Governments Trying to Battle Illegal Tobacco Trade

Source from:  By Jennifer M. Freedman Feb. 11 (Bloomberg) 02/13/2008

Governments and anti-smoking lobby groups are joining forces to draft a global accord to combat the illicit trade in tobacco products that costs billions of dollars in lost tax revenue every year and increases smoking deaths. Representatives of more than 150 nations are meeting in Geneva to discuss a supplement to an existing tobacco control treaty, the Framework Convention on Tobacco Control, which became international law in February 2005. Estimates about the financial impact of the illegal tobacco trade vary. About 600 billion cigarettes, almost 11 percent of the 5.8 trillion cigarettes sold globally in 2006, entered the market illegally, says the Framework Convention Alliance, which puts the annual loss in tax revenue at as much as $50 billion. British American Tobacco Plc says it's 400 billion cigarettes and the cost to government coffers is about $20 billion. These talks ''are at the heart of the effort to both reduce tobacco use and curtail the flow of literally billions of dollars in revenue from governments to organizations involved in smuggling," said Matthew Myers, president of the Washington-based Campaign for Tobacco-Free Kids. ''The current treaty does not put in place the concrete practical steps needed to curtail smuggling." Tobacco Industry Losses The illegal tobacco trade primarily involves large-scale smuggling, bootlegging and counterfeiting of cigarettes, the world's most widely smuggled legal consumer product. BAT, Europe's largest publicly traded cigarette maker, says smuggled and bogus cigarettes cost the tobacco industry more than 2 billion pounds ($3.9 billion) a year. The 2005 treaty compels 152 nations that ratified the measure to implement effective measures to reduce tobacco use, including higher tobacco taxes, strong health warnings, laws requiring smoke-free workplaces and public spaces and bans on tobacco advertising, promotion and sponsorship. The accord provides guidelines but lacks specifics, said Marcelo Fisch, general coordinator of inspections for Brazil's Federal Revenue Service and a delegate to the talks. ''We have to put down detailed actions that all the countries have to do to combat illicit trade," he said by telephone. The governments agree on the need for stiffer rules, Fisch said, but they have clashed on points such as who should ''track and trace" cigarette shipments and whether people arrested for involvement in the illegal tobacco trade should be extradited. 'Immensely Disappointed' While tobacco companies are excluded from participating in this week's talks, hosted by the World Health Organization, they support efforts to crack down on the illicit tobacco trade. ''We strongly support the need for a global protocol, but we are immensely disappointed to be excluded from the discussions," said Michael Prideaux, a spokesman for London-based BAT. ''We can make a productive and practical contribution to the debate, but they describe this as industry interference." The danger of excluding the tobacco industry from the negotiations, he added, ''is that they'll come up with something that won't work." The WHO's regional office for Europe estimates that 30 percent of cigarettes consumed in Uzbekistan and 20 percent to 30 percent in Russia -- the main illicit European market based on volume -- are smuggled. Up to a fifth of cigarettes sold in Poland and as many as half sold in Albania come from the black market, according to tobacco industry estimates and the WHO. Public Health Pakistani customs say the illegal tobacco trade represented 17 percent of cigarette sales in 2005 while 14 percent of the cigarettes sold in Colombia and India in 2004 and a quarter of those consumed in Iran were smuggled or fake. About 30 percent of the cigarettes consumed in Brazil in 2005 were illegal, 20 percent of the South African market is illicit and the market for illegal cigarettes in Canada is at least 10 percent. The WHO said last week that the tobacco ''epidemic" causes the deaths of 5.4 million people a year from illnesses including lung cancer and heart disease. That figure may climb to 8 million a year by 2030, with 80 percent of these deaths in developing nations, the WHO said in its Feb. 7 report. Most counterfeit cigarettes come from China, while Russia and Ukraine are other sources, as well as illegal factories within the 27-nation European Union, the European Commission said in December. Russia, Ukraine, Moldova and Belarus are the main sources of genuine cigarettes that are smuggled, according to the commission, the EU's executive in Brussels. Interpol, the international police agency, has said gangs involved in illegal drugs, arms and people are starting to trade illicit cigarettes and alcohol, BAT said. The EU loses 600 million euros ($868 million) in tax revenue a year because of counterfeit cigarettes, the commission said in December. More than 3 billion contraband cigarettes were seized in the EU in 2006 and, according to the World Customs Organization, Europe accounts for 75 percent of the world's seized cigarettes. Some 800 delegates and participants including customs officers and finance officials are attending this week's six-day meeting, the WHO said. Governments aim to complete the new treaty by 2010. To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net . Enditem