SMUGGLING IN EMERGING MARKETS - GLOBAL IMPLICATIONS

Economists and policymakers have lauded th adoption of liberal trade p olicies in many of the emerging markets. From the outside it may appea r that governments in these countries have cemented a new set of rules governing economic behavior within their borders. Yet the authors hav e found that these countries are likely to see the emergence or resurg ence of smuggling and contraband distribution in response to trade lib eralization. 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 dim inished competitive advantage and may seek new illegal sources, both l ocal 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 relat ionships and corporate control of global brands and pricing.