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Global Agenda Council on illicit trade

Sandro Calvani, Chairman for 2009-10 of the Global Agenda Council on illicit trade of the World Economic Forum, Davos and Dubai.

Illicit trade, which accounts for 7-10% of the world economy, encompasses trade which is illegal but also trade which may be legal but causes direct human, social, political or environmental harm. It is a major contributor to discrepancies in wealth between the developing and developed world, fuels devastating conflicts and has become the principal economic activity of several fragile states, severely undermining their legitimacy. It is well known that terrorist groups have engaged widely in illicit trade for financing their activities. Despite being relatively well documented and a priority on the political agenda, illicit drug trade, trade in small arms and human trafficking are further developing and have a tremendous human toll. Human trafficking and forced labour have widely penetrated the legitimate economy, and by several accounts more people are in slave-like situations than at any other time in human history. Debt bondage has become a routine aspect of transnational labour migration. In several industries, counterfeiting undermines legitimate competition and hampers innovation. Counterfeit medication is out of control in many developing and transitional countries and kills hundreds of thousands each year. Trade in wildlife is endangering our environment and illegal logging is an important contributor to global warming. Money laundering and illicit financial transactions undermine the global financial system.

Illicit trade is intimately intertwined with legitimate trade and has enormous negative costs for the business sector and states through loss of tax income and excise duties.

A world that is both flat and unflat. The idealized vision of a “Flat World” brought forward by globalization that creates infinite economic opportunities is now a reality enjoyed especially by criminals. Transnational criminal networks take full advantage of the protection and opportunities offered by failed and corrupted states, off-shore tax havens, reduction in trade barriers and the development of free trade zones. These illicit “opportunities” are supported by modern communication, production and transportation technologies, allowing criminals to capitalize on the differences in legal systems, living standards, income inequalities, banking regulations, and fiscal and taxation systems.

Addressing these deficiencies/gaps must be a top priority in the coming year.

-The international community is addressing the global financial crisis. Part of this crisis was precipitated by corruption, absence of transparency and tolerance of illicit financial flows and activities. Addressing these deficiencies is essential to economic growth and stability.

-The role of illicit timber trade and other environmental crimes exacerbate the problem of global warming and environmental disasters. Global warming, in turn, contributes to the precariousness of human life in many low lying regions.

-Absence of respect for intellectual property rights undermines the economy, investment, innovation and competition. Its consequences are far-reaching in the trade arena.

16 May 2010

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