Smuggling in emerging markets: Global implications

Abstract

Economists and policymakers have lauded the adoption of liberal trade policies in many of the emerging markets. From the outside it may appear that governments in these countries have cemented a new set of rules governing economic behavior within their borders. Yet the authors have found that these countries are likely to see the emergence or resurgence of smuggling and contraband distribution in response to trade liberalization. In order to survive under trade liberalization, smugglers will rely on cost savings associated with the circumventing of legal import channels. In addition they may employ violence to bolster a diminished competitive advantage and may seek new illegal sources, both local and international, for the consumer products they distribute. In a market environment in which organized crime competes alongside more legitimate channels of distribution, U.S. multinationals will face new challenges relating to strategic planning, maintaining alliance relationships and corporate control of global brands and pricing.