Illicit trade and food fraud can cause considerable damage to the international market and public health, according to the World Trade Organization (WTO).

Contributors to a WTO report underlined the importance of focusing efforts on prevention, as it is a more cost-effective strategy for governments and the food industry.

The recently published document includes input from participants of the WTO’s Annual Agriculture Symposium, held in December 2023, which covered the topic.

Adulterated or contaminated products can pose serious health risks to consumers. Counterfeit products, which fail to contain advertised ingredients, defraud customers and erode trust in the food supply chain. Illegal food trade also triggers trade barriers due to safety concerns.

WTO’s role
Tools to help tackle the issue include the WTO Agreement on Sanitary and Phytosanitary Measures, which allows members to regulate food imports based on science and risk assessment techniques, and the Agreement on Technical Barriers to Trade, which permits countries to address deceptive practices.

Ngozi Okonjo-Iweala, WTO Director-General, said the problem affects all continents and most agri-food sectors, such as olive oil, honey, essential oils, wines, and spirits.

“We need to leverage these agreements and the whole WTO toolbox to fight illicit trade and food fraud. The leveling of the playing field must extend to weeding out all forms of illegal trade and fraudulent activities,” she said.

The global cost of fraud to the food industry has been estimated to be $30 to $50 billion annually.

According to the report, any response to the problem requires a blend of regulatory measures, enforcement, industry cooperation, and consumer education.

Experts said unlawful trade in food and food fraud can create an unfair competitive advantage for fraudulent operators, disrupt supply chains, and place legitimate businesses at a disadvantage. It can raise the cost of trade by prompting ever-greater controls, which can lead to sweeping trade barriers. Legitimate products can also be inadvertently caught up in regulatory efforts to eradicate trade in fraudulent foods.

Negative impacts of fraud
Jeffrey Hardy, Director-General of the Transnational Alliance, warned that the illicit food trade will likely become more rampant shortly, driven by high demand for food and the growing population. He added that as long as the profits for traffickers outweigh the risks of being caught or adequately sanctioned, their illegal business will continue to flourish.

Maximo Torero, chief economist at the UN Food and Agriculture Organization (FAO), covered vulnerabilities such as e-commerce, novel food sources and production systems, the informal sector, and organized crime.

Helen Medina, CEO of the World Spirits Alliance, highlighted the sector as a threat, with one out of four bottles of spirits being illicitly traded, primarily through smuggling, fraudulent activities, and tax evasion.

The more links there are across the supply chain, and the longer the distance between wher food is originally grown or produced and finally consumed provides opportunities for fraudsters to act, according to Quincy Lissaur, executive director of SAFE. 

Lissaur said testing alone is not a solution, and customs officers don’t have the resources to check every food shipment in a country.

Ambassador Chenggang Li of China spoke about the country’s efforts at the border to combat illicit trade, including fighting trademark infringement, implementing a modernized government system for monitoring the safety of imported food, and using social media to improve transparency and public awareness.