Goods and services prohibited by governments for various reasons.
Trade that national governments refuse to condone, license, or tax is illegal trade, including the unauthorized domestic and international distribution of that which governments claim a monopoly or on which governments collect taxes. The range of commodities exchanged illegally on international markets includes narcotic and non-narcotic drugs, illegally mined precious stones (such as those extracted to pay for illegally purchased weapons), illegally harvested animal products, stolen vehicles, illegally exported antiquities, and even human smuggling or the illegal transport of migrants. The legal status of certain transactions varies from one jurisdiction to another.
Trade in narcotics, weapons, and antiquities are the world’s leading illicit markets. More than 200 million people are estimated to participate in illegal markets for drugs worldwide, and Asia is the most seriously affected by heroin traffic and abuse. According to Interpol, which counts 181 nation-states as members and coordinates individual states’ investigations of drug cases, of the 36 tons of heroin seized worldwide, about 19 tons were seized in Asia and 15 tons in Europe. Most heroin consumed in Asian countries is produced in Afghanistan and Myanmar. While heroin production in the “golden triangle” at the borders of Myanmar, Thailand, and Laos seems to have remained stable since 1997, an immense stockpile continues to supply markets in Australia, New Zealand, and North America. Illegal export from Ho Chi Minh City reaches Sydney, which is then distributed to other Australian cities by road. While Asian heroin remains strong in interna tional illegal trade, Interpol reports a dramatic shift in origin of the heroin consumed in North America within recent years. Until 1994, about 68 percent of that seized by authorities was produced in Southwest Asia; and after 1995, 62 percent originated in South America.
The United Nations Conference on the Illicit Trade in Small Arms and Light Weapons in All Its Aspects convened during the summer of 2001. Representatives of more than 140 nation-states and over 170 international nongovernmental organizations (NGOs) estimated that 500 million small arms and other light weapons are currently in illegal circulation. Methods continue to be implemented by which national laws could better regulate national arms brokers, effectively criminalizing illicit production and restricting unauthorized trade of weapons.
In an attempt to curtail this trade, the conference recommended that licensed arms manufacturers “appropriately and reliably” mark each weapon during the manufacturing processes, which would allow weapons to be traced through resale, meaning accurate records of weapons distribution could be created. The conference recommended that surplus stocks of small arms lacking such identifying marks be destroyed to prevent their potential illegal distribution. Speaking for the European Union, Belgian officials stated the need for stringent export controls and careful stockpiling management with supervised destruction in support of the conference’s measures. Representing one of the world’s largest weapons exporting nations, U.S. officials opposed measures to constrain legal manufacture and trade of small arms and light weapons and resisted the activities of nongovernmental organizations.
Interpol and the United Nations Educational, Scientific, and Cultural Organization (UNESCO) rank stolen art and cultural objects as the world’s third largest illegal market, behind drugs and the arms trade. Interpol has been tracking illicit trade in cultural objects since 1947. This trade came under regulation by a 1970 UNESCO convention that regulates cultural objects’ transfer among the ninety-four signatory nations. An international agreement, the Convention on Stolen or Illegally Exported Cultural Objects, was signed at a 1995 convention of the United Nations International Institute for the Unification of Private Law. Widely recognized as the world’s fourth largest art market, Switzerland represents one of the few countries not to have signed the UNESCO convention. As Andrea Raschèr, of the Swiss Federal Culture Office, explains, “It’s easier to import an ancient vase [into the country] than a tomato.” Neil Brodie, the Illicit Antiquities Research Center (Cambridge, UK) coordinator, explains, “the fact that [Switzerland] hasn’t signed up to the UNESCO convention is certainly linked to the fact that it is a thriving center for antiquities.” A recently proposed draft law would extend the period after which cultural goods of unidentified origin could legally enter Swiss markets from five to thirty years.
That weapons, drugs, and antiquities are the illegal goods trading at comparable levels of value is not a coincidence: most of the world’s illegal transactions are nonstate actors purchasing weapons, with the proceeds from illegal sale of drugs and antiquities.
During times of war, state institutions are at their most modern. In times of political emergencies, such as afforded by a declaration of war, much local and almost all foreign trade in consumer and producer goods becomes subject to government control. As historian John Singleton points out, “During peacetime a nation has no generally accepted economic objective, and what counts is the satisfaction of the subjective wants of individuals. But when a major war breaks out the national objective becomes victory or, at the very least, survival. Hence in wartime, it is the function of the government to deploy the country’s resources in those activities which will maximize the chances of the country’s military success.” Consumers’ trading habits are subject to disruption, in the form of rationing. Goods freely traded in peacetime, including items of clothing, meats and animal fats, dairy goods, and sugar, are subject to controlled distribution or rationing during wartime. Officials also restrict trade in labor (employment of draft-eligible individuals) and trade in industrial commodities (including metals, fuel, lubricants, fabric, rubber, plastics, and paper) to defense contractors.
This is not to say that governments leave trade to markets during peacetime. In peace, as in war, modern states adopt policies to control trade in national currencies. The national currency continues to circulate within the nation’s boundaries: local residents’ domestic trade may remain undisturbed by such controls. It is only international trade in goods and services that is affected, as the state administration seeks to prioritize access to “reserve currencies” for such autarkic measures as the national defense or an industrialization drive. Officially set local exchange rates for “soft currencies” then deviate from international market values that are governed by impressions of political or economic uncertainty, and a black (or illegal) market becomes the location for unauthorized exchange of domestic and international currencies. The classic illustration is the Soviet Union’s currency controls, which anthropologist Alaina Lemon describes as “currency apartheid.” The value of the Soviet ruble was strongly controlled through a state monopoly on foreign trade; in 1988, toward the end of the Soviet state, the official exchange rate was 0.61 ruble for one U.S. dollar, while a dollar traded for four to six rubles on various Soviet black markets. This is not to say that the U.S. dollar was the only reserve currency to trade in illegal Soviet currency markets: Canadian dollars circulated along with sterling pounds and deutsche marks.
Economist Case Sprenkle describes the way in which reserve, or “hard,” currencies trade in the world. Sprenkle suggests most U.S. currency circulates among nations in the developing world, as about $300 billion was in the hands of the public during 1992. Domestic households and business demands account for a bare 16 percent of dollar bills: the remainder was distributed among children, illegal enterprises, and foreigners. While the Federal Reserve is reluctant to attribute a large share of the missing currency to foreigners, residents of foreign countries circulate U.S. currencies abroad, without receiving goods and services from the United States equal in value to those initially purchased by U.S. citizens abroad. What Sprenkle describes includes unequal exchanges between industrialized nations and the rest of the globe.
Within sovereign states, legal trade in labor—employment—like currency is subject to restrictions governing the employee’s age, hours of labor, and payment of taxes and social benefits, as well as other factors. Employment of children and young persons subject to compulsory school attendance is severely limited during school hours, which ensures their presence in school. In New Brunswick, a minor must attend school until graduation from high school or until he or she reaches the age of eighteen. In the United States, a sixteen-year-old must present proof of school attendance before receiving a driver’s license. Other industrialized countries have similar rules and restrictions.
Trade in goods is no less subject to modern states’ restrictions than labor, even in peacetime. Trade in goods, including alcoholic beverages and tobacco products, is legal in many jurisdictions only if the transaction is registered and/or taxed. According to the World Bank, different tax rates are as important as variations in socioeconomic conditions and geographical proximities to various markets in contributing to illegal trade in tobacco.
Now, European Union (EU) representatives accuse a leading U.S. tobacco manufacturer of systematic illegal distribution of its products within EU jurisdiction. It must be noted that consumers of smuggled tobacco products may or may not be aware of the legal status of the cigarettes they consume. Few smokers stop to examine the excise stamp on the package, although they may notice the discounted price. In such a price-sensitive mar ket as that for tobacco, consumers respond to lower prices by buying more. This contributes to a widely held perception that contraband trade in tobacco is victimless. Law enforcement officials complain that, based on this perception, convictions for evasion of tobacco taxes are accompanied by comparatively lenient penalties.
While private firms produce tobacco goods, and public authorities tax these goods, public authorities control production, distribution, and sale of alcoholic beverages in many jurisdictions. While many consider contraband trade in tobacco to be relatively harmless, the first wave of feminists identified and enumerated the victims of trade in and consumption of alcoholic beverages. During the mid-nineteenth century, the Women’s Christian Temperance Union (WCTU) linked anti-alcohol sentiment with feminist principles and identified working men’s renunciation of alcohol with women’s increased economic security. In the WCTU, Frances Willard lined an anti-alcohol campaign with women’s suffrage, equal pay for equal work, and the eight-hour day.
Sociologist Harry Levine attributes Scandinavians’ warm reception to nineteenth-century temperance movements to Sweden’s Christian revival movement. Responding to public anti-alcohol sentiments, Sweden became one of several nineteenth-century imperial states to institute monopolies over the trade in alcohol to restrict its retail trade. The Swedish state’s monopoly dates from 1865; a controlled distribution network and high taxes were intended to keep Swedes from high-proof beverages. System Bogalet, the Swedish retail monopoly for beverage alcohol, compares the taxes levied on low-proof beverages with those levied on high-proof beverages: “[A] bottle of French wine that costs SEK 900 is taxed at just over 20 percent,” while “a bottle of unflavored vodka is taxed at 80 percent of the retail price, including a value-added tax.” Distribution of both is limited to certain hours and certain days of the week.
In contemporary Finland, another successor state to the territories formerly governed by Imperial Sweden, officials transformed these historical restrictions to contemporary trade in advertising media by banning all advertisements for alcohol. However, these restrictions have recently relaxed, permitting distribution of images containing beer and wine consumption in national media. Social science research alerts contemporary Finnish legislators to the effects of alcohol trade, suggesting that Finns’ increased access through either price/taxation reductions or extending an alcohol retail network contributes both to higher rates of consumption and drinking-related damage. In 1969, Finland’s distribution system was dramatically liberalized through changes in the places licensed to sell alcoholic beverages, increasing the density of retail outlets in the rural areas. A 50 percent per capita increase in alcohol sales in one year contributed to substantially higher rates of drinking-related deaths and other complications in following years.
The Russian empire’s monopoly over trade in alcoholic beverages was revived by the Soviet Union in 1937, which extended the production chain as a monopoly in legal manufacture as well as trade in these beverages. The Soviet Ministry of Agriculture was responsible for coordinating production and internal sales of all alcoholic beverages (including wines) in each of the fifteen constituent Soviet republics. International trade in alcohol was the monopoly of the all-Soviet foreign economic association Soyuzplodo import, which controlled legal distribution of all foods and beverages produced in the Soviet Union, including branded vodkas, worldwide. Until the end of the Soviet state, all other beverage trade was illegal.
Elizabeth Bishop
See also: Drugs.
Lader, Malcom, Griffith Edwards, and D. Colin Drummon, eds. Nature of Alcohol and Drug-Related Problems. New York: Oxford University Press, 1992.
Lemon, Alaina. “Your Eyes Are Green Like Dollars: Counterfeit Cash, National Substance, and Currency Apartheid in 1990s’ Russia.” Cultural Anthropology 13, no. 1 (1998): 22–55.
Singleton, John. “The Cotton Industry and the British War Effort, 1914–1918.” Economic History Review 47, no. 3 (1994): 601–618.
Swissinfo. “Iraqi Artifacts Find Easy Route via Switzerland.” March 5, 2003 (www.swissinfo.org/sen/swissinfo.html?sitesect=111&sid=1668784/, accessed September 2003).
United Nations Office on Drugs and Crime, Mission Statement (www.unodc.org/unodc/en/about.html, accessed March 2003).
World Bank. Curbing the Epidemic. Economics of Tobacco Control. Washington, DC: World Bank, June 1999.