With an annual turnover of almost $400 billion U S dollars, the tobacco industry has been a prevalent part of the economic landscape in America for many years (Capehart, 2003). Tobacco is unique because the United States is both a huge tobacco producer and consuming country. This scenario has had its benefits and currently presents obstacles for the tobacco industry. Macroeconomic factors provide insight into how the tobacco industry is faring in a new global economy.
Tobacco products have increased at a lower rate than inflation in recent years, resulting in a rise in the sales of tobacco products. Tobacco products are taxed using two forms of taxation. Specific or excise tax is a fixed amount added to the price of the tobacco product and ad valorem, also know as value added tax, is a percentage of the base price of the tobacco product. Most countries use a combination of excise and value added taxes in order to keep up with inflation. Taxation such as this also helps to control the reduction of price on tobacco products. In most industrialized countries, taxes on tobacco are at least two thirds of the retail price. The U S, however, levies a 30% tax on tobacco products. (Chaloupka, 2001). The Framework Convention on Tobacco Control (FCTC) recommends tying the price of tobacco to the rate of inflation and banning duty free tobacco sales.
Structural unemployment most closely relates and affects the tobacco industry today. This is also in large part due to the increasing number of foreign tobacco producers. In the truest sense, this is not unemployment, because the US farmers are still producing tobacco, but are unable to sell it or unable to get the asking price. The foreign tobacco is cheaper to produce, because conditions in South Americ ...