#Debate: How Should We Judge Smuggling, Morally?

Under Chinese law, smuggling covers everything from buying an iPhone in Hong Kong and walking through customs without declaring it to hauling drugs and guns across a border. Should all of it be judged the same way?

#Debate is a new QDaily column for interesting, contentious questions. We know we stand on the shoulders of those who came before us.

Is smuggling a crime?

In law, yes. The criminal codes of most countries in the world name it. But appeal to people's moral intuition and smuggling stops looking like the plain evil that murder, arson, robbery and rape are.

That gap between law and morality explains why a recent case left so many people confused. In August 2018 the Guangdong High People's Court found that a 42-year-old woman had spent three years shuttling between the mainland and Hong Kong, buying clothes for mainland customers — the trade known as daigou — and selling more than 11.4 million yuan worth of them at home. The court convicted her of smuggling ordinary goods, sentenced her to 10 years in prison and fined her 5.5 million yuan. Many people thought the punishment far too harsh. Others said daigou is smuggling, and smuggling is wrong.

People disagree about the morality of smuggling because so many different acts fall under the one word. Under Chinese law it covers everything from buying an iPhone in Hong Kong and walking through customs without declaring it to running drugs and guns across a border — two acts whose moral weight could hardly be further apart.

That is why criminal law defines smuggling so loosely. The codes say only that smuggling means moving goods and articles back and forth across a national border in breach of the relevant laws and regulations, which usually means dodging duty or trafficking in goods customs has banned. So in China as in the United States, deciding whether an act is smuggling means reaching for rules outside the criminal code.

In China, it is the Customs Law that sets out the detailed provisions. A charge such as smuggling precious metals sends you further still — to the General Rules on Tariffs and to the Measures for the Administration of the Import and Export of Gold and Gold Products, issued jointly by the General Administration of Customs and the central bank. In the United States, the answer depends on what Congress has legislated about the goods in question and on the rules of Customs and Border Protection.

What counts as smuggling, then, depends entirely on policy — and governments keep changing their minds. Goods that could not be exported become exportable; goods that could be imported are banned overnight. Import and export quotas rise and fall. The picture can turn over in a night, and nothing shows that wavering better than American Prohibition, which lasted less than 15 years.

In January 1919, with the dust of the First World War barely settled and national leaders still shut in the palaces of Paris arguing over how to carve up the defeated powers and redistribute the world's spoils, the United States passed the Eighteenth Amendment, making it illegal to make, transport or sell liquor. It took effect a year later, and the country entered the Prohibition era.

Alcohol is one of the most addictive drinks in the world, and Americans have never been able to resist it. In colonial times they drank as a matter of habit, men and women, old and young. After the Civil War, beer replaced spirits as the national favorite. In an 1848 painting of the first president leaving office, a bottle of spirits stands on the table beside Washington. When Prohibition arrived abruptly in 1920, that thirst gave birth to an enormous liquor-smuggling chain.

Some of the people in it were the liquor merchants themselves; the trade was their living and they could not give it up. Others simply saw the profits in bootlegging and took the risk. What they did was exactly what merchants in the liquor import and export business had always done — carry drink from around the world into the United States. One constitutional amendment had turned the work into a crime.

"Ships loaded with rum sailed from Bimini, Belize and Saint-Pierre, slipped into American ports in careful disguise, transferred their cargo to fast motorboats and ran it to safe coves. Trucks carried spirits hidden across the Canadian border; whole truckloads of whiskey were sometimes smuggled in under cleverly resealed caps. Smuggling of every kind flourished."

So wrote the American historian Frederick Lewis Allen in Only Yesterday. Citing Commerce Department figures of the day, he estimated that more than US$4 million worth of liquor entered the country in 1924 alone.

The dry years did not last. Prohibition was repealed in 1933: the new president, Franklin D. Roosevelt, first lifted the restrictions on a few kinds of drink, and Congress then passed the Twenty-first Amendment, striking out the Eighteenth. What had been called smuggling was legal again.

Legal, then illegal, then legal again: in 15 years the character of carrying liquor across a border changed completely, which is enough to show that smuggling is whatever a government decides it is. The reasons Washington gave for imposing Prohibition, and then for repealing it, happen to be the two arguments still used today to justify customs and tariffs.

The first is national security and morality. Through the 1910s, the dry campaigners loaded alcohol with moral meaning. People ought to be sober; drink robs them of their reason; drink itself is therefore an immoral thing.

Banning liquor across the country meant going after the source. Besides shutting down American producers, the government had to stop people slipping drink in from abroad — which is how carrying liquor into the United States became smuggling. Between 1920 and 1930 the number of federal Prohibition agents grew only from just over 1,500 to just over 2,800, a force nowhere near large enough for a country that size.

Today the goods that carry the same weight are drugs. Opium in the 19th century, heroin in the 20th, the new synthetics of the 21st — all judged fiercely addictive and ruinous to health. To protect citizens and keep order, most countries in the world ban holding or trading them. In the name of national security, it seems, a government may outlaw particular goods, and smuggling is the crime that appears as a by-product.

The trouble with arguing the morality of smuggling this way is that smuggling drugs is immoral because of what drugs are, not because of the smuggling. More important, as with Prohibition, what a government makes of the link between drugs and national security is a choice, and every government chooses differently.

Marijuana was once a drug no government would go near; lately the fashion has run the other way, toward legalization. California legalized it outright in 1996. By 2014, 20 states backed legal medical use. In 2018 Canada made it a legal drug, and a recreational product besides.

Canada has decided to go a step further. It is considering scrapping the legal penalties for drug possession and treating the spread of illegal drugs as a public health and social problem rather than a criminal one. The people behind the proposal point to Portugal: in the 1990s it was a center of heroin addiction, with the highest rate of HIV infection from injecting drugs in the European Union. Deaths from overdose and HIV cases linked to injecting have since fallen sharply there.

Alcohol in America went a similar way. The Chicago gangs under Al Capone took over the liquor-smuggling business and used the profits to build a vast criminal empire. The wholesale closing of American distilleries, many scholars argue, also held back the economy of the 1920s.

By the time Prohibition ended in the 1930s most people agreed it had cut drinking. But weighing its costs against its benefits for society as a whole was never a yes-or-no question. In that light, tying national security to the case for customs and tariffs is not much of an argument.

When the government repealed Prohibition in 1933 it may have weighed the social effects, but the decisive factor was money. Historians calculate that before Prohibition about 14 percent of government revenue came from liquor taxes, a share that reached 30 to 40 percent for some state and local governments. Through the prosperous 1920s the loss was bearable. Once the Depression arrived in 1929 and the Roosevelt administration launched the New Deal, which needed vast sums for public works, liquor taxes mattered far more — and the government repealed Prohibition by act of Congress.

Money is the second reason governments want customs and tariffs, and it is why they were invented in the first place.

A World History of Customs and Tariffs (《世界海关与关税史》), published in 2003, may be the most systematic account of the subject. Its author, Hirotaka Asakura, believes the ancient civilizations of Egypt and Mesopotamia had something like a customs service, though at that distance neither its exact functions nor its organization can be established. The firmer records begin with ancient Greece.

Greece, unlike Egypt or Mesopotamia, was coastal and mountainous, its farming thin and its grain supply short; it leaned heavily on trade with the whole Mediterranean for enough wheat. Once the Greeks had grown to displace the Phoenicians at the center of that trade, the Phoenicians brought them gifts, "hoping to ensure that trade between them and the Greeks would be protected and would run smoothly."

This near-tribute was later replaced by something more systematic: import and export duties. The rate is usually put at 2 percent, though some records say it could rise to 5 or even 20 percent as circumstances demanded. The Greeks appointed officials to supervise the taxes and farmed the collecting out to contractors. Like any other tax, import and export duties seem to have been about revenue. The clearest evidence is that once Athens was drawn into the Peloponnesian War against Sparta, it raised the rate from 5 percent to 20.

A duty raises an importer's costs, so some importers were bound to try to avoid it — the earliest smuggling. Asakura quotes the Greek philosopher Zeno: "In Olophyx live the customs collector and the smuggler, the misfortune of that city and the misfortune of its people."

If the Greeks taxed trade to raise money, the Ptolemaic dynasty, founded in Egypt in 305 BC, found another use for the same tool. Under the Ptolemies, making olive oil was a royal privilege and an important source of royal income. Their oil was worse than the Greek and Syrian product, and dear. To protect their own interests they pushed the import duty on olive oil to 50 percent, which left domestic oil nominally 25 percent cheaper than imported. They did the same with honey, wine and other goods.

"These are the classic cases of Ptolemaic protective tariffs," Asakura writes. "One of their functions, beyond doubt, was to keep foreign goods out of the home market." It may be the first instance of trade protectionism.

Revenue and the protection of home industry: those are the reasons rulers ever since have kept and extended the customs and tariff system. Fragmented medieval Europe had lords taxing the merchants who crossed their land, sometimes at more than 50 percent. In 782, Tang officials trying to close a fiscal deficit set up in the major cities and ports and levied import duties of 2 to 10 percent. During the Hundred Years' War in the 14th century, England raised the export duty on wool to pay for fighting France.

By the middle of the 17th century France was running a huge trade deficit with the Netherlands, England, Italy and other leading countries — close to 10 million pounds a year. In 1667 it overhauled its tariffs, raising rates steeply, with duties on some goods going up by more than 120 percent. By the early 18th century France had its surplus.

The same holds today. In March 2016 the United States and Hong Kong together cracked a smuggling case: clothing from the Chinese mainland, declared as bound for Mexico, was in fact entering the United States and being sold to buyers around the country. Joseph Macias, a special agent in the Los Angeles office of Homeland Security Investigations, put it most bluntly: "Commercial smuggling is a multibillion-dollar global industry. It deprives governments of revenue and undermines our economy."

Economists do not buy it. In the textbook Gregory Mankiw wrote for first-year students, a whole chapter uses the simplest supply-and-demand analysis to show what tariffs do to trade. "From the standpoint of economic efficiency, the best policy is free trade with no tariffs." That has been the mainstream view of the discipline since Adam Smith.

Economics also makes smuggling easier to understand. When a good carries a heavy duty, people look for a cheaper route — around the customs system — and in law that route is smuggling.

At first, smuggling went unpunished. According to the Border Force National Museum in Liverpool, the early English customs service only collected duty at the ports; catching smugglers was not its job. Smuggling grew enormously in the 17th and 18th centuries, and at times more goods may have entered England without duty than with it. Not until 1661 did England pass a law making smuggling a capital offense. After that both smugglers and customs officers armed themselves, and the clashes between them could be violent.

It did not stop the trade. British history textbooks record that ordinary people thought smuggling harmless and joined in. "Many respectable members of society were involved, sometimes for the money, sometimes simply because they did not regard smuggling as a crime at all."

Because smuggling carried no moral charge for so many English people, only money could curb it. "When Prime Minister William Pitt cut tariffs in the 1780s, the profits shrank. Abolishing tariffs further in the 19th century made the fairly open smuggling of the 18th century vanish altogether."

Citizens and governments will plainly go on playing this game. From haitao, ordering straight from foreign websites, to daigou, the personal-shopper trade, Chinese consumers have invented every method they can to dodge the high import duties and consumption taxes China levies on foreign goods — and turned the methods into businesses. A May 2017 report in The New York Times said students in Australia carried US$600 million worth of goods back to China over the course of 2016. A report by Bain & Company found that China's overseas daigou market, though a third smaller than the year before, was still worth 43 billion yuan in 2015.

Read strictly against China's Customs Law, all 43 billion yuan of it is illegal income. But set the legal definition aside and carrying goods across a border has no moral content of its own. Once you accept that a tariff is a tax, and a tax is one piece of a government's economic policy, the question is open to argument — and to change.