As the Philippines takes on the ASEAN Chairship, the EU‑ASEAN Business Council (EU‑ABC) is pressing for stronger policy alignment and credible enforcement measures to curb illicit trade.
Titled “Driving ASEAN Action Against Illicit Trade,” the council’s report submitted to the Philippine government and ASEAN Secretariat lays down a blueprint for weaving “Cooperation‑First” principles into the regional economic program.
The council noted that the Philippines is strategically placed to guide ASEAN’s response to illicit trade, as transnational networks grow more complex. By advancing cross‑border collaboration and harmonized enforcement, the country can strengthen the region’s supply chain resilience.
The council’s report underscores Philippine initiatives as regional models, including the Anti‑Agricultural Economic Sabotage Law, which criminalizes major smuggling operations and applies technical checks, alongside the Preboarded Technical Verification mechanism (PTV) mechanism that prevents noncompliant shipments from leaving the country.
The report says the Philippine chairship can showcase existing safeguards against diversion, notably the requirement under the Implementing Rules and Regulations of Republic Act No. 10643 (Graphic Health Warnings Law) that tobacco products for export bear destination‑market fiscal and regulatory markings. By ensuring packaging compliance prior to shipment, these measures help prevent leakage into unintended markets.
Elaborating on these points, the report highlights enforcement as the critical factor in ensuring success, noting that the Philippine Chairship can help accelerate progress and disseminate proven approaches throughout ASEAN.
The report says that at the regional level, the chairship can accelerate progress by enhancing customs cooperation, embedding risk‑based monitoring, and promoting data‑driven solutions that balance trade facilitation with effective action against illicit diversion.
The council’s recommendations are framed around ASEAN’s existing Priority Economic Deliverables (PEDs), designed to reinforce current goals rather than create new obligations. With the Philippines preparing to lead under the theme “Navigating Our Future Together,” the Council identifies a strategic moment to mainstream illicit trade prevention into the bloc’s economic agenda.
According to EU‑ABC executive director Chris Humphrey, the 2026 chairship highlights three key priorities: enhancing trade and investment connectivity, bolstering supply chain resilience, and advancing digital transformation.
“Achieving these objectives requires not only deeper integration, but also stronger safeguards to ensure that trade remains secure, transparent, and rules-based,” Humphrey said.
The council’s report highlights how illicit trade diminishes fiscal capacity and disrupts supply chain integrity across key sectors—including pharmaceuticals, fuels, consumer goods, agriculture, alcohol, and tobacco—arguing that countering these threats is vital to advancing ASEAN’s regional priorities.
To reinforce regional safeguards, the report urges ASEAN to expand customs cooperation, integrate AI‑powered risk management, and leverage digital tools like the ASEAN Single Window for greater supply chain transparency. It also highlights PTV as a targeted assurance measure for high‑risk exports to block diversion before shipment.
The council said the measures are intended to ease trade flows, ensuring legitimate commerce thrives while criminal elements are pushed out. Linking these safeguards to the 2026 priorities would bolster investor confidence and demonstrate ASEAN’s vision of a secure, future‑oriented economic community.
“By building on existing ASEAN mechanisms, promoting risk-based and trade facilitative approaches and strengthening cooperation with the private sector and Dialogue Partners, ASEAN can reinforce its commitment to a resilient, sustainable and future-ready regional economy,” Humphrey said.
The report stems from an EU‑ABC mission to Manila last year and has been delivered to major agencies, including the Department of Trade and Industry and the Department of Finance. The Council represents the interests of European companies across the ASEAN region.
ASEAN countries lose billions yearly to illicit tobacco trade, which also drives smuggling and organized crime.
Senator Win Gatchalian, chair of the Senate Ways and Means Committee, cited BIR data showing that the Philippines lost P50 billion in 2024 from cigarette smuggling and vapor product misdeclaration. Cigarettes alone caused P34.37 billion in losses; vapor products, P14.84 billion; and heated tobacco P840 million.
Tax leakages have steadily grown from P13.9 billion in 2019 to P48.3 billion in 2023. By 2025, losses hit P54.1 billion, with tax leakages projected to reach P58.2 billion in 2026, P62.1 billion in 2027 and P65.9 billion by 2028.
