Next steps for the WTO in combating illicit trade

By DDG Jean-Marie Paugam

Illicit trade harms societies and impedes economic growth and development. As well as undermining legitimate business activity, it fosters corruption and denies governments potential tax revenue needed to invest in society. This is why the WTO Secretariat, under the leadership of director-general Ngozi Okonjo-Iweala, has been examining how WTO rules help members to address some of the challenges posed by such trade.

In a recent publication on fighting illicit trade in medical products, DG Okonjo-Iweala emphasized that wider efforts are needed to deepen international cooperation and to provide the technical assistance needed to strengthen members’ capacity to combat illicit trade.

Building on this work, the WTO Secretariat has launched a new publication on illicit trade in food and food fraud to address the role the WTO could play in helping to tackle this issue. The publication draws on the expertise of a diverse range of organizations, including the Food and Agriculture Organization of the United Nations (FAO), the International Seed Federation (ISF), SSAFE – a non-profit organization for food safety, the Transnational Alliance to Combat Illicit Trade (TRACIT) and the United Nations Interregional Crime and Justice Research Institute (UNICRI), to examine this issue from various perspectives and to highlight strategies for tackling illicit trade in food and food fraud.

Illicit trade and fraud in the agri-food sector has a damaging impact on various stakeholders, ranging from consumers, farmers and agri-businesses to regulators and other operators within the food industry. Although the global cost of fraud to the food industry is difficult to determine given the clandestine nature of the activity, annual estimates are in the range of US$ 30-50 billion, not including losses associated with illicit trade in alcoholic drinks.

The impacts of illicit trade can be far-reaching, affecting different segments of society and the economy. Illicit trade in food and food fraud causes economic losses to legitimate businesses through the loss of sales and consumer confidence. Governments not only lose valuable revenue as a result of tax evasion but also incur costs in the fight against counterfeit crime and smuggling.

Fraudulent and fake food and beverages damage public health and safety. Adulterated or contaminated food products can pose serious health risks to consumers and can have deadly consequences. Even counterfeit products which cause no harm – but fail to contain the ingredients advertised – defraud customers and erode consumer trust in the food supply chain.

The WTO rulebook provides members with a range of legal instruments that can help to combat illicit trade in food and food fraud. Of particular importance to food safety are the WTO’s Sanitary and Phytosanitary Measures (SPS) Agreement, which allows WTO members to regulate food imports based on science and risk assessment techniques, and the Technical Barriers to Trade (TBT) Agreement, which allows members to address deceptive practices in traded goods.

At the launch event for this publication, I heard many new ideas from WTO ambassadors and others for the next steps for the WTO in this area. They included holding discussions with the World Health Organization to involve the health community, reviewing actions taken by governments to combat illicit trade in the context of the WTO Trade Policy Review process, and leveraging WTO Aid for Trade discussions to combat illicit trade. Other suggestions included exploring cross-border customs cooperation to combat the phenomenon, studying the impact of growing e-commerce activities on illicit trade in food and food fraud, and continuing to discuss the issue in TBT/SPS committees. Such discussions are particularly important in light of the new Codex standard on food fraud that is being negotiated. Any future action in this area will of course have to be agreed by WTO members.