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UN: Illicit Tobacco Trade Attracts New Scrutiny At New York Conference

About one-quarter of cigarettes sold around the world make their way to market though illegal channels, with smuggling particularly widespread in Eastern Europe. Acknowledging the problem, the World Health Organization and the U.S. Bureau of Alcohol, Tobacco, and Firearms (ATF) cohosted an international conference attended by representatives from 145 countries. There was controversy over the issue of the alleged complicity of the world's largest tobacco companies in the illicit trade, but the conference also was seen as making progress toward a future global tobacco-control treaty.

United Nations, 5 August 2002 (RFE/RL) -- A conference aimed at promoting global cooperation in combating tobacco smuggling alerted countries to the huge losses in revenues connected with the illicit trade.

World Health Organization expert Derek Yach told reporters at the end of a three-day conference at United Nations headquarters in New York last week that many of the 145 participating countries support the idea of spending part of their tobacco tax revenues to fight tobacco trafficking.

Yach, a cochairman of the conference, said the scale of the problem alarms both health officials worried about the ill effects of smoking and government officials worried about lost revenues. "A quarter of the cigarettes in the international trade are smuggled, and that translates into about 20 billion packs of smuggled cigarettes a year, at a loss of revenue value to governments of anywhere between $20 [billion] and $30 billion. So from a revenue point of view, this is a huge amount. From the linkages to organized crime, it's obviously a huge problem," Yach said.

The problems associated with tobacco trafficking are particularly acute in Eastern Europe and the Asia-Pacific region. The Framework Convention Alliance, a U.S.-based nongovernmental organization, says the two regions account for the majority of global cigarette smuggling.

Talks on a global tobacco-control treaty are set to resume in Geneva in October. But if the conclusion of the conference in New York is any indication, the road to a global tobacco treaty will be bumpy. Many of the participating nongovernmental organizations see as a major point of contention the alleged complicity of big tobacco corporations -- such as Philip Morris, British-American Tobacco, and R.J. Reynolds -- in the illicit trade.

Yach, who is head of the WHO's sector on noncommunicable diseases, noted that there are a number of open lawsuits against the tobacco companies. "There have been a number of court cases, and there are a number of court cases pending in U.S. courts, which suggest the serious complicity of tobacco companies. The latest one [involves] the European Union, joined by 10 member states and the government of Colombia, who are appealing in the U.S. Second Circuit Court of Appeals against a finding that they believe that tobacco companies are actively helping and actively engaged in smuggling large [numbers] of cigarettes on a worldwide basis," Yach said.

Yach stressed, however, that none of the companies so far has been indicted.

Some of the conference participants said it was puzzling that major tobacco producers were invited to the conference, if only as observers.

Arthur Libertucci is an assistant director at the U.S. Bureau of Alcohol, Tobacco, and Firearms and a cochairman of the conference. He said there was no consensus among the participants about the possible complicity of the big tobacco companies. "There was discussion on that point, and I can't say that there was full consensus on whether or not the tobacco companies are to blame, so to speak. Certainly some delegates expressed that view. Other delegates pointed out the value of the information that can be acquired from tobacco companies in an effort to combat illicit trade. And illicit trade includes not just counterfeit tobacco products but also contraband tobacco products, and there were distinctions made between the two," Libertucci said.

Some of the participants expressed the view that higher prices for tobacco products stimulate smuggling. In New York, for example, a pack of Marlboro cigarettes costs almost $7, more than twice the price of 10 years ago.

The dramatic price increase came after a higher excise tax imposed on tobacco products in the U.S. in the late 1990s, as well as from a higher tobacco sales tax imposed by New York state and city authorities.

Yach said higher prices do not necessarily lead to increased smuggling. He cited countries with high prices that have virtually no, or very low levels, of smuggling. Sweden, Denmark, Norway, France, Finland, and Ireland are examples. This, he said, shows that smuggling decreases when law-enforcement officials and customs and excise officials work effectively with public-health administrators.

At the same time, Yach said, there are countries where the prices of cigarettes are low but where the level of smuggling is high. He cited Spain, Italy, Pakistan, Nigeria, Russia, and Yugoslavia.

Yach said price is less of an indicator for smuggling than the overall law-and-order situation in a given country. "One of the key graphics we saw was the relationship between the Transparency International index of corruption and the level of smuggling. Generally, the level of law and order in the country is probably as good or may be a stronger [indicator] to predict the level of smuggling than prices per se," Yach said.

Robert Tobiassen, who is the ATF's associate chief council, said during the final day of the conference on 1 August that by restricting the channels through which tobacco products are distributed, governments can better implement health policies. "At the same time, as you reduce illicit trade, governments are able to better carry out public-health policies because, first, they have additional revenues which they can use to fund those policies. And secondly, by restricting the distribution of goods to legitimate channels of commerce, governments can carry out their public-health policies on restricting youth access [to cigarettes]. So it's a win-win situation," Tobiassen said.

Overall, there are 191 countries negotiating, under WHO auspices, a Framework Convention on Tobacco Control. These countries are trying to meet a target date of May 2003 for completing the text of what could be the first international treaty on smoking.