Illicit trade takes away US$2.2 trillion from global economy

Prioritizing the fight against illicit trade could stimulate the economic growth, employment and investment needed to achieve development goals.

Illicit trade poses a threat to the achievement of fair trade and requires concerted global action, experts said at a forum organized by UNCTAD and the Transnational Alliance to Combat Illicit Trade (TRACIT) recently.
From smuggling, counterfeiting and tax evasion, to the trafficking of humans and wildlife, it is holding back progress, increasing costs and pushing the Sustainable Development Goals (SDGs) further away.
“A dark side of globalization and the expansion of trade has been the alarming emergence of illicit trade,” said Teresa Moreira, UNCTAD’s head of competition and consumer policies.
She said economic leakages from illicit trade create an estimated annual drain of US$2.2 trillion to the global economy, nearly 3% of world economy.  “If illicit trade were an economy, it would be the eighth largest in the world.”
On both the black and grey markets, it significantly endangers all aspects of the SDGs, as it deprives governments of revenues for investment in vital public services.

Mapping the impacts

TRACIT’s director-general Jeffrey Hardy highlighted the impacts in various countries.  From illegal fishing affecting marine resources in Costa Rica to counterfeiting draining €83 billion ($93 billion) from the European Union’s gross domestic product (GDP) as well as 790,000 jobs.
The statistics are indicative of the problem.  Illicit trade in pharmaceuticals is valued at between $75 billion and $200 billion annually, while wildlife crimes are worth $23 billion, according to TRACIT.
“Insufficient attention has been given to the substantial impact that illicit trade has and how it is holding back progress.”
In response, TRACIT has mapped the impact on the SDGs to help governments and businesses better understand where and how illicit activity undermines progress on each of the goals.
“Illicit trade has ‘macro impacts’ as it cuts deeply across many of the SDGs, undermining achievement of the economic goals for poverty reduction, decent jobs and economic growth.”
When it generates revenue for organized criminal and terrorist groups, illicit trade undermines goals for peace and stability.  They also plunder natural resources, abuse supply chains and ultimately expose consumers to fake and potentially harmful products, affecting related goals.  It is also wreaking havoc on the rule of law.
It is feeding violence and breeding corruption, undermining trust in institutions, generating enormous illicit financial flows, fuelling organized crime and heightening threats to national and global security.

Prioritize the fight

To remain on track towards the SDGs, countries must prioritize efforts to increase the deterrent forces and plug the fiscal leakages associated with it, various speakers urged.
“Removing the economic drags of illicit trade can improve the efficiency and effectiveness of policies and actions to stimulate growth, employment and investment to achieve the SDGs,” Hardy said.
Experts also underlined the need for collaboration between countries to smash the transnational criminal networks.
“It’s not a problem confined to developing countries. Every country suffers from this menace, all that varies is the magnitude of the problem,” Moreira said.

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