EU Agreement with Japan Tobacco on Cigarette Smuggling Shows Need for International Treaty

Statement of Matthew L. Myers, president, Campaign for Tobacco-Free Kids

Dec. 14 2007

WASHINGTON, D.C. — The European Union (EU) announced today that Japan Tobacco, the world’s third largest multinational tobacco company, has agreed to implement a series of legally binding measures to combat the smuggling and counterfeiting of cigarettes. This follows a similar 2004 EU agreement with Philip Morris International.

The EU’s actions underscore that the illicit trade in tobacco products is a serious international problem that requires an aggressive and coordinated response by the world’s nations. This agreement is further evidence that the problem of international cigarette smuggling won’t be adequately addressed until all tobacco companies are required to comply with binding standards that apply to all countries.

This agreement is the result of litigation by the EU and would not have occurred had the EU not taken forceful action in the courts. It represents an important step forward, but it also points out the need for broader action. It doesn’t cover the United Kingdom, the United States or any country outside of the EU. It also doesn’t cover major multinational tobacco companies like British American Tobacco, which continues to promote weak voluntary measures with no meaningful enforcement mechanisms.

The EU agreements should serve as a floor for the development of strong international measures to combat the illicit tobacco trade that apply to all countries and all tobacco companies. Recognizing the need for a global approach, nations that have ratified the international tobacco control treaty, the Framework Convention on Tobacco Control, have agreed to begin negotiations in February on a protocol, or supplementary treaty, on the illicit tobacco trade. Adoption of a strong illicit trade protocol is critical to global efforts to reduce tobacco use because smuggled and counterfeit cigarettes are often used to evade effective tobacco control measures, such as tobacco tax increases and health warnings.

The smuggling and counterfeiting of tobacco products is a major international problem that undermines efforts to reduce tobacco use, threatens public safety and costs governments billions of dollars in lost revenue. In fact, cigarettes are the world’s most widely smuggled legal consumer product. In 2006, the global illicit cigarette trade was estimated to be about 11 percent of sales, or 600 billion cigarettes, according to the Framework Convention Alliance, an international coalition of non-governmental organizations that support the tobacco control treaty. There are several aspects to the problem:

• It is a public health problem. Smuggled and counterfeit cigarettes evade measures to reduce tobacco use and are usually cheaper than legal products, contributing to higher tobacco consumption and greater rates of tobacco-related illnesses and death.
• It is a law and order problem, and even a threat to international security. There is evidence that the illicit tobacco trade is carried out by transnational criminal groups and has been used to raise funds for terrorist organizations.
• It is a financial problem, especially for low and middle-income countries. The illicit tobacco trade is estimated to cost governments more than $40 billion (U.S.) annually in tax revenue that could be used for tobacco control and other public health programs. This is greater than the GDPs of two-thirds of the world’s countries.

While tobacco companies deny involvement in cigarette smuggling, news reports and lawsuits indicate that the companies have facilitated smuggling in order to penetrate closed markets, increase the sale of their brands by making them available at lower prices and undermine government efforts to reduce tobacco use. The EU agreements show not only that tobacco companies have the ability to control smuggling, but that they should have been doing it all along.

The Framework Convention Alliance is urging governments to include the following provisions in the illicit trade protocol:

• An international tracking and tracing system of tobacco products;
• Anti-money laundering measures;
• Markings and codes on packs, cartons and master cases;
• A system of record keeping for all imports and exports of tobacco products;
• Obligations for tobacco manufacturers to control their supply chain with penalties for those that fail to do so;
• The criminalization of participation in illicit trade in various forms;
• Increased international cooperation in the sharing of information and prosecution of offences.
There is an urgent need for action. Unless current trends are reversed, tobacco use is projected to kill one billion people worldwide this century. Tobacco will claim five million lives worldwide this year, and that number is projected to double by 2020, with 70 percent of these deaths in developing nations. However, public health experts have concluded that 300 million deaths from tobacco can be prevented in the next 50 years by cutting adult cigarette consumption in half worldwide. A strong treaty to combat the illicit trade in tobacco is critical to these efforts.