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May 31st, 2015:

How do you sell death? The tangled world of illicit tobacco

Tobacco companies make more profit every year than Coca Cola, McDonald’s, Starbucks, Google, and Disney combined – a staggering £30 billion.

That vast amount of money is difficult to comprehend, and even more so if you think about how those profits are made: divide those billions by the 6 million tobacco-linked deaths worldwide each year, and it turns out that the tobacco industry makes about £6,000 from each death.

So how do they get away with it, and still make billions?

Clearly, it helps if you use whatever means necessary to keep people addicted to your deadly product.

So to mark this year’s World No Tobacco Day, let’s delve into the tangled history of the illicit tobacco trade, where corporate words fail to match corporate actions – and public health loses out.

World No Tobacco Day

This year’s World No Tobacco Day sets out to focus the public’s mind on this illicit trade, which has been fuelled by both criminal networks and by tobacco companies’ own leaky supply-chains. Consequently, ‘illicit’ tobacco products are both genuine cigarettes smuggled across borders to avoid tax, and counterfeit products.

Each year, sales of these products cost more than €10 billion in lost tax and customs revenue across Europe.

And given that Governments continue to use tax to reduce smoking rates, illicit trade undermines public health by making smoking cheaper and more accessible to children and vulnerable communities.

So what do the tobacco companies have to say for themselves on the matter?

An argument made of air

During the campaign for standard packs, one of the tobacco industry’s key arguments was that plain packs would make counterfeit and smuggled tobacco easier to come by. As we said at the time, this argument is deeply flawed, for two reasons:

Firstly, because of the clear evidence that these companies themselves play a role in illegal trade.

Secondly, as we’ll see below, because of the very nature of international tobacco smuggling.

In fact, there is no reliable evidence that the introduction of standardised packs – due in the UK in 2016 – will increase smuggling. When the UK’s HM Revenue & Customs (HMRC) looked in depth at the issue, they found “no evidence to suggest the introduction of standardised packaging will have a significant impact on the overall size of the illicit market or prompt a step-change in the activity of organised crime groups”.

But as well as using tobacco smuggling and illicit trade as a red herring to try to interfere with measures like standard packs, it grates to hear tobacco companies say that legal cigarettes represent a ‘safer’ option.

Let’s be clear: there is no such thing as a safe cigarette – legally manufactured or illicit – with ‘legitimate’ cigarettes containing around 70 cancer causing chemicals.

A history of mischief

So let’s look at the smuggling trade – and how the industry has been found out.

Each year some 400 billion cigarettes are illegally smuggled across international borders, making it the most widely smuggled legal product.

In 2001, the European Commission, along with 10 EU Member States filed legal action against three of the largest tobacco companies, Philip Morris International (PMI), R.J. Reynolds Tobacco Co and Japan Tobacco International (JTI), for:

‘…an ongoing global scheme to smuggle cigarettes, launder the proceeds of narcotics trafficking, obstruct government oversight of the tobacco industry, fix prices, bribe foreign public officials, and conduct illegal trade with terrorist groups and state sponsors of terrorism’. (Emphasis ours)

PMI and JTI settled their cases in 2004 and 2007 respectively. But in August 2014, the courts upheld a decision which will allow the EU to pursue a case against R.J. Reynolds relating to the company’s alleged involvement in a criminal money-laundering and cigarette smuggling scheme.

And there’s more. In the UK in June 2013, the National Audit Office reported that HMRC had also kept a watch on manufacturers’ ‘oversupply’, i.e. producing or importing far too much tobacco in one area, making smuggling to another much easier (we blogged about it at the time).

In some instances, the HMRC estimated that the total supply of some brands of rolling tobacco to some countries exceeded demand by 240 per cent in 2011.

Since this report, HMRC hit British American Tobacco with a £650,000 fine in November 2014 for oversupplying cigarettes to Belgium which has lower tobacco taxes than the UK.

Fox guarding the hen house

The agreements following the European Commission’s legal action included obligations on several companies to make large payments.

PMI alone agreed to pay £674 million over 12 years – but it was also ordered to control the future smuggling of its cigarettes through a range of measures.

Frustratingly, however, it was left to the company itself to put these measures into practice. Given its track record, it’s hard to believe that it was put in charge of monitoring its own illicit trade.

Andy Rowell, research fellow at the Tobacco Control Research Group at the University of Bath, is not convinced at all. ”The tobacco companies have a history of complicity in smuggling. But we know that leopards do not change their spots,” he told us.

“The companies are spending millions trying to con people that they are the victims of smuggling rather than the villains,” he says.

The 12 year agreement is now coming to an end – but the European Commission is now discussing its ‘renewal’ with Phillip Morris.

This is incredibly worrying. There’s a fundamental conflict here, considering that the international community recognises the threat the industry poses to public health policy.

Now 180 parties have signed up to an international treaty to help reduce smoking rates and deal with the tobacco industry. Within this treaty – the Framework Convention on Tobacco Control (the FCTC treaty) – there’s a specific section worth noting. Known as Article 5.3, it’s designed to keep these companies at arm’s length when it comes to decisions about people’s well being.

Article 5.3 states that governments should engage with tobacco companies:

‘only when and to the extent strictly necessary to enable them to effectively regulate the tobacco industry and tobacco products’.
But is it really ‘strictly necessary’ for the EU to engage with PMI over illicit trade? And when it does, what does it say? Over the last 10 years there has been a worrying lack of transparency.

What needs to be done

We already have the blueprint for tackling illicit trade. The World Health Organisation’s Protocol to Eliminate Trade in Illicit Tobacco Products (ITP) outlines the introduction of a tracking and tracing system for tobacco products. But the protocol is useless without action – all 180 parties to the FCTC treaty should sign and ratify this protocol.

And we need to make sure the ‘track and trace’ system is one that will work, NOT one run by industry itself – something Rowell says is their preferred end-game, “which would be very much letting the foxes take over the hen house.”

It’s vital that this system – and all future initiatives to tackle the illicit trade – are completely independent of tobacco industry involvement, and that we learn from the past.

Tobacco products – which have no safe level of use – kill the population equivalent to Scotland every year. The industry’s involvement in the illicit trade demonstrates why we must raise the drawbridge, and not give them the key.

· Stephanie McClellan is a press officer at Cancer Research UK

All eyes on Beijing as China, world’s largest tobacco consumer, bans public smoking

Anyone caught violating the ban must pay 200 yuan (US$32.25)

Beijing has banned smoking in restaurants, offices and on public transport from Monday, part of unprecedented new curbs welcomed by anti-tobacco advocates, though how they will be enforced remains to be seen.

Health activists have pushed for years for stronger restrictions on smoking on the mainland, the world’s largest tobacco consumer, which is considering further anti-smoking curbs nationwide.

Under the rules, anyone in the capital who violates the ban, which includes smoking near schools and hospitals, must pay a 200 yuan (HK$250) fine. The present fine, which is seldom enforced, is just 10 yuan.

Anyone who breaks the law three times will be named and shamed on a government website. Businesses, meanwhile, can be fined up to 10,000 yuan for failing to stamp out smoking on their premises.

“Restaurant staff have a duty to try to dissuade people from smoking,” said Mao Qunan, of the National Health and Family Planning Commission. “If they don’t listen to persuasion, then law enforcement authorities will file a case against them.”

The government would also no longer allow cigarettes to be sold in shops within 100 metres of primary schools and kindergartens, according to state media.

Smoking is a major health crisis on the mainland, where more than 300 million smokers have made cigarettes part of the social fabric, and millions more are exposed to secondhand smoke. More than half of mainland smokers buy cigarettes at less than five yuan a pack.

The legislature passed a law last month banning tobacco advertisements in mass media, on public transport and in outdoor public spaces. Many mainland cities have banned smoking in outdoor public places, but enforcement has been lax.

Bright red banners, typically used to display government slogans, have been posted around Beijing with anti-smoking messages. The city has also set up a hotline on which violators can be reported.

The names of people and companies who violate the rules more than three times would be posted on a government website for a month, state radio said.

Anti-tobacco advocates said they were more confident in the government’s will to enforce the bans after a series of tougher measures in recent months, including a higher tobacco tax.

“We couldn’t say this is the strongest law in the world,” said Angela Pratt, of the World Health Organisation’s Tobacco Free Initiative.

“But it’s certainly up there with the strongest, in that there are no exemptions, no exceptions and no loopholes on the indoor smoking ban requirement.”

UN launches fight against illicit tobacco trade to save lives

On World No Tobacco Day, UN launches fight against illicit tobacco trade to save lives

31 May 2015 – The elimination of the world’s illicit tobacco trade will not only save millions of lives but also generate billions of dollars in windfall for governments, the United Nations World Health Organization (WHO) announced today as it marked the 2015 edition of World No Tobacco Day.

“On this World No Tobacco Day, I call for boosting the World Health Organization’s Framework Convention on Tobacco Control to eradicate the illicit trade in cheaper tobacco products which tend to lure younger and poorer groups into addiction while depleting the ability of States to charge taxes that could support health services,” Secretary-General Ban Ki-moon said in his remarks today.

“By striking at the criminal gangs and tobacco companies that engage in this reprehensible trade, we will advance public health and sustainable development,” he added.

The Day – observed annually by the global community on 31 May to highlight the health risks associated with tobacco use and advocate for effective policies to reduce tobacco consumption – will this year see the WHO and the UN system as a whole urge Member States to sign the Protocol to Eliminate the Illicit Trade in Tobacco Products in order to improve public health, help cut crime, and curb an important revenue source for the tobacco industry.

“The Protocol offers the world a unique legal instrument to counter and eventually eliminate a sophisticated criminal activity,” Dr. Margaret Chan, WHO Director-General declared in a press release. “Fully implemented, it will replenish government revenues and allow more spending on health.”

Nearly 80 per cent of the world’s one billion smokers live in low- and middle-income countries, where the burden of tobacco-related illness and death is heaviest, according to WHO.

The UN agency has further warned that tobacco, which caused 100 million deaths in the 20th century, may cause one billion deaths in the 21st century if current trends continue. Unless urgent action is taken, the annual death toll from tobacco consumption could rise to more than eight million by 2030.

The Protocol, a supplementary treaty to the WHO Framework Convention on Tobacco Control, requires a wide range of measures relating to the tobacco supply chain, including the licensing of imports, exports and manufacture of tobacco products; the establishment of tracking and tracing systems and the imposition of penal sanctions on those responsible for illicit trade. It would also criminalise illicit production and cross border smuggling.

“Public health is engaged in a pitched battle against a ruthless industry,” added Dr. Douglas Bettcher, Director of the WHO’s Department for the Prevention of Noncommunicable Diseases.

“On this World No Tobacco Day, WHO and its partners are showing the ends that the tobacco industry goes to in the search for profits, including on the black market, and by ensnaring new targets, including young children, to expand its deadly trade.”

According to WHO eliminating the illicit trade in tobacco would generate an annual tax windfall of $31 billion for governments, improve public health, help cut crime and curb an important revenue source for the tobacco industry.

The WHO Framework Convention on Tobacco Control entered into force in February 2005. Since then, it has become one of the most widely embraced treaties in the history of the United Nations with 180 Parties covering 90 per cent of the world’s population.