Big cigarette companies are warning homegrown tobacco is the next big black market drug that needs government regulation.
The claim comes as the tobacco industry steps up opposition this week to plain packaging legislation - and comes amid the clamp down on legal high synthetic cannabis.
A parliamentary health select committee held hearings this week into plain packaging.
The industry argued that the lack of regulation and taxation on the homegrown tobacco market in New Zealand was an anomaly that must be addressed by the government.
About 200 grammes of home grown tobacco sold illegally on the black market was shown to Fairfax Media by BAT.
"It has been banned in Australia for the last eight years, it is completely unregulated and open to abuse. A couple of weeks ago we went down [to the South Island] and bought some product to show how easy it is to do," said British American Tobacco general manager Steve Rush.
But, the homegrown market is an attempted distraction from plain packaging and the health damage of the tobacco industry, said Kylie Lindorff, chair of the tobacco issues committee for the Australian Cancer Council.
"There has been absolutely no change in the availability of illicit tobacco since the introduction of plain packaging [in Australia]. It is a tiny percentage of the market. It is a small problem and it appears it hasn't gotten any worse," she said.
Plain packaging has been in force in Australia for the last 12 months.
Rush said plain packaging will have no health benefits, will open New Zealand to international trade action, and fails to address the home grown tobacco market, while taking away the cigarette companies' intellectual property.
"To target the packaging, which is our intellectual property, the way we differentiate our product in a legal market, with no valid evidence that it will be effective, we believe is a very extreme measure," said Rush.
But these claims are completely untrue, according to anti-smoking advocates and international trade experts in Australia.
Independent peer reviewed studies have shown plain packaging and the graphic health warnings already present in New Zealand have had an immediate effect on smokers.
"It shows that health warnings increase awareness about the impacts of smoking, increase thoughts about quitting, smokers report them as really being really useful about quitting and reminding them," said Lindorff.
"To say that health warnings have no impacts is just out and out, false," said Lindorff.
And in the brief time plain packaging has been introduced in Australia the benefits are already being seen, Lindorff said.
"There was another study that showed calls to the quitline increased considerably and that increase wasn't attributable to anything else. There was a 78 per cent increase in calls to the quitline," she said.
The tobacco industry is trying to confuse the objectives of plain packaging, which are part of a broader package to reduce smoking, Lindorff said.
"The objectives of plain packaging in Australia were not to just straight out reduce consumption and reduce prevalence. They were to decrease the appeal of the pack, they were to make the health warning stand out more, and they were to make sure the pack couldn't mislead about harm," she said.
"The bottom line is the industry arguments don't make sense. Their arguments about what has happened in Australia are completely baseless. They are trying to muddy the waters about what the expected impact will be," she said.
It is also highly unlikely that plain packaging will have any real impact on international trade, according to legal experts.
Since Australia introduced plain packaging there has been five challenges bought before the World Trade Organisation (WTO) for restrictions on trade.
These challenges are made by tobacco producing countries not the industry itself, but are done with the financial support of the multinational tobacco companies.
However, these are highly unlikely to succeed, according to the director for the McCabe Centre for Law and Cancer.
"My view, and the independent experts on this, think overwhelmingly that the claims won't succeed. Essentially ... there is enough room in all of these WTO agreements for states to implement measures to protect public health including tobacco control measures," said Jonathan Liberman.
By threatening governments with the possibility of expensive international litgation the tobacco industry is hoping to convince governments not to move on measures to restrict their trade, Liberman said.
"It is clearly the strategy. They sue and they threaten to sue and clearly it doesn't matter to them whether the claims have any merit or not. The purpose is to prevent governments from enacting measures that the industry knows will hurt their bottom line," he said.
Earlier in the week the tobacco industry claimed Indonesia and other countries could slap New Zealand wine and dairy exports with their own packaging requirements.
In a submission on New Zealand's plain packaging bill, tobacco giant Philip Morris said a senior Indonesian Government official had already told the Ministry of Health that retaliatory sanctions could be placed on Kiwi wine and milk.
Professor Andrew Mitchell, of Melbourne University, said Indonesia could introduce sanctions only if New Zealand lost a legal trade dispute over plain packaging and refused to alter its law.
Even then, suggesting milk or wine could be slapped with plain packaging rules was "ludicrous", he said.
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