Posted on 22 Jul 2014

Governments and NGOs around the world expended significant time and effort to bring the Framework Convention on Tobacco Control (FCTC) into effect in 2005. The convention’s purpose is to reduce tobacco related deaths, estimated by the WHO at 6 million per year. The FCTC has achieved significant levels of ratification (168 at time of drafting, with 179 states parties) making it one of the most ratified international treaties in the world.  and is generally been hailed a major achievement by public health advocates because of the binding obligations on parties.

But while political momentum behind the Convention appears significant, where the FCTC has failed to achieve credible impact is in implementation.  This has been specifically recognised in the latest draft of the UN post 2015 development goals, where strengthening the implementation of the FCTF is the first proposed modality for achieving Goal 3: Promoting healthy lives and well-being for all.

Some of the FCTC’s obligations concern improving policy responses to illicit trade, and failure to comply can result in international liabilities for non-compliant states.

The illicit trade in tobacco products has major impact on public health, as it undermines the effectiveness of government smoking-related policies. According to the World Health Organisation illicit trade “undermines price and tax measures for tobacco control; thereby increases the accessibility and affordability of tobacco products”. This, in turn, has “adverse effects on public health and well-being, in particular of young people, the poor and other vulnerable groups”. And this has “disproportionate economic and social implications on developing countries and countries with economies in transition”.

Essentially the problem is that smuggled tobacco is much cheaper than legitimate and taxed tobacco, which boosts consumption amongst price-sensitive groups: typically those in the developing world.  Of course at the same time, this diversion into illicit markets also reduces government revenues for service providers and other governance priorities.

The FCTC has a specific anti-illicit trade protocol that will enter into force once ratified by 40 parties to the convention. This contains a number of requirements that will come into effect after the protocol enters force. However, already today there are already some binding requirements from the core convention itself, including obligations to:

  • “monitor and collect data on cross-border trade, including illicit trade, and exchange information…” (and to share such data in periodic reports)
  • “enact or strengthen legislation, with appropriate penalties and remedies, against illicit trade in tobacco products, including counterfeit and contraband cigarettes”
  • “adopt and implement measures to monitor, document and control the storage and distribution of tobacco products held or moving under suspension of taxes and duties within its jurisdiction” (and to share such data in periodic reports)

Yet countries are not fulfilling these obligations, even in those countries where treaties take direct effect on national law. This is somewhat surprising considering that illicit trade is no small problem. The WHO estimates that 9-11% of the global cigarette market is illicit, yet as shown in an earlier blog: “Illicit Cigarettes: crime at your corner store” in some countries it is above 50%, and governments could stand to gain at least 30 billion US dollars a year in tax revenues if it were eliminated.

With such extensive illicit trade there are also significant beneficiaries. The President of Paraguay for example happens to own Tabesa, the company that is the biggest supplier of smuggled cigarettes in Latin America.  Paraguay’s 2014 FCTC implementation report does not indicate that any measures have been taken to reduce illicit trade, yet over a decade has passed since Paraguay signed the treaty. A cynic may not be surprised that Paraguay has not fulfilled its FCTC obligations. But why have the big losers, neighbours such as Brazil with an illicit market exceeding 20 percent, not done more to report on the problem and implement tougher countermeasures (which they are obliged to do under the convention), and used the FCTC and its obligations as an instrument to apply pressure on Paraguay?

But this is one of many similar examples. Free Trade Zones, such as Jebel Ali in the United Arab Emirates with a cigarette production capacity exceeding 60 billion cigarettes, and key transhipment points such as Singapore, enable massive cigarette smuggling to countries around the world.  The FCTC obliges parties to take legal remedies to prevent illicit trade as well as “implement measures to monitor, document and control the storage and distribution of tobacco products held or moving under suspension of taxes and duties within its jurisdiction”.  This is not happening.  Massive effort has gone into bringing the FCTC into effect, but there appears to be an absence of will to ensure its benefits are realised.

How can this problem be solved?  How can political pressure be mobilised to ensure that parties to the FCTC and the WHO act in accordance with the requirements of the convention?  Realistically this would require a concerted “lobbying” campaign targeting governments and international organisations to remind them of existing obligations, and ensuring better media awareness of current shortcomings.

States have a clear interest in reducing smoking, as well as increasing tax revenue, by raising tobacco taxation. Indications are that this long term trend will continue. As taxes increase the profitability of selling illegal cigarettes, and consumer incentive to buy untaxed tobacco, grows. Consequently we can predict that the scale of the illicit tobacco problem will continue grow both in terms of volume and the tax losses caused, whilst the profits for organised crime groups continues to grow, with all the concomitant negative impact that this entails.

With the apparent lack of political interest in the problem, and the weak global financial situation, it would appear optimistic to expect governments to finance such an effort.  The public health tobacco NGOs would be well positioned to drive this issue, but appear primarily interested in marketing and taxation matters.  The legitimate tobacco industry has a commercial interest in supporting such an effort, but lacks universal credibility.

One solution could be to create a foundation, or affiliated programme at an existing organisation, dedicated solely to raising awareness of FCTC requirements to counter illicit trade. An oversight committee consisting of international experts with backgrounds in in government, law enforcement, academia, civil society and public health could ensure effective focus in the public interest.  With such a constellation, joint funding from both public health focused foundations and the tobacco industry might be possible.

All 179 states parties to the FCTC are obliged to combat this problem.  All that is needed now is to ensure that this actually happens…