Published: 21-01-2013, 21:16

Smuggling

Smuggling: Recent Trends in Smuggling

Smuggling: Smuggling and Legitimate Economic Actors

Smuggling is the surreptitious import or export of goods in violation of domestic or international law. Export smuggling is relatively rare and is mainly relegated to products involved in a multilateral boycott, such as a United Nations embargo on diamonds from African war zones, or state-subsidized products that consequently can be sold for higher prices abroad. Most commonly, smuggling involves the illegal import of banned goods or goods that face import quotas, significant tariffs, or other high taxes.

The preponderance of literature dealing with smuggling in the field of economics focuses on its impact on the welfare of the nation. In the mid- 1970s, many believed that smuggling was beneficial, at least to a small country, because smugglers circumvented tariffs that undermined free markets. Consequently smuggled goods (or contraband) could be sold for lower prices and therefore enhanced welfare. Bhagwati and Hansen (1973) challenged this commonly held belief, arguing that the level of prices resulting from smuggling was not the only issue relating to nationalwelfare. Smuggling could be welfare reducing when it undermined government policies of establishing tariffs to protect local industries. Subsequent writers also noted that smuggling could corrupt and demoralize a society as smugglers normally undermined law enforcement through bribery, intimidation, and even murder.

See also illegal drugs trade; nontariff measures; political economy of trade policy; quotas; tariffs

FURTHER READING

  • Albers Miller, Nancy D. 1999. ‘‘Consumer Misbehavior: Why People Buy Illicit Goods.’’ Journal of Consumer Marketing 16 (3): 273 87. Examines why consumers buy contraband and how they justify their behavior.
  • Bhagwati, Jagdish, and Bent Hansen. 1973. ‘‘A Theoretical Analysis of Smuggling.’’ Quarterly Journal of Economics 87 (2): 172 87. Presents one of the earliest and most influential discussions of the potential economic impacts of smuggling.
  • Gillespie, Kate. 2003. ‘‘Smuggling and the Global Firm.’’ Journal of International Management 9 (3): 317 33. Explores and documents the role of multinational companies in smuggling.
  • Gillespie, Kate, and J. Brad McBride. 1996. ‘‘Smuggling in Emerging Markets: Global Implications.’’ Columbia Journal of World Business 31 (4): 39 54. Traces the evolution of smuggling in the face of trade liberalization.

KATE GILLESPIE

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