The far reaching consequences of illegal trade

Illicit trade is funding criminal networks involved in drug trafficking, people trafficking and terrorism. Unless action is taken, this will continue – to the detriment of the most vulnerable in society
Dods Impact

By Dods Impact

Dods Impact is the award-winning content, research, and event studio at Dods Group

23 Nov 2022

The Covid-19 pandemic has caused an increase in illicit trade activities across a multitude of products such as pharmaceuticals, tobacco, alcoholic drinks, personal protective equipment, home and personal sanitising products and luxury goods. The scarcity of goods through legal channels, due to lockdowns and disruptions in the supply chain has favoured social acceptance for purchasing illicit goods, as reported by the Euromonitor International.

This increase in illicit trade has benefited highly organised groups of criminals. But it has also had a socio-economic impact, and has been a significant factor in creating and increasing social inequalities.

Asked about the impact of illicit trade on social inequalities, Luxembourg MEP Charles Goerens tells The Parliament that counterfeits and fake commodities come with major disruptions: “With unusable fake protective equipment, often produced by exploited minorities, people lost trust in masks and tests,” he says. According to the World Customs Organization, from 30 April to 30 September 2021, the largest-ever customs-led global operation involved 146 member customs administrations to crack down on the illicit trade in medicines, vaccines and medical devices related to Covid-19. Dubbed Operation STOP II, the massive task operated in 83 countries, hitting nearly 3,500 seizures. Of the 365.7 million units seized, 195.5 million were medicines related to Covid-19, 156.7 million were medical devices­ and around 13.5 million were doses of Covid-19 vaccines.

The proliferation of illicit tobacco during the pandemic was no exception. Illicit cigarettes accounted for around 7.8% of total cigarette consumption in 2020, representing 34.2 billion cigarettes, a 2020 report from KPMG revealed. The lost revenues could be used for healthcare, schooling and housing, adding that this social scourge is cause for concern and reason for authorities to crack down on smugglers.  

Illicit outflows correlate with more poverty, inequality and lower human development. That is why we need to be more efficient in tackling it and depriving criminals of the basis of their actions”
Christian Sagartz MEP

The tobacco industry, in particular, says that greater cooperation between governments, enforcement authorities and the industry is paramount to effectively fight criminal activities and for consumers to buy their products legally: “This is why we need to inform the public the wider social consequences of buying from and funding the lifestyle of criminal groups who are also involved in other criminality such as drugs and the trafficking of people and firearms,” says Japan Tobacco International’s (JTI) Vincent Byrne, Global Anti-Illicit Trade Operations Director.

According to a UN  report , the socio-economic impacts of illicit trade are also jeopardizing the delivery of the Sustainable Development Goals (SDGs). The study asserts that such illegal activities are all quantifiably negative and present significant deterrence to achieving all 17 of the SDGs. “Studies have shown that illicit outflows correlate with more poverty, inequality and lower human development. That is why we  need to be more efficient in tackling it and depriving criminals of the basis of their actions, but also in finding solutions in cooperation with business partners to track them down effectively,“ MEP Christian Sagartz tells us.  

Brand power

A 2021 report by Brand Finance shed light on how brands can help the fight against illicit trade and how brand protection is key to ensuring consumers have access to safe and credible products. 81% of consumers answered that brands help them navigate between real and fake goods while 90% agreed that brands ensure they buy genuine products sold through reputable stores. “The consumer has absolutely no way of telling the quality of products...and in some categories that can be downright dangerous,” says Brian Crean, former Senior VP Global Marketing at Diageo, a beverage company.

JTI has been raising awareness and encouraging action to crack down on the illicit trade of tobacco. They point out that the loss of revenue needed to be compensated by those who abide by the law is significant, as is the effect on consumers lured into buying sub-standard, illegal products.

Fighting the illicit trade of pharmaceutical, in particular, is paramount since the lack of rigid phyto-sanitary and quality controls that these products normally go through may put lives in danger. Moreover, access to tobacco products by children becomes easier through the illicit trade.  

In a 2019 report from the European Parliament addressing ways to reduce inequalities through in-work poverty, the document acknowledges the economic crisis caused by the pandemic could have serious long-term consequences for young people or vulnerable workers, as it may force them to accept precarious jobs or even engage in illegal activities to make ends meet.

“Communities, especially vulnerable groups, tend to become more accessible to organized crime during times of crisis. Economic hardship makes communities more receptive to certain offers, such as cheaper counterfeit goods or recruitment to engage in criminal activity,” stated Europol’s 2020 report.

Given the low risk that it entails and the high financial rewards, smugglers bet on the illegal tobacco trade to finance their activities, which are often associated with criminal practices such as funding terrorism or human trafficking.

Forced labour

Recently, Parliament’s Trade Committee stated that forced labour products should not be allowed into the EU and that global cooperation is essential to eradicate it. The MEP Bernd Lange is calling for a World Trade Organisation-compatible trade instrument to ban the import and export of products made or transported by forced labour. “We urgently need to put an instrument in place that ensures we target products whose production or transport exploit forced labour and stop their circulation,” Lange says. “We have clearly laid out the principles such an instrument needs to adhere to, now it's time for the Commission to deliver.”

Recognising the urgency in acting, the MEP Janina Ochojska tells us that “many routes of illicit trade are used for human trafficking”. Ochojska cited figures from the International Labour Organization saying that “almost 25 million people are victims of forced labour globally” generating more than €140 billion in illegal profit per year. “It increases inequalities and poverty within countries, deepens gender inequality, influences the economy and leads to societal stigmatization," she adds.

Unless action is taken, the illicit trade will continue funding criminal networks involved in other criminality such as drug trafficking, people trafficking and terrorism all to the detriment of society, especially the most vulnerable.

This content was commissioned by Japan Tobacco International (JTI) and produced by Dods Impact

 

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