The destructive impact of illicit trade & the fight to counter it.

All the articles 16 July, 2019

There will always be individuals, groups and traffickers seeking to smuggle and counterfeit products and goods, particularly due to the fact that smuggling and counterfeiting represents a global market totalling approximately $500 billion.

These figures continue to escalate at an alarming rate and, according to the European Union, do not even reflect the sale of non-counterfeit products outside of the legal supply chain.

An OECD report published in 2016 found that between 2007 and 2013, figures almost doubled, from $250 billion to $461 billion. A great many sectors have been (and continue to be) affected by illegal trade, to include medicines, textiles, arms, tobacco, sporting goods, luxury items, and much more. According to some estimates, the illegal economy accounts for 8% to 15% of the world’s GDP, thus distorting local economies, fuelling conflict, jeopardizing social conditions and diminishing legitimate business revenues.

Unfortunately, the dark side of globalization has enabled illicit trade operations to generate immense profits, alter rules, change power dynamics and cause political instability across the globe.

The rise in illicit trade represents a threefold challenge: a health challenge with the danger of counterfeit products that contain unregulated and therefore dangerous constituents; a security challenge with such trade financing crime and terrorism; and a financial challenge through the loss of tax revenue as a result of reductions in legitimate sales.

These illegal industries continue to flourish and only vague estimates can be provided of their size, though their impact and scope can certainly not be denied.



Counterfeit products and goods

In 2007, the Organisation for Economic Cooperation and Development said that the international trade in counterfeit and pirated goods increased to $200 billion. By 2009, this figure had increased to more than $250 billion, which amounted to almost 2% of world trade.

On an international scale, there are countless fakes. From high-tech items, such as computer chips and pharmaceuticals, to trademarks like Disney, brands like Chanel, and copyrighted music. According to the World Customs Organisation (WCO), counterfeiting accounts for 5% to 7% of global merchandise trade. Yet, this massive figure does not even begin to acknowledge the full impact of smuggling and illicit trade on a global scale.


The Fight to Counter Illicit Trade

The fight to counter illicit trade requires a number of political measures to be implemented, in addition to a modern technological response that keeps up with the ever-changing landscape of globalization. Companies, like INEXTO, are creating open-standards based and cost-effective solutions that are easily scalable and designed to secure supply chains whilst increasing trust, transparency, safety and ethics in trade flows.

Through innovative product traceability and authentication systems, such companies are developing advanced solutions that provide value to their customers, while simultaneously protecting the broader interests of all legitimate stakeholders and the market’s integrity.

We have entered a new era of understanding, cooperation, and urgency when it comes to the illegal economy and illicit trade. It has never been more essential to increase awareness and develop strategic policies that will protect law-based market systems, public health, human capital, national assets and natural resources. Creating the right conditions across markets and sectors will help meet the challenges posed by the illegal trade industry and aid in shutting down this illegal economy to the benefit of legitimate markets.

Inexto/Media Center/Papers/Illicit trade: its destructive impact and how to counter it