TRACIT

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The Transnational Alliance to Combat Illicit Trade (TRACIT) is a non-governmental organisation consisting of corporations and select trade associations within a range of sectors including tobacco, alcohol, agri-foods, petroleum and pharmaceuticals. TRACIT aims to build co-operation between business and government regarding regulatory responses to illicit trade. It has extensive tobacco industry connections and its reports ignore any industry involvement in smuggling activity. The organisation has been successful in accessing international meetings to insert its agenda.

Background

TRACIT was established in April 2017 and formally launched in New York in September 2017. It received endorsements from representatives of the American Department of Homeland Security, the UN Office of Drugs and Crime and the OECD.[1] Its first public event appears to have been a two-day conference in London on combatting illicit trade sponsored by the Financial Times and the Philip Morris campaign on illegal trade Impact.[2] As well as Tracit Director General Jeffery Hardy, the were several members of the PMI Impact panel: Suzanne Hayden, Alain Juillet, Paul Makin, Luis Moreno Ocompo, Navi Pillay and Jurgen Storbeck. PMI CEO Andre Calantzopoulos was also a guest speaker.

Membership

The TRACIT organisation does not say on its website who its members are, but in support of an application to the World Intellectual Property Organization it disclosed that Philip Morris International is one and that British American Tobacco and Japan Tobacco International are project partners.[3] Also listed as a project partner is Crime Stoppers International which has tobacco company support.

Partners

TRACIT is partnered with several other similar organisations including the Anti-Counterfeiting Group and is part of the UN Global Compact.[4]

Activities

Sectors

The organisation breaks its focus down into 12 sectors, of which one is tobacco. It says:

“Overall, for the tobacco industry the illicit trade in cigarettes results in lost revenue, reputational damage and loss of consumer trust, and increased costs in supply chain monitoring and the implementation of technologies that enable companies to track and trace their products.”[5]

It quotes from a KPMG report called Project Sun which was produced in 2015 and looks at the illicit cigarette market in the European Union, Norway and Switzerland. The report was produced on behalf of BAT, Imperial, JTI and PMI.[6] Nowhere does TRACIT reference the multiple reports, supported by evidence, of the involvement of tobacco companies in the illicit trade.

Work programmes

Global Illicit Trade Environment Index

The Global Illicit Trade Environment Index, released in June 2018, was produced by the Economist Intelligence Unit and evaluates 84 countries on their “structural capability to guard against illicit trade, highlighting specific strengths and weaknesses”. The objective is “to improve the knowledge and understanding of the regulatory environment and economic circumstances that enable illicit trade.[7] It is a key report which, with its regional and country subsets and recommendations, is the foundation for TRACIT policy proposals and lobbying. The report’s sponsors include Philip Morris International (platinum sponsor), British American Tobacco, Japan Tobacco International and Crime Stoppers International (bronze sponsors).

Mapping impact of illicit trade and sustainable development goals

In an area which has seen increasing interest by tobacco companies, TRACIT maps the impact of illicit trade against the UN sustainable development goals. It released a report in July 2019. The report has chapters for each of its sectors and how illicit trade has a negative impact on specific goals. For tobacco it lists the goals of good health and well-being; decent work and economic growth; peace, justice and strong institutions and partnerships for goals as being affected. Again, no mention is made in the chapter on any culpability that tobacco companies have for the illicit trade.[8]

Involvement with UNCTAD

In July 2019, as part of its launch on the report, TRACIT co-hosted a meeting on illicit trade and the UN’s Sustainable Development Goals (SDG) in partnership with the United Nations Conference on Trade and Development (UNCTAD).[9] TRACIT Director General Jeffrey Hardy addressed the meeting with contributions from UN officials.[10] TRACIT’sengagement with the UN organisation reflects the attempts of tobacco companies to use third parties to ingratiate themselves with governments as partners in reducing illicit trade. Other UN organisations have been targeted by groups with close tobacco company affiliations such as Concordia and the International Chamber of Commerce.[11]

Regional and Country Activities

TRACIT has been active in a number of countries representing industry interests at governmental level backed by its own reports. The principal report is the Illicit Trade Environment Index from which various regional versions have been produced.

Asia

Asia
  • Produced regional policy recommendations in 2018 for the region which in summary were: [12]
    • Association of Southeast Asian Nations (ASEAN) and Asia Pacific Economic Cooperation (APEC) play leadership roles on combatting illicit trade
    • Establishing an antic-illicit trade coordinator and inter-agency task force
    • partnerships with the private sector
    • Protect Free Trade Zones from illicit traders
    • Launch public awareness campaigns
    • “rationalize tax policies and subsidies to ensure that they do not incentivize illicit trade, smuggling, adulteration and theft, by adopting simple, single tier specific tax structures, and accounting for various demand-related factors including overall consumption, price, income levels and the ensuing affordability of products.”[12] The tobacco industry often uses these types of arguments regarding taxes, to prevent raises and further regulations. See Tobacco Tactics Price and Tax for more details on this aspect.
    • Establish joint investigations on illicit trade/trafficking and criminal organisations
    • Study the patterns of illicit trade flows
  • Produced a regional version of its Global Illicit Trade Index.[12] Among those who were interviewed for the Asia report were:
Myanmar
  • Produced regional policy recommendations in 2018:[14] The recommendations were similar to the report for Asia but also included:
    • Tackle pervasive corrupt practices
    • “Increase effectiveness of customs procedures to block the flow of illicit and parallel (grey) market products”
    • Partnerships with international organisations such as World Customs Organization, Interpol and the European Anti-Fraud Office.
  • Produced a regional version of its Global Illicit Trade Index.[15]

Latin America

Latin America
  • Produced regional policy recommendations in 2018:[16]. The recommendations were similar to the report for Asia but also included:
    • Pursue law enforcement and customs cooperation through expanding the Pacific Alliance (Alianza del Pacifico) or “through projects sponsored by Ameripol, the InterAmerican Development Bank (IDB) or the World Customs Organization (WCO).”
    • Intensify public-private coordination and uses examples from Argentina and Costa Rica (see below)
    • Strengthen copyright protection enforcement
    • fully adopt anti-money laundering regulations
    • raise public awareness about the threat of illicit trade “to help shift public perception … that contraband is not a minor issue but a national security problem, with links to organized crime.”[16]
  • In September 2019 TRACIT participated in the 7th INTERPOL Global Conference on Human Trafficking and Migrant Smuggling, in Buenos Aires.[17] This had 750 people attending from 97 countries.
  • In June 2019 TRACIT was in Buenos Aires at the Regional Summit on Security and Illicit Trade hosted by the business newspaper’ “El Cronista”. The panels included discussions on public-private cooperation and the vulnerabilities of Free Trade Zones.[18] Director-General Jeffrey Hardy particularly highlighted the need to curb illicit trade in Free Trade Zones. Philip Morris International had a strong presence at the event with representatives from its PMI Impact anti-illicit project as well as providing media support.[19]
Argentina:
  • In June 2019 TRACIT highlighted how fighting illicit trade is essential for attracting investment and creating growth opportunities during a National Roundtable for Fair Trade hosted by the Argentina Medium Business Confederation (CAME). A press release from TRACIT said that Director-General Jeffrey Hardy “called on Latin American governments to rationalize tax policies that can incentivize illicit trade”.[20]
Colombia
  • Produced policy recommendations which repeated many of those from the Latin American policy report (see above).[21] In particular it says <block quote>“Colombia should simplify its current structure following OECD standards [Specific + VAT] and reduce the tax burden to decrease the current high incentives for the illicit market.”[21]
The Ministry of Health of Brazil and the National Commission overseeing the implementation of the Framework Convention on Tobacco Control have provided solid arguments on this issue of taxation and these have become useful for the rest of the countries in the region, as well as Colombia.

“There is solid evidence that reducing tobacco tax is an inappropriate initiative to reduce illicit trade. Studies, including a recent World Bank review, point out that the main determinant of the illegal tobacco product market is not the difference in taxation of tobacco products between countries but the dominance of this market by organized crime factions, attracted by profitability and impunity, resulting from the soft penalties applied to this offense. In addition, countries that have reduced tobacco taxes to try to reduce illicit trade have experienced reduced tax collection, smoking growth, especially among young people, and no positive effect on smuggling. This was the case of Canada and Sweden in the 1990s. In Brazil, also in the 1990s, the Federal Revenue Service lowered taxes on cigarettes to limit smuggling. However, tax revenues fell, and illicit trade continued to grow”[22]

  • In October 2018 at a meeting in Bogota, TRACIT urged Colombia to work with the private sector to develop a comprehensive and effective anti-illicit trade program to curb illicit goods that harm legitimate businesses, workers, consumers and governments. Colombia ranks 43 out of 84 on TRACIT’s Global Illicit Trade Environment Index, primarily because of issues around transparency and governance of its Free Trade Zones (FTZs).[23]
Costa Rica
  • Produced policy recommendations which repeated many of those from the Latin American policy report (see above).[24] In addition it recommends strengthening the Comision Mixta de Lucha Contra el Comercio Ilicito, composed by representatives from the Ministries of Health, of Finance, of Home Affairs, from the Customs Office and the Police force. This Commission was created in 2014 and later on, representatives from the chambers of commerce and industry were added as members as well. [25] Costa Rican Civil Society have exposed the conflict of interest of this Commission and made a formal claim to the government in 2016, given that the representatives of the industry come from the Costa Rican-American Chamber of Commerce (AmCham), whose members include British American Tobacco and Philip Morris International.[26]
  • In August 2018 TRACIT addressed government officials and industry stakeholders during a conference on Illicit trade, hosted by AmCham, which has tobacco industry members.[27] The conference featured a presentation on TRACIT’s Global Illicit Trade Environment Index, which ranks Costa Rica 46th of 84 countries evaluated on the extent they enable or prevent illicit trade. Gerardo Lizano, AmCham’s representative to the Comision Mixta de Lucha Contra el Comercio Ilicito, and Nogui Acosta, vice minister of income in the Ministry of Finance, spoke at the event.[28]
Dominican Republic
  • Produced a country briefing based on its Global Illicit Trade Environment Index (see above).[29] The report quoted Manuel Cabral as an expert on local markets for alcohol and tobacco products as saying “frequent and piecemeal changes in tax policy create distortions that ultimately [aggravate] the use of illegal products”. Cabral worked for Philip Morris International from the country from 2011 to 2017, ending up as director of corporate affairs for the Dominican Republic and Caribbean[30] Among those listed as sponsors and contributors to the country report were British American Tobacco, Crime Stoppers International, Japan Tobacco International, and Philip Morris International
  • Produced policy recommendations which repeated many of those from the Latin American policy report (see above).[31]
  • In May 2019 TRACIT addressed government officials and industry stakeholders during a conference on Illicit trade. It was hosted by the Association of Industries of the Dominican Republic, the British Embassy and the British Chamber of Commerce of the Dominican Republic. The Chamber of Commerce has BAT subsidiary BAT Republica Dominicana and Imperial Tobacco subsidiary Tabacalera De Garcias.[32]
  • TRACIT’s Director-General, Jeffrey Hardy, called for more public-private partnerships saying they are “essential to the design and implementation of effective programs to prevent illicit, contraband and counterfeit products.”[33] Such partnerships could provide a means for tobacco companies to engage with governments and circumvent the Framework Convention on Tobacco Control article 5.3.
Ecuador
  • Produced policy recommendations which repeated many of those from the Latin American policy report (see above).[34] It highlighted the need for “strong and proactive measures” in strengthening the protection of Free Trade Zones
  • In November 2018, TRACIT addressed government officials and industry stakeholders during a conference on Illicit trade, hosted by Cámara de Industrias y Producción (CIP). The current vice- president of CIP worked previously as Corporate Affairs Director for Ecuador and Peru at Philip Morris International for 2 and a half years, before taking on her current position at CIP. [35] The conference featured a presentation on TRACIT’s Global Illicit Trade Environment Index, which ranks Ecuador 60th of 84 countries evaluated on the extent they enable or prevent illicit trade. “The country serves as a major transit point for illicit goods in the region, including … illicit trade in tobacco…”[36]
Panama:
  • In 2017, Ulrike Bonnier from TRACIT participated in a session exploring actions to combat human trafficking and other forms of illicit trades at the 38th Annual Crime Stoppers International Conference.[37] Crime Stoppers International regularly engages with the tobacco industry. Among the speakers at the Panama conference were Nicholas Otte and Arturo Fernandez from Philip Morris’s Illicit Trade Strategies and Prevention for Latin America and Canada region. The silver sponsor for the event was British American Tobacco.[38]

Europe

Europe
  • Produced a regional briefing based on its Global Illicit Trade Environment Index (see above).[39] Among those listed as sponsors and contributors to the country report were British American Tobacco, Crime Stoppers International, Japan Tobacco International, and Philip Morris International
  • Produced policy recommendations for the region including rationalising tax policies, subsidies and tax exemptions, encouraging partnerships with companies and have stronger criminal penalties. It highlighted the 2016 Administrative Cooperation Arrangement between the European Anti-Fraud Office (OLAF) and the State Customs Committee of Belarus aimed at helping investigative cooperation between them, specifically on the illicit trade in tobacco products.[40]
Serbia, Bosnia and Montenegro

Middle East

Israel
  • Produced a country briefing based on its Global Illicit Trade Environment Index (see above).[43] The report says:

    “illicit tobacco trade has steeply increased due to high excise taxes (accounting for about 27% of the market) and new regulations that standardize tobacco packaging can further increase the demand for counterfeit and illicit products.”

    This echoes industry arguments against plain packaging and tax increases. The evidence used to support this is a news story which is itself based on a PMI-funded study.[44]
  • Produced policy recommendations for the region which echoed much of those in the Europe report (see above).[45]
United Arab Emirates
  • Produced a country briefing based on its Global Illicit Trade Environment Index (see above).[46]The report recommends the UAE sign and ratify the five illicit trade treaties including the WHO Protocol to Eliminate Illicit Trade in Tobacco Products. Among those listed as sponsors and contributors to the country report were British American Tobacco, Crime Stoppers International, Japan Tobacco International, and Philip Morris International
  • Produced policy recommendations for the region including strengthening co-operation in the region, having tougher oversight of free trade zones, rationalising tax policies and subsidies and improving public awareness. [47]

Africa

Tunisia
  • Produced a country briefing based on its Global Illicit Trade Environment Index (see above).[48]The report says

    “Stopping tobacco smuggling, in particular, must be a top priority for policy makers given the significant fiscal leakages and the large profits that organized crime and armed militias in the region amass from the illicit tobacco trade.”

  • Produced policy recommendations for the region including strengthening co-operation in the region, having tougher oversight of free trade zones, rationalising tax policies and subsidies and improving public awareness. On the issue of taxation the report says:

    “excessive tax levels can reduce affordability of legitimate products and drive demand for illicit substitutes. Organized crime groups also may practice “tax arbitrage” to gain profits by smuggling products from relatively lower to higher taxed markets.”[49]

    As in other TRACIT reports there is no mention of the involvement of tobacco companies in illicit activity.

Staff

Senior Management

The senior management team is made up of the following people:[50]

  • Jeffrey P Hardy – Director-General. Hardy previously served as the Director of the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy. The group has consistently produced reports sympathetic to its tobacco industry members and lobbied against Plain Packaging measures. Hardy is founder and managing director of IDA Consulting, a management consultancy.[51] Hardy is listed in the EU lobbying register.[52]
  • Stefano Betti – Deputy Director General
  • Louis Bonnier – Director of Programs. Co-author of the report on illicit trade and SDGs
  • Ulrika Bonnier – Director of Programs. Co-author of the report on illicit trade and SDGs
  • Suriya Padmanaabhan – Director of Programs
  • Cynthia H Braddon – Head of Communications and Public Policy
  • Esteban Giudici - Senior Policy Advisor

Directors

Directors TRACIT gives its mailing address as One Penn Plaza in New York City, but it is registered in Fort Myers, Florida, as not-for-profit organisation under US tax code 501(c)(6). Its corporate filing on 19 April 2019 listed three directors: [53]

Advisory Council

The organisation’s Advisory Council is made up of independent experts providing advice in a personal capacity.[56] Among its members are:

  • Karl Lallerstedt, from the Confederation of Swedish Enterprise, contributed a chapter to a book on organised crime which grew out of a BAT-funded project.[57].
  • Leonard McCarthy, founder of integrity and risk management firm LFMcCarthy Associates, prior to that an investigator at the World Bank.[58] McCarthy came to prominence as the head of South Africa’s Directorate of Special Operations, or so-called Scorpions, which investigated organised crime, including tobacco smuggling. The unit was disbanded in 2009.[59]

Notes

  1. Tracit,Tracit launch, Tracit website, 6 September 2017, accessed October 2019
  2. Financial Times, Combatting Illicit Trade, FT Website, date unknown, accessed October 2019
  3. World Intellectual Property Organization, Advisory Council on Enforcement, WIPO website, 8 August 2019, accessed October 2019
  4. Tracit, Partners, Tracit website, date unknown, accessed October 2019
  5. Tracit, Tobacco, Tracit website, undated, accessed October 2019
  6. KPMG, Project Sun report, KPMG website, 2015, accessed October 2019
  7. Tracit, Global Illicit Trade Index, Tracit website, date unknown, accessed October 2019
  8. Tracit, Illicit Trade and the UN sustainable development goals, Tracit website, July 2019, accessed October 2019
  9. Tracit, Event dialogue on illicit trade and the SDGs, Tracit website, undated, accessed October 2019
  10. UNCTAD, Meeting Details, UNCTAD website, unknown date, accessed October 2019
  11. Expose Tobacco, UNGA briefing, Expose Tobacco website, 1 September 2019, accessed October 2019
  12. 12.0 12.1 12.2 TRACIT, Policy Recommendations to Combat Illicit Trade Inspired by the Global Illicit Trade Environment Index Asia Region, 2018, accessed October 2019
  13. International Trademark Association, Board, ITA website, undated, accessed October 2019
  14. TRACIT, Policy Recommendations Myanmar, TRACIT website, 2018, accessed October 2019
  15. TRACIT, Myanmar Illicit trade paper, TRACIT website, 2018, accessed October 2019
  16. 16.0 16.1 TRACIT, Latin America Recommendations, TRACIT website, 2018, accessed October 2019
  17. TRACIT, INTERPOL global conference, 11 September 2019, accessed October 2019
  18. TRACIT, Latin American regional summit, 14 June 2019, accessed October 2019
  19. Latin America’s head on fight against illicit trade, Stop: Illegal website, 23 June 2019, accessed October 2019
  20. TRACIT, Latin America scores low on illicit trade index, 13 June 2019, accessed October 2019
  21. 21.0 21.1 TRACIT, Policy recommendations Colombia, 2018, accessed October 2019
  22. Ministry of Health of Brazil and CONICQ, 5 July 2019, accessed October 2019
  23. TRACIT, Media Release, 18 October 2018, accessed October 2019
  24. TRACIT, Policy recommendations Costa Rica, 2018, accessed October 2019
  25. Ministry of Home Affairs Costa Rica, Bill to improve the fight against illicit trade, 17 November 2014, accessed October 2019
  26. Adiario Costa Rica, Conflicts of Interest in Costa Rica, 8 June 2018, accessed October 2019
  27. AmCham, Directory, AmCham website, 2018, accessed October 2019
  28. TRACIT, Costa Rica shown vulnerable to illicit trade, 16 August 2018, accessed October 2019
  29. TRACIT, Policy recommendations Cost Rica, 2018, accessed October 2019
  30. M.Cabral, M.Cabral profile LinkedIn, accessed October 2019
  31. TRACIT, Policy recommendations Dominican Republic, 2018, accessed October 2019
  32. BritCham, Membership Directory, BritCham website, undated, accessed October 2019
  33. TRACIT, Dominican Republic is on the right path to fight illicit trade, 8 May 2019, accessed October 2019
  34. TRACIT, Policy recommendations Ecuador, 2018, accessed October 2019
  35. Carla Muirragi, Linkedin profile, undated, accessed October 2019
  36. TRACIT, Ecuador must do more to tackle illicit trade, 27 November 2018, accessed October 2019
  37. TRACIT, Crime Stoppers International conference, 18 October 2017, accessed October 2019
  38. CSI, Conference Guide, CSI website, accessed October 2019
  39. TRACIT, Europe, 2018, accessed October 2019
  40. TRACIT, Policy recommendations Europe, 2018, accessed October 2019
  41. TRACIT, Serbia, Bosnia and Montenegro, 2018, accessed October 2019
  42. TRACIT, Policy recommendations Serbia, Bosnia and Montenegro, 2018, accessed October 2019
  43. TRACIT, Israel, 2018, accessed October 2019
  44. EBR, Tobacco illicit trade in Europe, Israel and Middle East, European Business Review, 27 February 2018, accessed October 2019
  45. TRACIT, Policy recommendations Israel, 2018, accessed October 2019
  46. TRACIT, UAE, 2018, accessed October 2019
  47. TRACIT, UAE, 2018, accessed October 2019
  48. TRACIT, Tunisia, 2018, accessed October 2019
  49. TRACIT, Tunisia, 2018, accessed October 2019
  50. TRACIT,Team TRACIT website, date unknown, accessed October 2019
  51. IDA Consulting, About, website, date unknown, accessed October 2019
  52. Lobby Facts EU, Transnational Alliance to Combat Illicit Trade, undated, accessed October 2019
  53. State of Florida, 2019 corporate filing May 2019, acccessed October 2019
  54. Website, Who We Are, ACC website, date unknown, accessed October 2019
  55. Website, A Complete List of ACG Members, date unknown, accessed October 2019
  56. Tracit website, Advisory Council, date unknown, accessed October 2019
  57. Comolli, V (ed). Organized Crime and Illicit Trade: How to Respond to This Strategic Challenge in Old and New Domains, Palgrave Macmillan 2018 https://www.palgrave.com/gp/book/9783319729671
  58. LFMcCarthy Associates, website, date unknown, accessed October 2019
  59. Staff reporter, Former Scorpions boss lands big job monitoring Russian telecoms firm, City Press, 23 August 2019, accessed October 2019