The Serious Impact of Global Illegal Trade

Illegal trade is a grave global issue, with staggering financial losses amounting to over $2 trillion annually, according to the United Nations. Naturally, discussions on illegal trade and its negative impacts often focus on its economic costs. However, while facts and figures are important, we also need to highlight its effects on people's lives and the various harms it inflicts on global consumers and communities.

Poses a threat to consumers.

All illegal products have one common characteristic: they are not regulated or subject to any form of proper supervision. Basic safety and quality standards, as well as laws, are often overlooked, which is hazardous to consumers.

Currently, many adult smokers are unable to purchase legal tobacco products, which also applies to those who would have continued smoking but are looking for a better alternative to cigarettes. Both circumstances are a result of increased taxation and the current economic environment. This implies that millions of people are turning to illegal, rolled tobacco products to continue smoking.

Data from the European Union (EU) is highly convincing. A recent report by KPMG found that the illegal consumption of cigarettes in the EU increased by approximately 3.9% in 2021, totaling 35.5 billion illegal cigarettes. This accounts for 8.1% of the total consumption of cigarettes in the entire EU.

The results of this annual study clearly indicate that we need to continue focusing on education and awareness to help the most vulnerable individuals in our society understand the real dangers behind illegal trade. It is also essential to develop and implement innovative policies that are truly inclusive of everyone. These policies should continue to discourage smoking and encourage smoking cessation, while also promoting better alternatives for adult smokers, including smoke-free products.

Encouraging organized crime.

One cannot overemphasize this point: consumers need to understand the consequences of buying unregulated counterfeit products. Illicit trade is often regarded as a victimless or minor crime, with little impact on society. However, this is far from the truth. Many are unaware that the financial flows generated by illicit trade fuel transnational organized crime groups. These funds help facilitate other crimes, such as human trafficking, corruption, and money laundering.

This is why at PMI, we collaborate with others to raise awareness of this global issue. In 2020, we partnered with a private sector alliance to launch a US campaign to combat illegal trade, highlighting the importance of protecting against fraud and substandard products.

Furthermore, we are spearheading a public education program called "United to Safeguard America from Illegal Trade (USA-IT)". USA-IT collaborates with individuals from both the private and public sectors to provide information and training programs to local officials, law enforcement agencies, and thought leaders, in order to address the issue of illegal trade and increase awareness of the depth and severity of the problem.

Damage to Public Services

Illegal trade of goods deprives the government of much-needed tax revenue. A report by PwC found that if all illegally traded cigarettes were to be bought legally in the countries where they were discovered, the EU government could generate an estimated €10.4 billion in additional tax revenue. This loss of tax revenue could limit the government's ability to invest in public services, public safety, and infrastructure, while people in Europe and other parts of the world are already grappling with rising prices of basic goods.

Enforcement, awareness, cooperation, and technology.

There is no quick fix for combating illegal trade. The only way to bring positive change for consumers and society is through education, partnerships, innovation, and the specific implementation of the rule of law. Given the immense and widespread human cost of illicit trade, we should use every tool at our disposal to address it - technology is key. PMI is using cutting-edge technology and innovative tracking and authentication solutions to safeguard our supply chain and protect our products.

Governments around the world should consider strengthening punishment for those engaged in illegal trade and enforcing it strictly. In a climate of escalating inflation and geopolitical instability, it is particularly important for governments to fulfill their role in ensuring security through harsh punishment of criminals and effective law enforcement. For instance, OECD recommended measures for effective policy in free trade zones.

An important tool in combating illegal trade is public-private collaboration. According to a recent survey by PMI, most people believe that leaders need to consider all perspectives when finding solutions to the world's biggest issues. For illegal trade, this means stakeholders coming together. PMI IMPACT is our global initiative that supports projects dedicated to reducing or preventing illegal trade and addressing its negative consequences - proving the effectiveness of this approach.

Finally, many consumers are still unaware of the human cost of illegal trade. That's why at PMI, we invest so much energy in awareness-raising activities. You can learn more about our work to prevent illegal trade here.

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