Global illicit tobacco trade down worldwide

According to a study published by Tobacco Control, the share of illicit trade in global tobacco consumption has remained stable over the past decade. Given that tobacco consumption has declined over the same period, absolute levels of illicit trade have therefore declined in recent years. The researchers attribute this decline to the entry into force of the World Health Organization Protocol to Eliminate Illicit Trade, but also to the global trend towards tobacco tax policies, contradicting the industry's conventional rhetoric, which seeks to establish a causal link between tax increases and increases in illicit trade.[1].

In 2007, a seminal paper by Luk Joossens estimated that illicit trade accounted for 11.6% of the global tobacco market, based on data from 84 countries. In high-income countries, the level of illicit trade was estimated at an average of 9.8% of the total market, compared to 16.8% in low-income countries. The author further suggested that the cost of this illicit trade was $40.5 billion per year.[2].

Stable in its relative share, global illicit trade is decreasing in volume

According to a study published in 2022, based on data from 36 countries, tobacco products from illicit trade represented 11.2% of the total market, between 2010 and 2018.[3]. While the methodology and countries covered by these studies are not entirely comparable, the similarity between these two estimates suggests that the proportion of illicit trade in global consumption has remained particularly stable over the last decade.

While the relative share of illicit trade remains unchanged, the authors point out that smoking prevalence has declined in recent years: in 2010, there were 27.3% smokers among the entire global population aged over 15, compared to 23.6% in 2018. These prevalence figures are consistent with estimates of global market trends. According to GlobalData, a research firm, the global tobacco market has declined from 5.8 trillion cigarettes in 2007 to 5.7 trillion in 2015, and is likely to fall to 4.6 trillion by 2025. In other words, illicit tobacco trade is now “a stable share of a declining market.”

Price increases likely reduced illicit trade

At the same time, the authors show that a number of countries have implemented tax policies to combat smoking. Overall, these pricing policies have resulted in a decrease in the affordability of tobacco products, leading to a reduction in cigarette consumption. For the researchers, this data is of real importance: for years, the tobacco industry has sought to dissuade governments from engaging in proactive tax policies on its products, claiming that these would inevitably lead to an increase in illicit trade. In reality, this study tends to demonstrate that the decrease in the affordability of tobacco products has significantly contributed to the decline in demand for tobacco, and therefore probably to the decline of the market, both legal and illegal.

Public health policies are not decisive

The tobacco industry is responsible for the vast majority of illegal cigarette production, while its estimates of illicit trade are proven to be deliberately exaggerated, and based on studies whose methodology is contested. However, the tobacco industry continues to brandish the argument of illicit trade, presenting it as a "serious and growing threat to society". Beyond discrediting tax policies, the tobacco industry instrumentalises the issue of illicit trade to dissuade public authorities from undertaking any form of binding regulation, such as the ban on menthol in the European Union or the introduction of plain packaging. However, predictions of a sharp increase in illicit trade following the implementation of a policy to combat smoking are very regularly contradicted by the facts. Other elements appear to be much more decisive in explaining the levels or dynamics of illicit trade. For the authors of the article, it is first and foremost the capacity of a State to ensure the authority of its tax administration, and its level of governance in general, which appears essential. Thus, in South Africa, the illicit trade in tobacco products exploded at a time when the country experienced a reduction in the resources allocated to its tax administration, without any increase in taxes having been decided.

A proliferation of independent studies to understand a complex phenomenon

Assessing illicit trade is, by definition, complex to achieve. Public authorities around the world have difficulty understanding its scale and nature, and sometimes even rely on data from manufacturers themselves. However, since 2010, various independent industry studies have been conducted in 40 countries, using different methodologies. A commonly used approach is to assess the gap between measuring actual consumption and legal sales. This measurement may have limitations, for example in France, where this methodology cannot account for legal cross-border purchases. A second approach is to directly interview smokers, or to analyze discarded empty cigarette packets. Here again, the distinction between legal and illegal purchases is not guaranteed. The proliferation of these studies, sometimes funded by States, demonstrates the desire of public authorities to seek to measure and understand the phenomenon of illicit trade.

The price dynamics of illegal cigarettes

From one country to another, the price of cigarettes from illicit trade varies greatly. According to a study conducted between 2014 and 2020, the prices of illegal cigarettes generally follow the evolution of the prices of legal cigarettes. On average, it is estimated that a pack of cigarettes from contraband costs 87% of the price of a legal pack. In France, between 2014 and 2021, the price of an illegal pack was on average equivalent to 70% of that of a pack from legal channels. As a result, while the average price of legal cigarettes is increasing worldwide, the prices for illegal products are following the same dynamic, increasing both the value of the illegal cigarette market and helping to reduce the overall demand for cigarettes, both legal and illegal.

The challenge of a tracking and tracing system to combat illicit trade

Furthermore, the researchers note that the last ten years have seen an improvement in global coordination in the fight against illicit trade in tobacco products, in particular with the entry into force of the WHO Protocol in 2018. One of the challenges in controlling illicit trade lies in the ability of public authorities to equip themselves with a system for tracking and tracing tobacco products, in order to be able to determine at what point in the supply chain the tobacco has left the legal circuit. In particular, given the involvement of the tobacco industry in global illicit trade, the independence of this tracking and tracing system from cigarette manufacturers is a condition for its effectiveness. In this respect, the study recalls that the Codentify and Inexto systems, proposed to governments by the tobacco industry, are not effective tools. At present, the European tracking and tracing system is also not independent of the tobacco industry.

The next challenges in the fight against illicit trade

According to several studies, the very nature of tobacco and nicotine products from illicit trade is changing. While cigarettes continue to represent the vast majority of illicit trade, other products are emerging. This is particularly the case for shisha tobacco, which increased from 1 to 6% of global seizures between 2012 and 2019. Similarly, electronic cigarettes accounted for 7% of all seizures in 2019.

While the dynamics of illicit trade are generally positive, the study stresses that the problem is still far from being solved. In particular, according to the researchers, it is important to address the persistence of hotspots of global illicit trade, such as Paraguay, as well as the proliferation of clandestine factories within the European Union.

The researchers also stress the need for governments to effectively implement the WHO Protocol on Illicit Trade, while guarding against interference from the tobacco industry. In this sense, the researchers say that specialized technical assistance is now needed to assist some states in implementing the Protocol, particularly low- and middle-income countries.

Photo credit: ©Alain THIESSE/PHOTOPQR/L'EST REPUBLICAIN/MAXPPP

©Tobacco Free Generation

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[1] Paraje G, Stoklosa M, Blecher E, Illicit trade in tobacco products: recent trends and emerging challenges, Tobacco Control 2022;31:257-262. [2] Joossens, L., Merriman, D., Ross, H. and Raw, M. (2010), The impact of eliminating the global illicit cigarette trade on health and income. Addiction, 105: 1640-1649. https://doi.org/10.1111/j.1360-0443.2010.03018.x [3] Goodchild M, Paul J, Iglesias R, et al, Potential impact of eliminating illicit trade in cigarettes: a demand-side perspective, Tobacco Control 2022;31:57-64. National Committee Against Smoking |