Illicit trade drains 3% of global economy

The global economy loses more than US$2 trillion annually due to smuggling, counterfeiting, trafficking of humans and wildlife and other forms of illicit trade.

Cross-borders illicit trade threatens global economic growth, social stability and leads to the festering of criminal activities. More synchronized efforts between governments and industry players are needed to combat it.  Lee Kok Leong, executive editor, Maritime Fairtrade, reports

According to the Transnational Alliance to Combat Illicit Trade, the global economy loses more than US$2 trillion annually due to smuggling, counterfeiting, trafficking of humans and wildlife and other forms of illicit trade. Illicit trade drains nearly three percent of the world’s economy.

If it is a country, its underground economy will be larger than Brazil, Italy and Canada, and as large as Mexico and Indonesia combined. It also endangers public health.  For example, sub-standard and fake antimalarial medicines alone cause more than 100,000 deaths per year in Sub-Saharan Africa.

Moreover, illicit trade pushes endangered animal species to the brink of extinction and causes irreversible damage to ecosystems. For instance, illegal logging, with an estimated annual value of up to $157 billion, is the world’s most profitable crime involving natural resources.

Further, it threatens the rule of law, owing to its links with organized crime, from human trafficking networks and tobacco smuggling to the involvement of organized criminal groups in fuel theft and the trade of counterfeit goods. Even more frightening are the links to terrorist financing that heighten threats to national and global security.

Serious economic, social consequences

A report by TRACIT listed the following negative impacts.

  • Up to five percent of goods imported to the European Union are fake. Imports of counterfeit and pirated goods are worth nearly $500 billion a year.
  • Fake, substandard, smuggled and illegal agri-foods cost the global food industry an estimated $30 billion to $40 billion each year.
  • The Ivory Coast lost about 125,000 tons of cocoa to smuggling in the 2017- 2018 season, equivalent to nine percent of the harvest.  This is a significant loss in a country where cocoa accounts for 20 percent of exports.
  • One in four alcohol bottles worldwide are illicit, representing 25.8 percent of all global consumption.
  • Global losses to illegal, unreported and unregulated fishing are estimated at between $15 billion and $36 billion, representing 14 to 33 percent of global marine capture value.
  • Between 72,000 and 169,000 children may be dying from pneumonia every year after receiving ineffective illicit medicines.
  • South Africa’s illegal trade in precious metals is estimated at $1.3 billion a year. Illegally extracted gold and platinum alone cost the industry five to 10 percent of its annual production.
  • Illegal gold mining in Ghana degrades forests, pollutes around 75% of the waterways and erodes biodiversity. The water contaminated with heavy metals has resulted in cases of poisoning.

A united global response is needed

TRACIT Director-General, Jeffrey Hardy, said: “Given the scale and damaging effects of illicit trade, a coordinated and sustained global response by governments and companies is urgently needed.”

The international response to illicit trade is largely fragmented among many sectors vulnerable to illicit trade, which necessitates a joint approach that considers the interconnected nature of the problem, commonalities and points of convergence among its various manifestations.

“Every country is feeling the malignant effects of illicit trade, underscoring the need for expanded partnerships and cooperation among governments to push back against this deterrent to global sustainable development,” said Pamela Coke-Hamilton, UNCTAD’s Director of International Trade.

Kok Leong Lee

Kok Leong Lee

Kok Leong, executive editor, has overall editorial responsibility for the direction and focus of Maritime Fairtrade. He has two decades of working experiences, including holding senior regional roles in business-to-business (B2B) print and online publications. He enjoys his work as a journalist, and regards it as a calling.

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