Why a black market looms as NZ stubs out smoking

Dr Eric Crampton
23 November, 2021

Legislation banning smoking and vaping in cars with children will take effect on Sunday. At the Auckland boundary, police will not only be checking exit papers, but also whether cars comply with the new smokefree regulations.

Since May, the government has been working on a new set of SmokeFree rules aimed at sharply reducing smoking rates by 2025. The new action plan may be released on Sunday in conjunction with the new rules on smoking and vaping in cars.

As the government completes its action plan, we might hope officials took notice of a quiet seminar at Auckland University later this month.

Prof. Robert Beaglehole has devoted a lifetime to reducing the harms caused by smoking. Prof. Beaglehole discussed SmokeFree 2025 with the Auckland School of Population Health on 2 November. Despite broadly supporting the government's draft initiative, he raised more than a few troubling issues.

The draft SmokeFree 2025 plan aims to reduce access to cigarettes, the affordability of cigarettes, and the appeal of cigarettes. On the supply side, there are proposals such as regulating tobacco retail outlets, reducing their number, banning flavourings in cigarettes, and reducing nicotine content.

However, Professor Beaglehole warned that these measures will only be successful if smoking demand is reduced and illicit trade is controlled.

New Zealand can only reach the SmokeFree 2025 goal of keeping smoking rates below 5% by convincing some 60,000 smokers to quit every year until then: a quadrupling of current quit rates.

And taking measures out of proper sequence has risk.

Beaglehole indicated that more needs to be done to encourage smokers to quit through media campaigns, support communities with high smoking rates, and encourage smokers to switch to less harmful alternatives.

He noted that while mass media campaigns and community support measures have been effective, funding for them has been chiselled away. Smokers, who largely come from lower-income communities, contributed over two billion dollars in tobacco excise in 2020. But tight funding meant that the Health Promotion Agency’s Vape To Quit Strong programme, which encouraged smokers to shift to vaping, was cut in favour of a youth prevention programme.

New Zealand does not permit reduced harm alternatives that have been proven effective elsewhere in reducing smoking rates. Snus, in Sweden, has sharply reduced smoking rates. But it has not been available in New Zealand and was explicitly banned this year.

Prof. Beaglehole and Action on Smoking and Health, which he founded and now chairs, support the additional supply-side measures the government has proposed.

But he warned that measures targeting supply can only have effects in the longer term. Reducing demand by encouraging reduced-harm alternatives should be the priority. New Zealand's highest rates of smoking are found in isolated rural communities with limited access to tobacco retailers.

Moreover, if supply-side measures are implemented before measures that encourage people to shift to reduced-harm alternatives, they could hinder the goal's achievement.

His reasoning makes sense.

Currently, illicit tobacco is relatively minor issue. In the Regulatory Impact Statement for the draft action plan, Customs advises that illicit imports make up 6 or 7 percent of the overall market and are increasing.

Excise on tobacco is $1,307 per kilogram, making tobacco smuggling reasonably lucrative relative to the risk.

Importing $800,000 worth of cocaine draws a six year and nine month jail sentence. But importing almost 20 million cigarettes and evading almost $19 million in excise and GST draws just over five years in jail, with less risk of being caught in the first place. 

So there are some advantages in smuggling tobacco rather than harder drugs.

Legal product is more expensive than illicit product, but the illicit market is still relatively small. Finding an illicit supplier is harder than finding a legal supplier. And dealing with illicit markets can be inherently less appealing.

But if the illicit market is the only place to find cigarettes with a higher nicotine concentration, that could easily change. As Professor Beaglehole put it, “if we take the nicotine out of the cigarettes when people are still dependent, they will get the brand of cigarettes they want to get from other sources – and that means the black market.”

According to research published in Preventative Medicine in 2018 and cited in The New Zealand Initiative's submission on the draft SmokeFree 2025 Action Plan, restricting nicotine to very low levels can encourage smokers to switch to other ways of getting nicotine.

When vaping and reduced-harm alternatives are well established and encouraged through appropriate promotion campaigns, shifting to those alternatives may be the result. But while those alternatives are less well established, shifts to the illicit market could be a risk.

And that would make it harder to encourage smokers to shift to vaping.

Vaping is attractive not only because it is far less harmful than cigarettes, but also because it is far less expensive. Nicotine does not draw excise. The switch to vaping can save a smoker an awful lot of money.

But if a smoker first shifts to illicit tobacco suppliers, that cost difference erodes. If the illicit market, as the only source of full-strength cigarettes, grows and becomes more competitive, prices in the illicit market will fall. And the cost difference between vaping and smoking will reduced.

Harm-reduction approaches encourage smokers to switch to less-harmful alternatives. Professor Beaglehole expressed exacerbation with the World Health Organisation’s shift away from harm-reduction, perhaps unduly influenced by the Bloomberg Foundation’s “prohibitionist” approach.

New Zealand’s regulatory framework around vaping takes a more appropriate harm-reduction approach than frameworks in other countries. But there is always risk that international trends toward prohibitionist approaches will influence New Zealand’s strategies.

The government’s finalised SmokeFree 2025 Action Plan may arrive as early as Sunday. Before that plan goes to press, the Ministry of Health would do well to listen to Professor Beaglehole.


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