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Excerpts from BIG TOBACCO'S HARD LINE WON'T SOFTEN CONGRESS

By Richard S. Dunham and Howard Gleckman, Business Week [04/20/98]

On Apr. 8, RJR Nabisco Inc. CEO Steven F. Goldstone tried to drive a stake into the heart of a tobacco deal now wending its way through Congress. ''This legislative process is broken beyond repair,'' an angry Goldstone told a lunchtime audience at the National Press Club. But if he thought that pulling out of tobacco talks would kill anti-smoking legislation, he badly miscalculated. Although other tobacco companies quickly followed Goldstone's lead, the industry's hard line may backfire.

Instead of snuffing out a tobacco bill, the industry walkout will only change the form of the final measure -- and not to its liking. ''There is overwhelming bipartisan sentiment to pass legislation to stop the industry from going after kids,'' says Representative Henry A. Waxman (D-Calif.). ''The tobacco companies are not as powerful as they once were.'' That's for sure. Rather than intimidating lawmakers, the cigarette makers' counteroffensive has only hardened their resolve.

Within hours of Goldstone's bombshell, all the key Washington players rushed to declare anti-tobacco legislation very much alive. ''We cannot be blackmailed or cajoled by the tobacco industry,'' fumed Senate Commerce Committee Chairman John McCain (R-Ariz.), whose $ 506 billion measure was approved by his panel on Apr. 1.

A grim President Clinton challenged the industry to reverse course. ''We're going to get this done,'' he said. ''Now, they can be part of it, or they can fight it. But I think they ought to be part of it.''

Even tobacco's longtime defender, House Commerce Committee Chairman Tom Bliley (R-Va.), was quick to reject the industry's effort to pull the plug on a deal: ''Efforts in Congress to reduce teenage smoking are not dead. I hope Congress will ultimately agree on a tough, bipartisan plan.''

Now, lawmakers predict that Congress will go ahead with a narrower bill. It likely will grant the Food & Drug Administration sweeping new powers to regulate tobacco, fund new programs to combat youth smoking, raise excise taxes on cigarettes by at least $ 1.10 per pack over five years, and use some of the proceeds for a middle-class tax cut.

But a walkout deprives Big Tobacco of the one thing it craves most: some protection against lawsuits. Indeed, if it's serious about abandoning the legislative process, the industry would break one of the cardinal rules of Washington: Never take yourself out of the ball game. Goldstone's move also could be a PR disaster, opening the industry to allegations that it cares more about its bottom line than children's health.

Tobacco's worsening image would force even once-sympathetic congressional Republicans to take a hard anti-tobacco line lest Democrats paint them as industry lackeys next fall. ''In a counterintuitive way, this (walkout) increases the chances of legislation,'' says former FDA Commissioner David A. Kessler, now dean of the Yale School of Medicine. ''No one likes being bullied.''

Many Washington hands think Goldstone's dramatic announcement was simply a negotiating ploy. ''The industry is bluffing,'' snaps one key Senate staffer.

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