Brexit Is a Bonanza for Smugglers (and That's a Good Thing)

Borders offer a wonderful opportunity to evade high taxes and restrictive rules.


Denis Kilcommons/Newscom

With the deadline for Britain's "Brexit" from the European Union (EU) coming up at the end of the month, the details of the country's withdrawal from that economic and political union remain fuzzy, as does the actual timeline for the separation—and even whether the secession will take place at all.

But while British lawmakers debate the wisdom of reasserting national sovereignty and the shape that sovereignty might take, it's obvious that there are distinct benefits to at least some people in the firming up of borders. That is, there's real potential for liberty and profit in having conflicting rules on either side of arbitrary lines that can be crossed by smugglers.

"Brexit fuels smuggling fears on the Irish border," Sky News cautioned two years ago. "Different tax regimes on either side of it for the first time could increase the opportunity for illegal profit-making."

That may sound a bit odd in a world in which Britons have acquired a reputation for meekly submitting to the dictates of a nosy and controlling state, but that's not the whole story. Whatever the reality of modern Britain, the country has a colorful history of turning high taxes and authoritarian restrictions into business opportunities by honoring them only in the breach. A taste of that tradition can be found in classic movies like Green Grow the Rushes and Whisky Galore, in which clever locals steeped in a culture of doing as they please thwart tax collectors and other representatives of officialdom.

"In the 18th century illegal trade across England's coast grew at a prodigious rate. What had previously been simple small-scale evasion of duty turned into an industry of astonishing proportions, syphoning money abroad, and channelling huge volumes of contraband into the southern counties of England," writes Richard Platt, author of Smuggling in the British Isles: A History (2007). "This extraordinary situation … was a natural and inevitable result of punitive taxation imposed by a succession of governments each more desperate than the last to pay for costly wars in Europe."

It's no accident that Green Grow the Rushes and Whisky Galore were made in post-World War II Britain still groaning under tight rationing of food, fuel, and other goods as well as the central planning of the Labour government. In escaping government-imposed strictures, Britons turned to the black market to make life bearable. It was only natural for them to feel nostalgic about those who had gone before and made similar choices.

That everything old is new again is apparent from the flurry of post-Brexit news reports reminiscing about pre-EU smuggling escapades and anticipating the future. "It was tea at first, then butter and finally cigarettes. Evading the customs became his favourite pastime," one correspondent reported of his grandfather.

Later, the Irish Republican Army (IRA) came to dominate the business, finding it a ready source of funding for terrorist actions. Former IRA leaders still profit by evading heavy duties on cigarettes which keep tobacco smuggling viable via inventory brought in from outside the EU. Smuggling illegal drugs remains profitable, too, as the British government struggles with the eternally thankless task of trying to stand between eager consumers and the goods they want to buy.

Brexit promises to create more such opportunities as British and EU tax and regulatory policies drift in different directions, creating the potential for arbitrage for those willing to run a little legal risk. Existing smuggling networks with knowledge of the business and established channels are likely to reap the greatest rewards in the short term.

"It is entirely possible that the activities of such organised smuggling operations could be turbo-charged by a no-deal Brexit which would bring with it import and export duties between Northern Ireland and the Republic of Ireland and regulatory divergence for a wide range of commodities," writes Cathall McCall of Queens University in Belfast. "The golden rule of smuggling is that where there is a difference in the price of a commodity, or it is in short supply on either side of a border, smugglers will seek to step in and make a profit."

In the U.S., wildly varying taxes have created a lucrative trade in cigarettes and booze, since a small fortune can be made by simply filling a truck with goods in a less-avaricious state and transporting them for sale elsewhere. In New York, which has the highest cigarette taxes in the country, over half of all cigarettes are smuggled.

For the U.K., the border between Northern Ireland and Ireland keeps coming up as ground zero of revived smuggling, "given the Border's intricate networks of back roads, unofficial crossings, currency and tariff mismatches," as the Irish Times puts it. Those back roads and unofficial crossing have been in continuous use for generations; Brexit will just subject them—as well as routes elsewhere—to greater traffic.

In forecasts of revived smuggling, words like "fear," "risk," and "danger" keep recurring. Clearly, the powers that be have a negative view of people who move goods across borders without jumping through official hoops. To them, the growth of illicit trade is an unquestionably bad thing to be avoided.

But as both Platt and McCall make clear, smuggling is the "natural and inevitable result" (Platt's words) of high taxes and restrictive rules that create a "short supply on either side of a border" (McCall's words). Smugglers provide relief for people seeking to escape greedy tax authorities and authoritarian lawmakers. It's the taxes and rules that many people perceive as evils to be avoided.

That's not to say that smuggling is the ideal solution to sticky-fingered tax collectors and pushy politicians. Illegal markets attract people comfortable with illegality and all that entails, meaning violent organized criminals and terrorist groups like the IRA. But the responsibility for that situation rests on the politicians who create such markets with their onerous rules and heavy duties.

The best way for politicians to keep Brexit—or any cross-border opportunities—from turning into smugglers' bonanzas is to leave people unmolested. That's because illicit trade isn't a measure of bad behavior so much of bad policies. In the absence of high taxes and restrictions on the availability of desirable goods, smuggling isn't a lucrative activity at all.

Brexit will be a smuggling opportunity only if government officials make it so. But, with history as a guide, they probably will.