen sharply." But the FT notes that Finland did not have much room to maneuver -- the addition of Estonia to the EU would undermine the high Finnish prices in any case. So despite the problems, Sweden might follow Finland's lead:

Alcohol consumption in Sweden has already reached its highest level for 100 years, increasing by 30 per cent since the country entered the EU. Yet sales of spirits at state stores have fallen by 12 per cent so far this year. The country's main schnapps distillery is taking a production break this summer because of a lack of sales.

Kent Hrstedt, appointed by the Swedish government to examine the issue, sees no alternative to a tax cut. "Against our will we are forced to follow a path far removed from the traditional successful Swedish alcohol policy."

Labels: alcohol, Estonia, EU, Finland, free trade, Sweden, taxes