EU’s internal failures on illicit tobacco make it a weak partner for neighbouring countries

On March 13, Montenegro’s Ministry of Finance, the WHO Framework Convention on Tobacco Control (FCTC) Secretariat, and the WHO Regional Office for Europe convened for high-level talks in Podgorica to address the Western Balkans’ illicit tobacco trade.

At the meeting, WHO Regional Director for Europe, Hans Henri Kluge, lauded Montenegro’s progress in implementing the WHO FCTC Protocol to Eliminate Illicit Trade in Tobacco Products (ITP Protocol), while emphasising tobacco taxation as the most effective tool to tackle illicit tobacco and thus reduce smoking rates, healthcare costs and tax revenue losses. Echoing calls for a coordinated crackdown, EU Ambassador to Montenegro, Johann Sattler, reaffirmed Brussels’ commitment to supporting Montenegro’s efforts.

Yet, with Montenegro set to join the EU as early as 2028, it should be wary of Brussels’ helping hand. Indeed, the EU’s Big Tobacco-aligned tobacco traceability system has failed to rein in the bloc’s illicit tobacco trade, with its lack of adherence to ITP Protocol requirements leaving critical enforcement gaps. As Brussels drags its feet, member states like France are stepping up, pushing for stronger EU-wide measures to tackle the cross-border trade undermining the bloc’s public health and finances.

France’s ‘Luxembourg’ problem reflecting EU-wide vulnerability

Amid the EU’s rising ‘parallel market’ for tobacco, France has found itself in the eye of the storm, with neighbouring Luxembourg among the neighbouring countries whose significantly cheaper cigarettes are fueling a thriving cross-border trade. According to a recent report from the French Observatory of Drugs and Addictive Tendencies (OFDT), sales at French tobacconists fell by 26% between 2017 and 2022 – a figure rising to over 46% in France’s Moselle region bordering Luxembourg.

This trend is no sign of declining smoking rates in France but a symptom of tax-driven market distortions. In 2025, a pack of 25 cigarettes costs €13 in France compared to a mere €8 euros in Luxembourg, a price gap severely undercutting France’s excise tax strategy. A 2021 Santé Publique France survey notably found that 15% of French smokers bought their last pack abroad, soaring to 42.1% in border regions. Moreover, in the Grand Est region, over half of all tobacco purchases come from outside France.

While France is among the hardest hit – with its annual tax losses estimated between €3 billion and €7 billion – the parallel market threatens all of Europe, which loses potentially up to €20 billion every year to this scourge. Countries across the bloc, such as the Netherlands, are equally facing a rising tide of Luxembourgish tobacco, with Dutch citizens taking 12-hour bus trips to bring back up to €500 worth of cheap cigarettes – clearly above the EU’s four-carton regulatory limit.

Valletoux’s bold push for EU reform

As the OFDT has rightly cautioned, fragmented EU tax policies encourage cross-border purchases, reducing the effectiveness of national health measures aimed at cutting tobacco use.

Well aware of this regulatory vulnerability, Big Tobacco exploits EU tax disparities by flooding low-tax countries with surplus products destined for large, high-tax border markets like France to boost profits. Luxembourg, for example, imported 4.9 billion cigarettes in 2024 – roughly eight times its annual domestic consumption. Meanwhile, significant price differentials between countries – in Bulgaria, for example, cigarette prices are roughly half of those in neighboring Romania and Greece – are exacerbating this continental plague.

In response to this worsening situation, French MP and former Health Minister Frédéric Valletoux – supported by all 33 MPs from the Horizons & Independents parliamentary group – recently tabled a motion for resolution calling on the French Government to push for EU-wide tobacco delivery quotas, limiting supply to each country’s actual domestic consumption.

The proposal aims to spark a broader European debate on tightening anti-smoking regulations and tackling the tobacco industry’s oversupply tactics in line with the WHO’s ITP Protocol. As Valletoux has highlighted, “public health policies aimed at reducing tobacco consumption see their effect limited, in particular because of the development of the parallel market” – an avoidable problem enabled by the EU’s weak regulatory safeguards.

Pelletier mobilising MEPs, civil society to tackle illicit trade

Since 2019, the EU has had a traceability system to tackle tobacco smuggling, yet the illicit trade has only worsened. The reason for this failure is laid bare in a White Paper published last year by a group of France-led MEPs, including Anne-Sophie Pelletier, alongside leading civil society actors like Smoke Free Partnership: the system is effectively controlled by industry-aligned firms with little incentive to curb the lucrative black market.

Revealing its deep transparency shortcomings, the European Commission has allowed Swiss firms Dentsu Tracking and Inexto to maintain key roles in its track-and-trace system, despite their historic ties to Philip Morris International’s discredited Codentify system. Since acquiring Codentify from an industry front group, Inexto has long misrepresented the technology as WHO-compliant. What’s more, Dentsu Tracking has secured and renewed its contract with the EU executive without a public tender or required transparency disclosures.

As noted in the White Paper, the tobacco industry’s grip over EU tobacco control policy was cemented during the 2014 revision of the Tobacco Products Directive (TPD), when lobbying efforts stripped away WHO ITP Protocol requirements to ensure an industry-independent system. The result is clear: the EU’s illicit trade has continuously risen under this flawed system, while new data from the UK – where Dentsu Tracking also operates – paints a similarly dire picture.

According to the HMRC, legal tobacco sales have nearly halved since 2021 while smoking rates remain broadly stable – a clear sign of black market growth. A recent Philip Morris International-commissioned study corroborates this conclusion, reporting that illegal cigarette consumption in the UK jumped by over 20% in just one year.

Expanding France-led initiative across the bloc

While France has taken the lead in addressing parallel trade, the movement will inevitably extend to other affected EU member states.

The initiative’s leaders are rightly promoting a vision for overhauling Brussels’s flawed approach to the illicit trade, notably by robustly implementing the ITP Protocol in the Tobacco Products Directive and Tobacco Excise Directive revisions delayed for years by the Big Tobacco lobby. In addition to imposing country quotas on tobacco deliveries, the Valletoux-led motion echoes the MEP-led White Paper’s call for an industry-independent tobacco traceability system.

Crucially, in expanding its anti-smuggling crusade across the EU, France’s leaders must abandon the stagnant, decades-old debate over harmonising tobacco prices across the bloc, as this proposal transcends the EU’s jurisdiction and has long served as a justification for inaction. Instead, Paris should encourage member-states to raise domestic excise taxes, such as Bulgaria – the EU’s cheapest cigarette market and a major parallel market supplier – which has encouragingly introduced a strong tax hike effective from 1 April.

With the bloc’s rising illicit tobacco trade continuing to drain public finances and compromise public health, Montenegro’s commitment to the WHO Protocol should inspire the EU to follow suit. As the Valletoux motion flags, while all EU member states have voted to ratify the Protocol, eight – including Luxembourg and Spain – have yet to do so, while in France it remains unimplemented nearly a decade after ratification. Without universal ratification and strict implementation, parallel trade will continue to thrive, benefiting Big Tobacco giants at the public’s expense.