What happens when governments implement blanket bans on Tobacco Harm Reduction (THR) products? In this insightful panel discussion, experts from around the world expose the dangerous, unintended consequences of over-regulation and prohibition - what moderator John Fell calls the "invisible foot."
From street-level corruption to billion-dollar criminal enterprises, our panel explores how prohibition fails to stop consumer demand and instead directly fuels global organized crime.
Transcription:
00:04 - 02:49
[Jon Fell]
Good afternoon, everyone. Thank you very much for joining this session on tobacco harm reduction and illicit trade. My name's John Fell, and I come actually from an investment background. I spent abo ut 30 years following what's going on in the tobacco industry and fascinated by the transformation that is now underway. And I currently work for a business called Hexis capital management. We've just launched a fund, an exchange-traded fund, which will only invest in tobacco and nicotine companies. What we're trying to do is make that transformation faster. Yesterday's fascinating Michael Russell oration by Alex Wodak referred to the role of markets, the invisible hand in helping to tackle the problems caused by combustible cigarettes, the massive health problems. Sadly, in this session, it's our job to tackle what I like to call the invisible foot, what happens when governments and regulators get in the way and do dumb stuff which has adverse and unintended consequences. We are going to explore those real-world consequences of banning or over-regulating tobacco harm reduction products. consumers, on retailers and manufacturers and the wider societal damage caused by organised crime and others filling the supply gap. So I've got a series of questions for each of the panellists and I'll introduce them as we go along rather than introducing everyone now. And I'm going to start with Asa Saligupta. He joins us from Thailand is a founding member and director of the ECST, the E-Cigarette Smoke Thailand Consumer Group, which he set up over a decade ago to advocate for the rights of Thai smokers to access harm reduction products. He's also sat on a parliamentary committee in Thailand examining the regulation of e-cigarettes there. And it's his misfortune, I suppose, to live in a lovely country, but one which currently forbids importing, distributing, and selling vapes. So my first question for you, Arthur, is you've smoked for 37 years, or you did smoke, and tried almost every cessation method before switching to vaping, and you've been smoke-free now, I think, is it 18?
02:50 - 02:51
[Asa Saligupta]
About 15 years.
02:51 - 02:52
[Jon Fell]
15 years.
02:52 - 02:52
[Asa Saligupta]
Around there, yep.
02:53 - 03:03
[Jon Fell]
So can you tell us what it means to you personally to live in a country where the product that probably has saved your life is actually illegal.
03:04 - 06:12
[Asa Saligupta]
Well, actually, personally, at first, you know, when I started switching to vaping, I was a dual user and there was a void. So it was, you know, you can buy vape anywhere, but nobody understand what vaping was back then. And that's also the time I started doing a YouTube channel to share the experience and to tell the people what vaping was and how to use items properly. And then all of a sudden, the FCTC started to turn their attentions around to THR products instead of tobacco, like regular cigarette tobacco instead. So that was about 10, 11, 12, something over a decade ago. So they started, like I said, they started to turn their attention to especially electronic cigarette. So Thailand was one of the first country to answered the call, and about 11 years ago, all of a sudden they said like, oh, vaping is so dangerous, let's ban it. The beginning of the ban was, it is illegal to import, and that's it. That's the only laws and regulations that came out, and I was like, I was not happy, because like, personally, I've been, I mean, my health was getting worse and worse, and I found vaping and my health was much better And so we went in to talk to the government, but to no avail. And then, you know, other add-on laws and regulations came into effect. Like, you cannot distribute, and then you cannot vape in a place where it is forbidden to vape. So, you know, like, if there's a sign saying, like, no vaping allowed, then of course, and then plus. It had just been added to tobacco products, so you cannot use vaping in public areas and such. And so we've been trying to work with the government, trying to go in and ask and get education. But like you said, personally, I wasn't happy. We have millions right now. We have millions of vapers in Thailand. And the other thing that happened, might call it side effect, was that lots of briberies are going on, especially for tourists. You don't know. So you get pulled over by a local policeman and say, hey, vaping is illegal, and you cannot process, which is not true, though, by the way. Possession is not illegal. It's the importation and distribution and plastic vaping in public area, like John just said. So that pretty much sums up the situation. in Thailand right now, not talking about the legal and to leave the ban or not.
06:13 - 06:31
[Jon Fell]
Thanks. And I'm wondering what the sort of practical reality of being a vaper in Thailand today is. How do you actually get hold of products from week to week? And has that changed a lot in the time that vaping has or selling vapes has been illegal?
06:32 - 07:57
[Asa Saligupta]
Within this last year, yes, but not since the ban came out, because most people would just, since before the ban, right, we just go out, of course there are shops, but most people would just buy it online. It's much easier, you get it delivered right to your door. And then... Thailand, the government, they tried to please FCTC, the WHO, and they tried to please, so they heard some wish words and something like that, so they raided out big warehouse. So right now, it's more difficult to get web items, but it's just been this past year. But before that, it was very easy. I mean, I can, we can go to the flea market, open market, or even, you know, like a touristic areas, and then you see like kiosk and chills and whatnot with like, but mainly it will be like refillable, you know, the cheaper stuff. But for more expensive, they also have web shops. We used to have web shops where we can go in and buy web items, but now it's getting more and more difficult to find.
07:59 - 08:10
[Jon Fell]
When you're buying online, do you think you're buying from an online business which has been set up in Thailand, or is the stuff all coming from there? direct from overseas?
08:10 - 08:41
[Asa Saligupta]
No, it's been set up in Thailand. They are the one who risk importing into Thailand. But all that to be said, it's like one of the riskiest thing for consumer is that you don't know if you get authentic items or not. I mean, they even have the QR code. on the packaging, you can go and scan the QR code. The QR code leads you to a website that you can register. But everything is fake.
08:43 - 09:02
[Jon Fell]
When we spoke last week, you also mentioned, I think, that the vaping community in Thailand had long found ways to sort of mobilize and share ideas through Facebook. And I think there's a sort of, is it WhatsApp or an equivalent of WhatsApp that people use to share information about? where to get stuff?
09:03 - 09:44
[Asa Saligupta]
Yeah, we do that. I mean, I was an admin. I use the word was because that Facebook group had been shut down a couple years back. There was about half a million members there, about four. Before Facebook shut it down, I think the last time I checked was like 480,000 some members within the communities and we shared like, you know, hey, You know, you can do this and we can give out information and things like that. But it's against Facebook. You know, Facebook just came up with a rule like anything that has to do with promotion of vaping is not allowed. So it was like completely shut down.
09:45 - 09:52
[Jon Fell]
And did you, I think you mentioned that you think there might be millions of vapers in Thailand. Do you have any kind of estimate for the number of?
09:54 - 10:51
[Asa Saligupta]
Yeah, you mean vapors, right? Right now, the actual number, hold on, I have it right here. From the National Statistics Bureau, in 2021, they said, they surveyed and it came up to 78,000 vapors. At that time, That's about the time that we have about 480,000 vapers as members, right? And at the moment, they say they estimate that. This is what the government said. They said like the survey came out like we have like about almost a million, about 900 something. But the government had said that there are about two million vapers. And I think you probably have to times that by at least two or three times to get a real figure.
10:52 - 11:13
[Jon Fell]
And then you also said just now that people, if you're buying online, one of the problems is you're not quite sure what you're getting. And again, when we spoke last week, you mentioned that it was becoming an issue, this question of there being unsafe products on the market. You mentioned a compound, is it Tomidate?
11:13 - 11:14
[Asa Saligupta]
Tomidate, yeah.
11:14 - 11:16
[Jon Fell]
Which I hadn't heard of, but it's an anesthetic.
11:16 - 12:17
[Asa Saligupta]
Yeah, it's the word in the market around is called K-POD. The K-pod is a very dangerous substance. And so you don't know what's inside the pod. And it gets people addicted. And it's dangerous also. I think many of you here know what etomidate is. It's used to mix in the liquid. But it's as dangerous as amphetamine and things like that. And you don't really know. But it's more expensive. So the people who's in the inside, the insiders, they know. But then again, it came out, maybe accidentally, and younger generation, I don't really want to use the word kids or youth, right, and might get a hand on it, or they might get some leftover, somebody just leave it, and that's dangerous also.
12:19 - 12:38
[Jon Fell]
And then I just wanted to, come back to this question of could the legal status of vaping actually change at some point in Thailand? And you were on this committee. I think it made a unanimous recommendation to legalize vaping, and then the government changed and nothing has happened.
12:38 - 13:55
[Asa Saligupta]
That must be incredibly frustrating. Yeah, because last year I was here and I talked about that and we were just like that close and, you know, like, I went into the House of Parliament and got to present our committees and we got to talk and had been passed unanimously and it's up to the government to come up and we also have draft of laws and regulations of what to do and especially how to tax THR products. You cannot tax it so high that people just go back into underground market and things like that. And About six or seven months ago, something changed with the government. Some of you might have heard, some of you might not. And the new government said that what happened in the past is not considered, and this is the person the Prime Minister, this present Prime Minister, was the Minister of Public Health who lifted the ban on cannabis right before COVID hit. And he was the one who's really, really against vaping.
13:58 - 14:07
[Jon Fell]
Presumably, if the market did become legal, there'd be a big upside in excise revenue for the government.
14:07 - 14:57
[Asa Saligupta]
Definitely, because I think I mentioned ago, just within three or four, the first three or four months of this year, there was just seizures, confiscation, about four million wear products worth almost $200,000. 1,000 US dollars. I mean, maybe half a million US dollars just within a few months time. And the Department of Customs had stated, he came into our wonderful meeting. He said the rate on the illicit product that really got confiscated was less than 10% of what really is going into the country.
14:59 - 15:52
[Jon Fell]
So thank you very much. That was fascinating. We will come back to you later on. But I'm going to move the questioning now along to Dori Hemskerk. Dori is from the Netherlands, and she supports e-SIG Bond, which is the Dutch trade association for e-SIGs as its external secretary with a particular focus on legislation and regulation. So, Dori, since you've been involved in this, the Netherlands has had this cascade of measures that's come in, display bans, online sales bans, and these really strict ingredients and flavour restrictions. Can you walk us through the context of those measures and what they've actually done to the legal market? Yes.
15:52 - 20:48
[Dorrie Heemskerk]
Yes. I started in 2020 to support the trade association, and of course that was just after the Evali crisis in the US. And the government wanted to, of course, restrict smoking, but also restrict vaping. In 2020, the Trimbos, which is the Institute on Mental Health and Addiction, they came with a report. It was a reasonable report, I guess, on e-cigarettes. They used, of course, all the available reviews. But they concluded one thing and they said vaping is more harmful than we thought. And of course that was taken up by the media and that was an introduction of more harsh restrictions. At that time, there was of course experimentation, but there was not a lot of use of e-cigarettes. That came later in 21, when there was an inflow of disposable vapes from China, of course. So what the government wanted is, first, they came with a restriction of a display ban, of course, to prevent children from seeing the products. So the retailers, they had to... changed their windows, and also had to request a certain permission to show their products inside. And their websites, of course, they had to really change that. They could still sell online, but they were not allowed to show pictures or use any colors, so they had to change that. So that was quite an investment as well, of course. And that was about in 21, mid-21. And then the flavors was still an issue, and there was a research done by RIVM, or at least one of the scientists, and they had this whole diagram of a lot of flavors which were used and of course that it attracts youth to start vaping. And then they decided, okay, we want to only allow tobacco flavors It has taken some time to actually implement. And in the meantime, they also started legislation that they wanted to introduce an online sales ban. That was introduced by mid-23. And by the 1st of January 24, the flavor ban was introduced. And what they did is they said... We are going to look at all the flavors and if they are used in tobacco or not in tobacco flavors, they get on the list and they use some kind of selection and ultimately they arrived at 23 ingredients at the beginning, a white list that could be used to make tobacco flavored e-cigarettes. There were a couple of ingredients that were carcinogenic and so they had to review it again and then they arrived at 16 ingredients saying, okay, we could either leave the product available for smokers or we can just kill it. completely and of course so they said okay we're going to leave it the consequence was that with the 16 ingredients no tobacco no current tobacco flavor at that time could be made because there was always some ingredient that was not on the list of the 16 ingredients. So of course the industry, well it was not really an industry I guess, but the e-cigarette branch market had to develop new tobacco flavors. And so that's where we are at the moment. And we see a lot of difference, of course, in use at the moment.
20:49 - 21:05
[Jon Fell]
So, again, when we spoke last week, you mentioned, I think, that someone, maybe even the government itself, had done a report estimating how much of the vaping market in the Netherlands now came from somewhere other than the legal Dutch market.
21:06 - 21:06
[Dorrie Heemskerk]
Yes.
21:06 - 21:09
[Jon Fell]
Market. Can you remind me what that figure is?
21:10 - 21:10
[Dorrie Heemskerk]
Yeah, 87.
21:10 - 21:12
[Jon Fell]
And also where the stuff comes from.
21:12 - 22:02
[Dorrie Heemskerk]
Yeah. So 87% currently. So there was an April report at 26 recently. And it was commissioned by the government. And 87% of the vape users buy it, either illicit products or they buy it in an illegal way. And it could be also abroad. So that's about 10% of the 87% is bought abroad, which I guess comply to the TPD standards, but they are of course not allowed in the Dutch market because they contain flavors or larger volumes or whatever.
22:02 - 22:14
[Jon Fell]
And do you have any sense of So to the extent that people are buying these products in the Netherlands itself, who are they buying them from?
22:15 - 22:54
[Dorrie Heemskerk]
It depends on the age, I guess. The younger the users are. So the miners, they buy it from street dealers, 40%. And they buy it from friends, about 33%. They buy it from social media. And... and they buy it 13%, I guess, from shops, but the shops are not defined. So, yeah, you know, like you have these mobile phone shops, and you have a baker, and you have, well, all kinds of shops that can sell tobacco products and also vape products, of course.
22:54 - 23:12
[Jon Fell]
So they might have vapes under the counter in those places? They do, yeah, they do, yeah. So the Dutch government's response to finding that 87% of the market comes from somewhere else has been to come up with further regulatory proposals, yeah?
23:12 - 26:03
[Dorrie Heemskerk]
Yeah, because what also is currently happening already some time, I guess last year the government said, okay, we have a campaign, no against vaping. And it was, of course, to protect youth. And they already used, well, some kind of research which used, I guess, well, a certain amount of respondents, of course, and they exaggerated the harm, which was, I guess, covered by the media that they did that. They said like 40% of vaping youth is addicted or feels addicted. Apparently there was like eight people or eight young people that mentioned that. But 40% was of course like ventilated also in the media, which of course makes it a huge problem. It was a transition that's already started a couple of years ago, that they want to restrict the sales to specialty stores, not only for vaping but also for tobacco, which is, I guess, a logical policy measure. But the problem is after the online sales ban and especially the flavor ban, the vape shops, like the 100% vape shops, they disappeared. So there was already a decline of approximately 80% of the market. And now they're transitioning further. So they say, okay, we are going to restrict sales for e-cigarettes earlier than for cigarettes. We're going to restrict it only to specialty stores. Currently, there are about 4,400 stores. sales points still in the Netherlands. But if they do that, for e-cigarettes, it will be 400 or a bit more than 400. So that's another 90% drop in sales. But due to the flavor ban, I guess, of course, the specialty stores, well, they had to close their shop because they couldn't continue. And by that, the consumers were not able to find their products anymore. So they go abroad or they go online. That's what's happening.
26:04 - 26:23
[Jon Fell]
And final one for you before we move on. So the Government's stated aim through this has been to protect youth and try and stop people vaping and smoking. Has it been successful? What's happened to vaping and smoking rates across the age ranges in the last few years while this regulation's been going on?
26:24 - 27:57
[Dorrie Heemskerk]
Well, before, I guess, the flavor ban, there was an uptake in youth use of vaping, of course. But there was also an uptake of smoking. Smoking has always been more, like youth and adults smoked more than that they vaped, of course. But what happened is since the flavor ban, you see an uptake in certain age groups. So the government says on population level, yes, flavor ban has been successful because more people quit vaping. But they didn't really address the issue that in certain age group, the smoking rose significantly. significantly, like in 16 to 20 age group it rose with something like 50%. And both also just prevalence, but also daily smoking and heavy smoking. And the 50-year-olds and older, like the older people that actually are really the heavy smokers, they increased their use, like cigarette use as well, and they declined e-cigarette use. So that's what's happening.
27:57 - 28:05
[Jon Fell]
OK. So they've destroyed the Dutch vaping industry, and smoking rates have drifted up, so it's not not a great success story.
28:05 - 28:27
[Dorrie Heemskerk]
No, and they supported, in fact, well, I guess they supported tobacco use because, yeah, that's what's happening. Well, not, of course, in the other age groups, you saw a decline in everything, like vaping and smoking, but especially in the 16 to 20 and all the people older than 50, they increased in smoking.
28:28 - 29:18
[Jon Fell]
Thanks very much, Dori. That was fascinating as well. I'm going to move now to our third speaker. Oscar, Oscar Balderas, who's made the longest journey of our speakers today, from Mexico City, I think, via Paris. Oscar is an investigative journalist specializing in organized crime, national security, and human rights. Spent the last 15 years covering Mexico's drug cartels for national and international outlets. He's won lots of prizes as well, and certainly gets my award for no disrespect intended to the others, probably being the bravest panelist. So Oscar, I wanted to ask you to start with how you got into all this. How did you start covering organized crime and what led you to look at tobacco and then vapes?
29:18 - 32:54
[Oscar Balderas]
Yes, of course. Thank you so much, everybody. When I graduated from university, I knew I wanted to become a war correspondent, but my country was in the second war on drugs at the time. So I realized I didn't need to go to any exotic or foreign country. I just needed to stay in my country. Just to say the war on drugs, the war on cartels. So I started to try to investigate violence because that was the way for me to explain my world. I was living in this really tight and warm community. Suddenly, my community was filled with dead bodies, beheaded people, kidnappings. So I needed to start realizing what was happening. And of course, the answer was in the drugs. So I started looking out for drug trade, drug trafficking. And that led me to have a really, really strong investment in fentanyl. By the time, fentanyl was a really big crisis in the United States, and it was, sooner or later, it was going to wreak a diplomatic fight against Mexico because a lot of fentanyl that killed people in the U.S. was made in Mexico with chemical precursors from China. So when I was investing in fentanyl, then I realized that the former Mexican president, Andrés Manuel López Obrador, just a few months away from leaving power, sent a proposition, a change in constitution to the Mexican Congress to ban fentanyl in constitution. But in the same document, he pointed vaping products. And I think that, wow, that's crazy. Just to make the comparison with fentanyl and vapes. So that was when I started looking for vape and then I got to this really big story proposition was only going to make things worse, evidently. Not only wasn't going to stop and preventing people from using vapes, but it was going to create a really big black market for the drug cartels. And I started to investigate and realize that this was seven big cartels that had a big profit from this. new black markets. And also the investigation that I did, I realized that this black market had a value, a revenue from one billion US dollars every year. So this was, I mean, that's... That's from vapes. Yeah, that's only for vapes. We're not talking about illegal tobacco, we're not talking about anything else, just vapes. And for me, it was really frightening because When we're talking about the Mexican drug cartels, maybe we're talking about the biggest drug cartels in the world, the most dangerous, the most vicious, the most violent. And to handle them one extra billion dollars every year, well, that's going to cost us lives, not only for diseases associated with vaping, but also, of course, violence. This is money they can use to buy ammunition, to buy guns, to buy vehicles, to buy... explosive drones that you're using against poor and rural people. So that was really frightening to me. And that's why I started to talk about in Mexican media about these absurd measures like prohibition.
32:54 - 33:21
[Jon Fell]
I guess in European markets where vapes have been banned or very heavily restricted perhaps, sorry. We have this situation where consumers access grey markets or they go to a neighbouring market, neighbouring country to buy their products. It's not necessarily a big organised crime problem, but in Mexico, 100% of the market essentially is organised crime.
33:21 - 36:14
[Oscar Balderas]
Yeah, it's really worth Mexico because illegal babes that come into Mexico mostly come from Asia. So in order to make this really long travel to go to Mexico, it requires great logistics that only drug cartels have. You cannot be a small organization to create these long journeys. You have to be big, you have to have a lot of money in order to corrupt and to bribe official policemen and also to penetrate borders in Mexico. So we're talking about these really, really, really violent people. And 100% of the vape market now, it's black market, it's illicit vape. And one of the things that I realized when I started investigating all this topic was that the illegal vape was not only a matter of revenue. It was also a way for the drug cartels to recruit young people because because the illegal babe market is not seen as a black market for a lot of young people. Because in Mexico, we don't have an official, we don't have legal babes. We don't have campaigns in order to sell teenagers, hey, don't use this. This is a product that is only intended for 18 years old and above. So what the drug cartels do in Mexico is that they approach these babes into teenagers, people that, I don't know, kids are 11, 12 years old. And they say, hey, you see this every day on the streets, in every market. So it's not really illegal. And this is a perfect way that you can earn some more money if you sell them to your schools, to your community. So they bring these babes to the young people. I knew a babe seller boy who was nine years old in his community. And when these boys are accustomed to this extra money that it's really good for them just to go out and go to the cinema or go to the park or everything, They say to them after two or three weeks, hey, you're not only going to sell vapes, now you're going to sell drugs, you're going to sell arms, and if you don't do it, we're going to kill you. Not only are we going to kill you, we're going to kill your family. I'm going to kill everybody that you love. So it's not only a revenue issue, it's also a recute issue. And that's really the way that the drug cartels are thriving in Mexico, because no matter how many arrests and detentions you made, they always find a way to substitute for the people they lost.
36:14 - 36:34
[Jon Fell]
That sounds really quite frightening. Yeah. I think you also mentioned that, again, as Arthur described, if you're buying vapes in Mexico, you're never totally sure what they might contain, and that fentanyl, mercury, other things have been found in some of the vapes that are available for sale there.
36:34 - 39:39
[Oscar Balderas]
Yeah, it's maybe a common thing with Thailand, because the user really doesn't know what they are using. And that's why I challenge this phrase that the former Mexican president said when he presented, this constitution law, they said, we are doing this in order to protect the public. And I say, okay, that's not the case. You're making it even worse. So what we have discovered in Mexico is that a lot of the vapes, nearly 40% of the illegal vapes, are filled with another kind of drug, just to create addiction to this product. So in the better scenario, it's marijuana. And that's the best scenario. In the worst case scenario, we're talking about... It's a good scenario to me. Yeah, exactly. In the worst scenario, we're talking about fentanyl. So as you know, it's a really deadly drug. Just a minimum amount of fentanyl can kill an adult. And this is a substance that is mixed with vapes that are flavored with pineapple. bubble gum that are targeting, of course, young people. They don't want to use this strong meat flavor. They want to strawberry, the apple, the candy cotton flavor. So these are made. in the laboratories that also create fentanyl methamphetamines. And this is a way to create a captive public. And of course, they did it with real, real violence. Also, this is something that I try to talk in Mexico media, but there's a lot of fright in Mexico media also to talk about this. The illegal vape in Mexico, it's also a way to draw invisible front lines in some territories. You can sell a vape that has a sticker. For example, it is half like a purple devil, a purple demon. It's from a cartel that is called CJNG, Cartel Jalisco Nueva Generación, which is the deadliest, the most violent cartel in Mexico, even more violent than the Sinaloa cartel. So if you see a guy... anybody with this uh purple devil vape you know that he voted from the another from another neighborhood and now he's injured neighbors so if you saw him You can kidnap him, you can kill him because he crossed a frontier that is invisible. So the vape is a way just to create these zip codes that you cannot enter, you cannot cross. And if I see you with this vape, with green, with yellow, with red, then I know you crossed the border that you cannot cross because that's my territory, that's the cartel turf, and then you will get killed. Best scenario, you're going to get killed. Worst scenario, all your family is killed. Goodness.
39:42 - 39:59
[Jon Fell]
So when Mexico changed its constitution last year to prohibit vapes, you and others warned them that this would hand all the market cartels, but they apparently didn't listen. Why didn't they listen, do you think? What was the factors that made them
40:00 - 41:37
[Oscar Balderas]
There's a story that is unverified, but we say that the former Mexican president, Andrés Manuel López Obrador, once he get into his house, the presidential house, he saw his young children vaping, and that made him furious. And that's the only explanation we have, because there's some media photos about this. Then underage kid, son of the Mexican president, vaping. So that's the only reason. A lot of people, journalists, doctors, specialists, who try to warn this is going to happen, this is going to be a tragedy. We don't need to feel the fire when it comes to the road cartels. We are making them a favor if we prohibit vapes. But he didn't listen. We tried to put the data, the scientific word, but that's the thing with prohibition, right? It's only fear. It's only a conservative political opinion. you consider that and you still will ignore it. And I think it comes out of fear, mainly. And then the former Mexican president leaves the office, and then the new Mexican president, Claudia Sheinbaum, then continued the work. She pushed this constitutional ban, and now we're at that. We have killings, we have extortion associated with the legal bait market.
41:39 - 42:01
[Jon Fell]
My final question for you at this stage is, is there any way back from this situation now? And I'm wondering, you know, if the Mexican government saw the light and changed the rules and vaping became properly legal again, would you be able to get the trade back from the cartels? Or is that it now? Is it stuck with them?
42:02 - 44:15
[Oscar Balderas]
I think it's really hard to call because we only have like one year from prohibition. But I think maybe the damage, it's irreversible. I don't think we can take now this black market away from the drug cartels. They are stuck with it. They know now the revenues. They know the benefits. They know that illegal rape is not only something to sell. It's not only another product in their menu. It's also a way to recruit young people. It's currency in jails. It's a way to get people to do what they want. In places in Mexico, like Veracruz, Tamaulipas, Guerrero, which are states that are in a really violent war, the drug cartels rob these big, really big trucks with vapes, and then they give away these illegal vapes. But they don't do it, of course, because they're with people. They are trying to gain the will of these really, really poor towns that need that vape, not only for the consumption, but to sell them in the market and try to make an extra money. So I think they know now, and they're not going to let easy the really big markets. So every day we stop talking about these absurd measures of prohibition, I think the drug cartels are earning money, a lot of money, and they're hurting us. And I want to say this because for me it's really important. When we talk about Mexican drug cartels, we tend to think this as a Mexican issue, but this is not a Mexican issue. CJ&G Cartel has presence in 62 countries around the world. Sinaloa Cartel in 52. The other ones, Gulf Cartel, Los Zetas, Carteles Unidos, La Unión Tepito, they have together a presence. in 38 countries in the world. They are also in Thailand, they are also in Netherlands, they are also in New Zealand, Canada. We're talking about a global menace. So every time we empower these criminal groups, it's not only an issue for my country, it's also an issue for the country of everyone present in this room.
44:17 - 45:01
[Jon Fell]
That was brilliant. Thank you very much indeed. We are now going to move to Trevor McGuffey from Philip Morris International. Trevor is Director of Corporate Affairs Research and Insights, and he supports PMI's markets and regions with surveys of public opinion on regulatory, fiscal, and societal topics. So I'm going to start with a general question for you, Trevor, for PMI generally. How does the scale of the illicit trade in smoke-free products compared to combustibles, and how much of a priority for you is it to tackle that?
45:01 - 48:07
[Trevor McGaughey]
Thanks for the question. And I mean, the short answer is that yes, it's a priority for us. We as a company started really looking into this in around 2021, 2022, where we're trying to get a handle on what is the size, the scope of this issue. And some of the recent numbers that we have put out is that if you look at global volumes of tobacco and nicotine products, and for a moment you just exclude China, we would say that right now the illicit evapor market is about 4%, which 4% doesn't sound like a big number on its own, but you compare that to what looks at legal evapor product, and that's right at 7%. Heated tobacco, globally again, what we estimate is around 6%. We're also seeing higher growth of some of the illicit SFP products compared to the legal market. So that illicit evapor number I gave you at 14%, over the last three years that has grown by about 18% on a compounded annual growth rate compared to the legal vape market at only 5% growth. So yes, it is a big issue. Yes, it is something that we're taking quite seriously. And we're also trying to look beyond that global picture and really understand some of the specific markets in which we operate and how does that compare. So if you take Germany as an example. We estimate through all of our empty pack collection and some of the different algorithms that we have that the illicit cigarette market is around 1.9 billion cigarettes consumed in 2025. When we do that same estimation for illicit evaper and when we convert that to a stick basis, so we have an apples to apples comparison. It's 1.8 billion. And so it's roughly the same size as the illicit cigarette market in Germany. Illicit vapes and illicit cigarettes, near equal. But we're also starting to see it emerge on different categories like oral. So within nicotine pouches, Germany unfortunately has a de facto ban on the products. And even the German government is estimating there's about 1.5 million consumers of nicotine pouches in the country. We've done mystery shopping programs to understand the scale of it, and what we found was that roughly around 16% of points of sale had nicotine pouches available for consumers if they wanted to purchase it. We obviously made those purchases and sent that off to our forensics teams to take a look at. And we found around 14% of those were actually counterfeit products. So they were bearing somebody's brand name on it that wasn't produced by them, that had different types of ingredients in it compared to what the legitimate product looked like. And if you look at, again, Germany to make a comparison, counterfeit cigarettes are only 0.8%, so less than 1% compared to 14%. So we're seeing this prohibition opening the door and at a very large scale.
48:09 - 48:35
[Jon Fell]
Yeah, I think it was yesterday, obviously, that the report that you publish in collaboration with KPMG came out on tobacco nicotine trade in Europe, and I couldn't help noticing that on pouches, there's several quite big markets now. Germany, you mentioned, Netherlands... Finland, I guess, sadly, seem to be France as well, which are just dominated by products which are not legally available for sale in those countries.
48:35 - 48:55
[Trevor McGaughey]
Completely. Yeah. So we see places like Belgium, we see places like Germany, Netherlands, products that are not allowed to be sold at a very high percentage. We're talking somewhere in the 80, 90% range for those markets. These are the products that are found when we go out and we do the collection in the streets and look for the discarded packaging.
48:58 - 49:24
[Jon Fell]
So do you think you've already mentioned some of this research that you've done on the scale of the market share of illicit smoke-free products in markets that have imposed prohibitionary measures, whether that's full bans like Mexico, Turkey, or Brazil, or partial measures like the disposable bans in the UK and France. Are there any general lessons that that research
49:25 - 52:46
[Trevor McGaughey]
Yeah, I think to put it into the 30-second sound bite, it's just that prohibition doesn't work. Bans don't work. Dr. Wodak said it much better than I could yesterday when he made the point that black markets will respond to strong consumer demand, and that's exactly what we're seeing. If you take the world and you split it between those markets that have full prohibition, Thailand, Mexico, the numbers are astounding. I think it was in 2024 in Mexico, the Colmex University estimated there was around 7.7 million adults who were using a product that was banned, whether that was heated tobacco at the time, whether that was e-cigarettes and contributing to a $1 billion market. Interestingly, I found that that study also found that around a third of Mexican adults didn't even realize these products were banned. It's become so widespread that they look at this and they say, well, no, these products must be allowed here in our market. Brazil, another market that faces a full ban, last year the University of Sao Paulo published a study where they found around 10 million adults were using a banned product and they put that in comparison with around 25 million smokers. So you see rates coming up and up. I could keep going on with places like Turkey, Argentina before the ban, but I think what we're seeing on that side is an abject failure of the policy. The consumers are still looking for these products and they're just getting it from very non-traditional ways. When you talk about prohibitionary policy, unfortunately the EU is the perfect test case right now where you have different member states like Netherlands, you have France, you have others that are starting to dip their toes into prohibition, whether it's things like online sales ban, disposable bans, flavor bans. And so one of the things that we have looked at is, how do we look at regulation and these illicit vape measure, or these illicit vape estimates, and is there a correlation? The answer is absolutely yes. As a member state like Netherlands, goes further and further into prohibition, you see the percentage of illicit evaper go up and up and up. So if you take a market that has no prohibitionary measures, right now it's about 19% of the market is product that shouldn't be there for one reason or the other. Move that up to three in the case of Netherlands, and we already heard the number. It's up to 87%. But I didn't need to come to Warsaw to tell everybody here that, as you prohibit more products and you get a higher share of elicit that almost makes sense, a product that was once legal is now illegal, of course, we would say Okay, we move it from column A to column B. But also what we're seeing is that the volumes are going up as well, so this isn't just about. oh, a disposable ban in France, and it goes from a legal product on the 31st of March to an illegal product on the 1st of April. What we see over three years is that these markets continue to grow, that there's more and more consumers consuming products that shouldn't be there. So it comes back to the previous, that 30-second soundbite, just frankly, it doesn't work.
52:46 - 53:02
[Jon Fell]
So you've done as well, I believe, research on broader societal issues towards illicit trade in nicotine products. What does the general public think? Do they want action taken or they just not particularly, or they just accept it as a fact of life?
53:03 - 55:16
[Trevor McGaughey]
This is where it gets really interesting, because when we do this research across the globe, and so one of the pieces of work that we have is in around 27 different markets across the globe. When we ask the question, do you believe your country has a problem with illicit cigarettes, 61% say yes, absolutely, our country has an issue. It goes up in numbers like 85% in Mexico 77% in Australia, even places like South Africa to 81% of the population saying yes, this country has a problem. And you see very similar numbers occurring as well on illicit vapes or illicit heated tobacco products or nicotine pouches. Again, the public is saying, we have a problem with this. Something needs to be done. They've also made that link in terms of different consequences. So it's not just enough that they're saying, hi, this is a problem. We need to deal with it. But we're seeing six out of 10 saying, actually, this illicit market is undermining legitimate efforts to reduce smoking rates in this country or to reduce nicotine consumption. In places like South Africa, eight out of 10 South Africans are making that link to community issues. They're telling us that it increases crime, that it causes lost tax revenue. that then has an effect on the health care that we can receive or the education that our children receive in school. And so that connection is quite there and it's quite strong. And interestingly, people are also demanding that our leaders do something about it. They're demanding that more action is taken at a very high level. Even if I go back into a time machine a few years ago, when we did a piece of work in the EU, we found three quarters of EU adults across 13 different member states saying governments need to study the impact of illicit before they go and they start making new rules, they start increasing taxes. And so from a societal standpoint, it's absolutely there. They recognize the issue, they recognize the consequences, and they make that demand that more needs to be done.
55:18 - 55:36
[Jon Fell]
message get across to politicians and policy professionals do you think especially when it comes to uh smoke-free products are they are they fully aware of the consequences of prohibition or is it some sort of blind spot for them
55:36 - 58:17
[Trevor McGaughey]
I think what we've seen over the past couple of years and what we've all discussed over the past couple of days is that there is a big disconnect. And it's actually quite interesting. It was a bit of an intellectual itch that we had. So we went out and we conducted interviews one-on-one with policymakers in the EU. They could be in Brussels. They could be back in their member states. Really ask them about this issue. And what we see is that if you get somebody one-on-one, they'll tell you a couple things. One, they'll say, look, I agree, I recognize that illicit trade is an issue. It's a complex issue and it has very wide reaching consequences. They'll also tell you, I agree that this is undermining the efforts that we are trying to take to reduce smoking rates or to achieve our whatever target it is that is set by either the commission, the WHO, or an individual member state. But then there's a big disconnect between what they will say, yes, this is an issue, yes, there's consequences, to then their actions. And so we asked them about this. We said, one, why the disconnect? What do you need to know? What do you need to see in order to have this become a bit more real? And unfortunately, I give out the bad news a lot when you work in societal research at Philip Morris International. There's no silver bullet to this. But one of the things that they told us that really stuck with me on how do we get a better message across is they said, one, we need to understand a bit more the size, the scope, the scale of the problem. What's the market sizing? What's the lost tax revenue? How does this have an effect on other criminal activities? Interestingly, they also told us we need to hear more from people. We need to hear more from people about the consequences that they see in their everyday. Talking about neighborhood crime increasing. Talking and hearing stories from legitimate vape shop owners about how they've been put out of business or how they've had a very difficult year for their business. And hearing more from people who are concerned about criminals who are not doing proper ID checks, that are concerned about these products ending up on school playgrounds and elsewhere. And so, you know, for me, I took that as a big takeaway, a big learning that, yes, there is a bit of a basis today that people or policy professionals are starting to see this problem, but we need to do a better job of making sure that they fully understand those consequences and that we're really saying the things that will help them. I don't think all hope is lost, but I think it is a very tough, tough audience to crack.
58:18 - 59:03
[Jon Fell]
Thanks very much. We'll move now to our final panellist, Mike Ellis. Mike has 30 years of experience in trying to combat illicit trade across actually quite a range of industries. I think you started off in music or trying to combat music piracy, then did a stint at a skincare company and then moved to Interpol running anti-illicit trade programmes across their 190 member countries. And Mike now advises Prohibition Does Not Work, which is a campaign advocating for better regulation of tobacco harm reduction products. So Mike, thank you for waiting patiently, first of all.
59:03 - 59:05
[Michael Ellis]
It's been very disturbing, actually.
59:06 - 59:08
[Jon Fell]
Fascinating and disturbing.
59:08 - 59:08
[Michael Ellis]
Unbelievable.
59:10 - 59:31
[Jon Fell]
So first of all, with your experience across the broader range of stuff that people trade illicitly, I'm wondering how The trade in tobacco and nicotine products compares with illicit markets in other things like music, luxury goods, narcotics. Is there something that makes tobacco and nicotine stand out for you?
59:31 - 61:30
[Michael Ellis]
Yeah, there's a couple of things. So a little bit about myself. I'm not an academic or a researcher. I started my life as a detective at Scotland Yard. I dealt with serious major organised crime as a detective. I moved into the private sector. I fell into IP crime, counterfeit products, headed European music piracy, then worked as global head for a skincare company. And then... My life turned back full circle because I was invited by Interpol, brought back into the police environment, assistant director of the organized crime unit where I was specifically in charge of the Interpol program across 190 countries. So, as you say, my experience goes from music to skincare to smuggled gold to diamonds to smuggled wildlife to smuggled human body parts to smuggled snake venom, don't ask me why, to smuggled fake pharmaceuticals, clothing, fake food, fake alcohol, fake car parts, fake aircraft parts, think about that when you go home. Fake semiconductors, fake electrical parts, fake microphones, fake TVs, fake everything. So I've had a touch on all types of product. And hand on heart, none is more lucrative, more profitable, more easily available, more sellable than tobacco. Without a doubt, tobacco is the most profitable illicit product that I have experienced. And then I'll go one step further to say the explosion in illicit vapes at the epidemic level that it is now is, in my opinion, without doubt, the fastest growing illicit commodity that law enforcement and communities and policymakers face at the moment.
61:33 - 61:46
[Jon Fell]
And do you think – I mean, is there anything special about tobacco and nicotine when it comes to the criminal elements involved or other people selling those hooky stuff?
61:46 - 62:40
[Michael Ellis]
I think the speakers before me have told the story. I think the violence that goes with illicit tobacco because of the profitability – the violence that is offered, the examples of corruption and bribery that we've heard about, the instability of rule of law, the exposure and exploitation of young people, the links with other types of crime, whether that's subversive political groups trying to follow their own agenda, i.e. terrorists, or whether that is organized crime groups who are investing in human trafficking, firearms, drugs, cybercrime, whatever, those stories exist and I think this type of crime fuels that without a doubt so that's where it is also unique is the offer of violence that goes with illicit tobacco and illicit vapes.
62:40 - 63:13
[Jon Fell]
When we had our preparatory chat you mentioned that quite often in the tobacco and nicotine space if stock gets confiscated and intercepted then the criminals just replace it for free and I'm guessing that even if they there'd be someone else come along in the next minute to sell the stuff anyway. So I'm wondering what that tells us about the limits of enforcement as a strategy to address this. Can we actually ever enforce our way out of this
63:13 - 64:38
[Michael Ellis]
When you listen to the Mexican story, you have to dig deep to think how are you going to enforce your way out of that. That example I was explaining to you is where a shopkeeper who was raided, the shopkeepers who are raided, the criminals just turn up with another three or four pallets. They replace the product for free. They say to the guy, here, I'll sell that. You can carry on your business. Very much similar to what my friend on my left was talking about, where they give products away free to begin with to try and entice the market. Very obvious techniques by the criminals to infiltrate the market. Listen... You cannot enforce your way out of illicit trade. I accept that, and I think hopefully all on the panel said, you can't enforce your way out of illicit trade. But illicit trade plays a part. Illicit trade is a pillar in the whole story, along with the discussions about health that we've been having over the last few days, along with discussions with consumer groups, along with discussions with policymakers and with governments, with tax levels, with pricing, etc., etc., But you cannot ignore enforcement. If you ignore enforcement, you might as well walk away because you're leaving your community and your society vulnerable to complete anarchy. So you must have enforcement. Enforcement plays a part, but I'm the first to put my hands up to say it's not going to solve the problem on its own, no.
64:41 - 65:11
[Jon Fell]
So that's fascinating. Thanks. When consumers buy illicit vapes, they might often assume that what they're getting is what is basically normal, legitimate product that's come from China, say, but just not sold through totally legitimate channels. Is that true? Have you seen many examples, as we've heard a little bit of discussion of, where the products are actually fake or dangerous?
65:11 - 66:09
[Michael Ellis]
So again, go back to some of the stories from Thailand and stories from Mexico and maybe the other countries involved where the actual oils are impregnated with fentanyls or opioids or toxins or any other type of addicted drugs. I think it's a complete lottery for consumers if you're buying off the internet or buying from an unknown source that you're going to digest this product. You've got no clue, no idea what's inside. It mirrors very much, I think, about fake pharmaceuticals, for example, fake medicines. You think you're buying a product that's going to help you or you're buying a product that's going to meet your needs, but actually you're causing yourself far more harm. I think it's a very, very dangerous thing. Very, very dangerous. And when you hear that certain crime groups are deliberately corrupting those oils to create addiction, it tells its own story.
66:12 - 66:42
[Jon Fell]
My final one for you is we've heard a couple of the other speakers mention that these prohibitions actually create the conditions for vapors to be extorted. Do you think it's a pattern that's generally applicable, that illicit markets in smoke-free generally also encourage whether that's from customs officials, police and politicians?
66:42 - 68:35
[Michael Ellis]
Again, it's made complete sense from what we've heard from the first four speakers here. Prohibition doesn't affect demand, does it? You prohibit a product, you're not affecting the demand for that product, so the consumers are going to still carry on buying that product from wherever they can buy it. If they're through prohibition, they're forced into the dark, into the black economy. These types of controls need to be balanced in a constructive... A blanket ban simply doesn't work. And what that means in reality, at street level, as you've heard in... As you've heard, in Mexico, it leads to murders and beheadings and extortions. In some parts of the world, it leads to shopkeepers being a... You know, I know stories, shopkeepers, they've owned a shop for 80 years, two guys come in, put an envelope on the counter and say, we're going to buy your shop. You say, what are you talking about buying my shop? My shop's not for sale. He said, it is for sale and we're buying it. And forcing, they want the shop, they want the shop because they want to sell the illicit tobacco from the shop. The shopkeeper doesn't sell the shop, the shop gets burned down. The same, my experience, I've met shopkeepers who've had a gun put in their face. guy comes in puts a gun in the face with a box of illicit products and say sell this illicit product I'll come back in two weeks and you must have sell it if I haven't sold it I'm going to shoot you so when a consumer comes in to buy product the shopkeeper is saying oh please you must buy this directs them over to the illicit product real life stories that's what we're facing that's how that's how they are at ground level that's how they're that's how they're operating the criminals at ground level
68:37 - 69:33
[Jon Fell]
Thank you very much, Mike. Ladies and gentlemen, we'll be coming to you to see if you have any questions in a moment. So get your thinking caps on to enable you a bit of time to reflect on that. I'm just going to ask a couple of more broader questions to the whole panel. And please feel free to speak up and answer if you've got something to say on this. So I'm wondering about the role of consumers in this. I'm guessing that there's quite a lot of consumers of illicit vapes, illicit other things, who don't really regard themselves as doing anything wrong. They're just buying a product that they want. And if anything, it's governments and regulators who are in the wrong and the people who are selling them the product actually providing a useful service. Do you think that's a fair way to look at stuff? Do you think consumers should be thinking more about where their money might end up?
69:35 - 70:45
[Asa Saligupta]
As a pure consumer right here and up here on the panel, I think that's pretty much fair to say that as a consumer, we don't really care as long as, you know, like personally, if I go somewhere that I can buy something that I feel it's authentic enough, then I don't really care. I'm paying my money and that's it. The money stops there. But also, if I look on the other side, you know, like because I work with the government, of course, you know, like I kind of think like, okay, yeah, the money should have some kind of taxation, you know, but so that taxation will come back to me in some kind of form, like community service or whatnot, but the taxation has to be fair. It can be overpriced or overtaxed. But mainly to answer your question is, yeah, I'm just paying what I think it's worth. It's not overpriced. I get what I want. And the money goes where? I don't care, really. Yeah.
70:45 - 73:30
[Michael Ellis]
And I think that's the tragedy. So in both countries, the violence that's been associated with selling the product is far removed at the point of sale. The consumer doesn't care. The consumer doesn't care that the person who's imported that product might have had his legs broken, doesn't care that he might have had his head chopped off, so long as he can buy that product. My own example, and excuse if anybody's heard this story before, but it's very personal to me, is a case that I was involved in in a particular country where we had identified a series of domestic manufacturing and distribution points which we came to raid, about 20 addresses. These addresses were controlled by Nigerian crime gangs. They were the masters in that particular country. and they had exploited and trafficked young Ethiopian girls to work in these particular locations. We started raiding these premises and a picture was formed of cages. They were barred windows. They were being fed during the day and watered. They were having to make illicit products, a certain number of illicit products. At night, they were completely under the control of the gangsters. At night, they were put onto the street, forced into the sex trade. forced into prostitution and we started doing the raids and this young Ethiopian girl in the house that I've gone into starts crying and I think yeah great you're crying because you've been caught you're crying because you've been arrested And that's not at all the reason. She was crying because she'd been found. She was crying because we'd rescued her. She was crying because she'd been released. And she was freed. And she was being brought out of this nightmare life that she'd been trafficked into But how far away is that removed from the consumer who doesn't give two monkeys because he's buying a cheap product? Doesn't care. He doesn't care. And there's been so many attempts by my own previous organization and others to try to reach out to consumers to raise consumer awareness, which is a piece and it remains a piece. And we mustn't not do it. But you can't compete free. You can't compete against free. And until it affects their families, until they themselves and their child is harmed by the harmful toxins inside the oils until that point they won't give a monkeys unfortunately in my view sorry i don't know what anyone else thinks thanks very much i'm also wondering about um the consequences of illicit markets and accessing illicit markets being being normalized for consumers um
73:32 - 73:42
[Jon Fell]
Do you think there are broader societal consequences of that? Does it erode trust in governments? Does it erode trust in authorities and law enforcement?
73:44 - 76:21
[Oscar Balderas]
I want to answer this one question because in Mexico and a lot of places, the first contact that a boy made with an illegal actor, a cartel member, is not obviously, I want fentanyl. I want a big machine in order to kill people. I want a vehicle. They have nine, 10 years old, and they are looking for babes. So that's the first contact they have with a leased market. And once they have that, They know that they can, that this illegal market is reliable, it's safe maybe in some parts of the country because this guy who are selling babes is really well known in the community, it's feared, it's respected also, and also can create a lot of solutions for this boy, for this teenager. And this happened in a really community in nearby Mexico City where I live. This boy was 10 years old that used to sell vapes. He was contacted by this cartel in Mexico, it's called La Union Tepito. He was selling these vapes, and then he realized, I had an issue with the neighborhood. I'm just not really connecting, we're having some issues. And instead of going to the police, he goes to this cartel boss. Because he know him and he's reliable. If he ever wants anything, he can connect with him. So he said, this cartel boss, hey, I had a problem with a neighbor. I need your help. We're not getting along and I really need for you to talk to him. And the cartel boss didn't know how to talk. He only knew how to shoot. And this cartel boss killed the neighbor of this boy. He killed the mom, the dad, and the and the sister. So when I heard this story, I said, of course. These illegal actors, these armed armors in Mexico that are selling babes, are also doing that because they are fulfilling a need. And as far as a consumer, even if it's a boy from 10 years old, acknowledge that he is reliable and he will get the job done, not what the police are going to make, but the drug cartel, that's going to be a big issue for us. So the illegal vape is not only a commodity, it's also our way to see criminal life.
76:22 - 77:29
[Asa Saligupta]
I would like to also add something. I think your question, when we look at it in the broader picture, it depends from area to area and country to country. It depends on how that certain part of the country or the world wherever you're from, how do you enforce it? Plus also how the communities are looking at the laws and regulations. Do they agree with the law and regulations and the people who are enforcing it? How good are they at their jobs, at what they are doing? Plus also, it's different from certain parts, like the fine and the punishment. are also different. So it depends on the level of severity of punishment and the enforcement of the law itself. So officers, the person who enforce the laws, plus the community. So it really varies a lot.
77:29 - 77:34
[Jon Fell]
Right. Are there any questions from the audience at this stage? Please raise your hand if you'd like to ask one. Harry.
77:43 - 78:41
[Harry Shapiro]
It's a good start. In discussions about prohibition, we keep on hearing this phrase, unintended consequences, which always makes me laugh because I can't possibly believe as a politician or a legislator on the planet who doesn't understand what is likely to happen when you start banning products and that has clearly already got a huge market. And I don't know if any of you have, our friend from Thailand who's been involved with government, they must realise what's going to happen. So if they realise what's going to happen, is it simply a question that the health ministry decide this is what we're going to do? And, oh, dear, look what's happened. And they just pass the whole lot over to law enforcement and tell them to sort it out.
78:44 - 80:17
[Asa Saligupta]
I'm going to, for a sense, since Harry just mentioned my country, and what is going on is really the legislators... I'm gonna say like some of them are really stupid, really. And I'm gonna give example, I'm not saying anything, but so I'm gonna speak for Thailand only, right? The first ban I just mentioned that it came like, you know, you cannot, it's illegal to import. The laws came from the Ministry of Public Health, but Ministry of Public Health has nothing to do with importation of anything at all. So they went and asked Ministry of Commerce, say like, please come out with this law. So the Ministry of Commerce say like, oh, What is it? What is electronic cigarette? Oh, it's THR. What is it? Oh, it's bad. It's worse than cigarette. Oh, OK. Well, we'll just ban it then. So that's how it happened. Really, I mean, and then they just keep on saying, like, vaping, electronic cigarette, heat not burn, and all those stuff, like pouch and everything else is much, much like 10 times, 100 times worse than regular tobacco or combustible cigarette. And the other people in the other department said, oh, must be true because it came from the Department of Health. So, you know, let's do it. So, yeah, maybe stupid is the word.
80:18 - 80:53
[Michael Ellis]
I think there's also the concept, some people believe, I couldn't possibly comment, that when a government bans cigarettes, makes a ban, they've made a decision, right, we've banned it. Now the responsibility is over there. And when something goes wrong over there, the government says, well, that's their fault. That's their fault. The police, the customs, the Ministry of Medicines or Food Drugs Administration, they must deal with that. We're the government. We've done our decision. And I think I couldn't comment. There's a possibility that that might be behind it.
80:55 - 80:59
[Jon Fell]
Good point. Thank you. Any more? Yes, we've got a question over here.
81:09 - 81:50
[Dannny Fournier]
Hi, I'm Dannny Fournier, illicit trade prevention, responsible for Philip Morris in Canada. First question maybe to Oscar, then Mike, maybe listen, because the second part is for you. How present are cartels when it comes to online illicit trade? I guess a eight or nine-year-old in downtown Mexico may not have access to phone or cell phones or easy access to internet. but are they present with the online illicit space? And after a second part maybe for Michael, how difficult or how much more difficult will this be in the future to tackle not only traditional illicit but online illicit trade?
81:51 - 85:27
[Oscar Balderas]
So thank you for the question. Before pandemic, I think drug cartels weren't really online. But after pandemic, they acknowledged the opportunities that has. They are not only recruiting young people through video games, they're also, for example, now that it's the World Cup in Mexico, we know that they are setting call centers in order to sells counterfeit tickets to go to the stadiums. They also are creating online fake gamble pages to create bank frauds. And of course, we now know that they are selling vapes mainly through social media, Facebook, TikTok, Instagram, which are the most popular social networks in Mexico. They are doing that relentlessly because they know now that a lot of young people are in those social media and they are trying to make a way to earn some extra money. So they buy these illegal vapes on Facebook, maybe, and they go through their schools. And maybe it happens something like Thailand. Students see illegal vapes everywhere, in the streets, in the kiosks, everywhere. And they say, OK, how could this be illegal? It's everywhere. I guess it's not that bad. And they're selling through and after that they're being recruited. So they're increasing the bets on online sites, especially social media. And this is something that happens to a lot of countries in the world. Organized crime are three, four steps ahead than law enforcement in cyber security issues. So once they close a page, a profile in Facebook, has already had three or four more ups. So I think it's been increasingly present. And just for that, I want to answer to the first question. In Mexico, I think there's a combination that is far worse than in Thailand. Maybe we are stupid and then corrupt. And that's a horrible combination. Because in Mexico, for example, you can only win an election with a really tiny public budget. In Mexico, we are not allowed to make private contributions to political campaigns. So for a lot of governors in Mexico, it's easier, it's more convenient to give a drug local cartel a really big black market so they can make a profit and then contributes to the political campaigns. So for some governors, it's really convenient to have drug cartels that are millionaire because then you can trade popularity for votes and for money. And one of the biggest, the most horrible but also admirables, if I may say things for Mexican drug cartels, is that they're not only a criminal machine, they're also an electoral machine. once every three, four or six years, the cartel boss is not only ordering killings and kidnappings and extortions, he's also ordering people how to vote. They are electoral masterminds. So I think maybe they are not just stupid in Mexico, they are also corrupt.
85:28 - 85:28
[Dannny Fournier]
Thank you.
85:28 - 87:39
[Michael Ellis]
I think for those trying to enforce illicit trade, the internet obviously creates so many challenges and barriers. Imagine you have a factory in one country. You have that factory sending product to a distribution sensor in a second country. You have the ISP in a third country. You have payments going into a bank account in the fourth country. You have the cartel guy running the whole thing in the fifth country. And you have the consumer buying the product in the sixth country. So a huge enforcement challenge to bring that all together, which is why organizations like mine, my previous employers, and many others now try to bring... countries together on multi-level countries all coming together to combat particular investigations. And then, of course, the payments in crypto. So you're trying to follow the money brings challenges as well. But then I'll chuck in another spanner is that my experience now that I'm seeing is that the criminals are trying to reduce the length of the supply chain. The 6,000 plus factories in China are now being replaced by domestic production. I'm seeing domestic vape production in rooms the size of your average bathroom where a guy will be mixing his own oils. He'll buy... He'll buy the component parts, the batteries, the electric batteries, the vape, the material, the plastics. He'll mix it all himself and then goes and gives that to... Imagine the cartels or the gangs are controlling 100 of these addresses. They're producing 1,000 a day. There's 100,000 a day coming out of these domestic... cottage industry places which fragments the investigations very hard to find if you do find one you're just going to catch a small player anyway so I think that's something we've got to look at in the future in this space is not just container importations or postal stream importate using parcels small parcels but also domestic production in country reduces the risk in the supply chain for the bad guys thank you
87:39 - 91:41
[Attendee]
My name is Moorthy, and I'm from Malaysia, your neighbor, my friend. The government of Malaysia has acknowledged that we lose several billion ringgit per year from illicit drug trade. Sorry, cigarette trade, combustible cigarette trade. But yet, there are talks that they may want to ban vaping in Malaysia. I mean, I'm just amazed that here they acknowledge they're losing X amount of ringgit, that's the currency of Malaysia, and yet they talk that they're going to, of course there's a movement going against it. The other impact, which I stressed yesterday during a session on the impact of prohibition on public health. I think it's not only public health. I think many of you here have acknowledged it has an impact on the criminal justice system. And Malaysia's a bit punitive. Drug users are sent to prison. I'm reiterating this because I'm trying to tell you that if they do ban vapes in Malaysia, besides fine, there's going to be prison sentence. And you know what happens when small offenders land up in prison. They're going to learn about crime. They're going to extend their networking, even if they never had one before. And what I'm very concerned about is we're just labeling, unnecessarily labeling, many Malaysians to be criminals, because your job opportunities will be limited. The minute you have a criminal conviction, you can't work for the government, you can't work for government-linked companies, you can't work for statutory bodies and maybe even the private sector and certain types of jobs you're eliminated from. And this is the worrying trend. Look, everything, each one of you, ma'am and the gentleman here have said, has such serious implications and, you know, the label of politicians being stupid, not so smart, corrupted, and it will enhance corruption. Illicit cigarettes can easily be bought anywhere in Malaysia. I'm a criminologist. I've been practicing this for 30 over years. And I speak frequently in various programs in my country and organize forums and conferences on crime and policing. And it is just very pathetic and it's very heartbreaking. I read a lot about Mexico. I spent 14 years in U.S. I understand about the issues in your country. And as the moderator said, you know, you're most probably the bravest man to be here. And anyway, may you always be safe and well. But it is just logic and rationality does not prevail in many politicians, not limited to from my country, I think many parts of the world as well. And I'm so shocked in Mexico. I asked this to a speaker earlier today. How can two-thirds of your politicians amend the Constitution? It takes two-thirds of the electorate, from what I understand of the political system in your country, the Congress. You need two-thirds of the... Don't tell me two-thirds of this... You don't have politicians who oppose this. You know what I mean? That they amended the Constitution to say that vaping... is an illegal act or criminal act or whatever. Thank you, Mr. Moderator. I just wanted to, this session has been very good because of the fact that we are pushing on this issue about non-prohibition. Prohibition is inherently evil, gentlemen. Thank you. Thank you. Thank you. Is there anything else you want to say?
91:41 - 92:54
[Asa Saligupta]
Yeah, I just want to just answer just one quick question. just a very short thing, it's like one of the things that before it came down to us, right, before the government decided on any law or regulations is there's got to be some kind of information fitted in, but most of the information is misinformation or disinformation that we are, I think all of us are trying to fight against, but those are misinformation going on before decision, like you said, you know, two-thirds and whatnot, or more than 50% or more than half or whatever. And that was before. So I think I would love to encourage all of us to spread the word around and just try to go against misinformation. Because if you go do a Google search, everything is all the misinformation and all the negative side of technology. tobacco harm reduction in general is still very negative, negative, negative. And that's what had been fed into the decisions of the policy and lawmakers. And so the result, of course, is gonna be negative for us.
92:57 - 93:46
[Jon Fell]
Thank you. Well, ladies and gentlemen, time has flown by. We've actually overrun slightly, so we need to draw it to an end here. somewhat disturbing and depressing subject matter. But I have found this conversation really enlightening with some pretty firm messages that prohibition doesn't eliminate demand and harsh regulation can push markets to become illicit where there's no need to, and those kind of policies don't achieve their stated aims of getting youth use down. They don't protect consumers because the products end up more dangerous. Thank you very much indeed to all the speakers. I hope you enjoyed it too. Thank you.