Tuesday

24th Apr 2018

Opinion

Illegal cigarette trade still dogs Europe's fringes

  • There are concerns over the independence of a new 'track and trace' monitoring system for cigarettes in EU being smuggled (Photo: Tom Sinon)

A battle is being fought on the EU's borders: a struggle to intercept illegal tobacco products, and the stakes keep rising.

In 2015 alone, the illicit tobacco trade deprived EU governments of more than €11bn in tax revenue, a figure projected to have risen even further since then.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

This is not to mention the estimated 700,000 in deaths each year from smoking-related illnesses, a number inflated by illegal trafficking.

As the costs to member states increase, so too do the number of creative ways by which smugglers seek to sneak their products, known as 'cheap whites', past border controls.

Earlier this month, Lithuanian border police intercepted thousands of packets destined for a country where one in every six cigarettes smoked in 2016 was illegally imported.

Belarus is origin

The smugglers had attached the packets to blocks of ice and floated them along the river Neris. It's no coincidence that upriver leads to Belarus.

As much as 85 percent of all illegal tobacco in Lithuania comes from Belarus, with the majority caught in transit to other EU countries.

Over the past few years, such stories have served as the backdrop to the European Commission's tortuous efforts to stamp out the illicit tobacco trade.

Unfortunately, so far, their campaign remains hampered by the persistent influence of the tobacco industry, as well as their failure to ratify a critical global protocol meant to put an end to the illegal tobacco trade once and for all.

Over the past few years, the EC's efforts have been driven by the EU Tobacco Products Directive of 2014, which, among other things, requires tobacco companies to comply with a new track and trace (T&T) system by May 2019.

The system, whose delegated and implementing acts were released in December, is meant to control the flow of tobacco at all stages of the supply chain. According to the document, each member state will have to appoint an 'ID issuer' charged with creating and assigning ID codes for unit packs, while ensuring the issuer's independence from industry.

This system replaces a previous anti-smuggling agreement between the commission and Philip Morris International (PMI), which expired in 2016 and had been criticized for allowing too much industry involvement.

Tobacco companies have instead pushed for the tracking and tracing of its own products through a system originally called 'Codentify'.

Developed by PMI itself, then licensed for free to three other major companies, it is under the remit of a supposedly independent third-party organisation called Inexto – that is staffed by former tobacco industry representatives.

The continued existence of Codentify as an alternate T&T system, and one that could potentially be nominated by individual member states as an ID issuer, is cause for concern.

After all, there is a long history of links between cigarette manufacturers and smugglers: in 2004 for instance, PMI reached a 12 year long, $1.25bn (€1.01bn settlement) with regulators to conclude a legal dispute over its role smuggling cigarettes into the EU.

Separately, British American Tobacco was fined £650,000 in the UK for oversupplying cigarettes to Belgium, in a move to duck higher taxes in the country.

How 'independent'?

The new T&T proposal needs to strengthen restrictions for nominating ID issuers, and make clear that no industry influence whatsoever is allowed – a position the current version does not take, potentially rendering the new "independent' system null.

This means that, despite the commission's protests to the contrary, the proposal fails to meet best practice under the World Health Organization's Protocol to Eliminate Illicit Trade in Tobacco Products under the Framework Convention on Tobacco Control (FCTC), which aims to eliminate the influence of corporations on efforts to regulate the industry.

Not only are they uncompliant with WHO rules, they go against the best practices identified in the organisation's publications on tobacco control.

Perhaps that isn't surprising, given that five years after the FCTC protocol was adopted, a number of EU member states have adopted but not yet ratified the convention.

Critically, the WHO needs 40 parties to the protocol before it can become an international treaty this year. It's fair to say that even if a viable T&T system is adopted at the EU level, unless the FCTC Protocol becomes a global treaty, its impact will remain limited.

In addition to concerns about the T&T draft proposal's adherence to the FCTC, there is another issue that the new system doesn't address – one brought to light by the Lithuanian authorities' discovery earlier this month.

That is, the close ties between Big Tobacco and government authorities on Europe's fringes, where tobacco manufacturers continue to hold major stakes in state-owned enterprises (SEOs) in countries like Belarus and are directly implicated in trafficking illicit cigarettes.

Indeed, many illicit cigarettes come from Belarus, where they are produced by two SEOs, Grodno Tobacco Factory Neman (GTFN) and Tabak Invest.

Last year, GTFN reportedly supplied 5.53 billion illegal cigarettes to the European market. Not surprisingly, while these firms manufacture their own brands, they also produce under contract with some of the major international tobacco companies – including BAT, which has described itself as the biggest foreign investor in Belarus' tobacco industry.

Given Big Tobacco's continued efforts to take a slice of the illegal trafficking industry, it's clear the commission needs to go much further.

Firstly, it needs to make a more concerted effort to wipe off the industry's fingerprints from its new T&T system before they have a chance to sideline it.

Secondly, EU member states need to set an example to their neighbours and ratify the FCTC Protocol if they are serious about bringing their anti-trafficking mechanisms in line with best practice.

This wouldn't only help return billions in lost revenues, especially in the Baltic and East European states that are disproportionately impacted by the illicit tobacco market.

It would also help reduce the number of lives lost to 'cheap whites'. The successful ratification of the protocol alongside the implementation of a new T&T system could turn into a valuable victory for the EC, and by extension for the European Project, in both public health and solidarity.

Felipe Cruvinel is a researcher at St Andrews university, Scotland

How Russian propaganda depicts Europe - should we worry?

Russian domestic television - the only source of foreign news for most Russians - consistently shows Europe over-run by immigrants, beset by terrorist atrocities, and on strike. This has serious consequences.

More commitment to renewables from Council, please

More and more consumers are likely to invest in solar panels in the future as it becomes simpler to produce one's own electricity, writes Monique Goyens, director general of BEUC, the European Consumer Organisation.

More commitment to renewables from Council, please

More and more consumers are likely to invest in solar panels in the future as it becomes simpler to produce one's own electricity, writes Monique Goyens, director general of BEUC, the European Consumer Organisation.

News in Brief

  1. Far-right attack migrants on Greek island
  2. Merkel defends accepting UN refugees
  3. EU commissioner plans Malta 'money laundering' inspection
  4. Survey: Half of high polluting farms receive CAP subsidies
  5. Commission will 'not shy away' from Malta killing repercussions
  6. EU Commission opens probe on Alitalia state loan
  7. Paris suspect given 20-year sentence for Brussels shoot-out
  8. Merkel and Pena Nieto praise EU-Mexico trade agreement

Stakeholders' Highlights

  1. Nordic Council of Ministers12 Recommendations for Nordic Leadership on Climate and Environment
  2. Macedonian Human Rights MovementOxford Professor Calls for an End to the Anti-Macedonian Name Negotiations
  3. ACCAPeople Who Speak-Up Should Feel Safe to Do So
  4. Mission of China to the EUProgress on China-EU Cooperation
  5. Nordic Council of MinistersWorld's Energy Ministers to Meet in Oresund in May to Discuss Green Energy
  6. ILGA EuropeParabéns! Portugal Votes to Respect the Rights of Trans and Intersex People
  7. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  8. Martens CentreJoin Us at NET@WORK2018 Featuring Debates on Migration, Foreign Policy, Populism & Disinformation
  9. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  10. UNICEFCalls for the Protection of Children in the Gaza Strip
  11. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  12. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight

Latest News

  1. Spanish navy makes bid for EU anti-pirate HQ
  2. How Russian propaganda depicts Europe - should we worry?
  3. MEPs tell Chinese ambassador of concerns on trade
  4. Greenland votes with eye on independence
  5. EU court delivers blow to anti-abortion activists
  6. Hungary activists defiant after 'Soros Mercenaries' attack
  7. European Commission proposes whistleblower protection law
  8. Secrecy of VW fraud report 'unacceptable', says MEP

Stakeholders' Highlights

  1. Macedonian Human Rights MovementMacedonians in Bulgaria Demand to End the Anti-Macedonian Name Negotiations
  2. Counter BalanceThe EIB Needs to Lead by Example on Tax Justice
  3. ILGA EuropeTrans People in Sweden to be Paid Compensation for Forced Sterilisation
  4. International Partnership for Human RightsThe Danger of Standing Up for Justice and Rights in Central Asia
  5. Mission of China to the EUChina and EU Must Work Together to Promote Global Steel Sector
  6. Swedish EnterprisesEU Tax Proposal on Digital Services Causes Concern for Small Exporting Economies
  7. European Jewish CongressCondemns the Horrific Murder of Holocaust Survivor Mireille Knoll in Paris
  8. Mission of China to the EUAn Open China Will Foster a World-Class Business Environment
  9. ECR GroupAn Opportunity to Help Shape a Better Future for Europe
  10. Counter BalanceControversial Turkish Azerbaijani Gas Pipeline Gets Major EU Loan
  11. World VisionSyria’s Children ‘At Risk of Never Fully Recovering', New Study Finds
  12. Macedonian Human Rights MovementMeets with US Congress Member to Denounce Anti-Macedonian Name Negotiations

Stakeholders' Highlights

  1. Martens CentreEuropean Defence Union: Time to Aim High?
  2. UNESDAWatch UNESDA’s President Toast Its 60th Anniversary Year
  3. AJC Transatlantic InstituteAJC Condemns MEP Ana Gomes’s Anti-Semitic Remark, Calls for Disciplinary Action
  4. EPSUEU Commissioners Deny 9.8 Million Workers Legal Minimum Standards on Information Rights
  5. ACCAAppropriate Risk Management is Crucial for Effective Strategic Leadership
  6. EPSUWill the Circular Economy be an Economy With no Workers?
  7. European Jewish CongressThe 2018 European Medal of Tolerance Goes to Prince Albert II of Monaco
  8. FiscalNoteGlobal Policy Trends: What to Watch in 2018
  9. Human Rights and Democracy NetworkPromoting Human Rights and Democracy in the Next Eu Multiannual Financial Framework
  10. Mission of China to the EUDigital Cooperation a Priority for China-EU Relations
  11. ECTACompetition must prevail in the quest for telecoms investment
  12. European Friends of ArmeniaTaking Stock of 30 Years of EU Policy on the Nagorno-Karabakh Conflict: How Can the EU Contribute to Peace?