Canadian Manufacturers and Exporters calling on feds to address illicit trade issues

Ambassador Bridge between Windsor, Ontario and Detroit, Michigan.

The Canadian Manufacturers and Exporters is urging the federal government to treat illicit trade as a major economic issue, not just a policing problem.

In a new report, the industry group says illegal markets are undermining manufacturing competitiveness and damaging Canada’s reputation as a reliable trading partner.

The report, Pressing Matters: Combatting Illicit Trade and Manufacturing Equipment Misuse in Canada, examines the growth of contraband tobacco, illegal nicotine products, cargo theft, cannabis, auto theft and other illicit activity. It also highlights how organized crime is using advanced manufacturing equipment and online platforms to expand operations, particularly around key border hubs such as Vancouver, Montreal and Windsor.

The report says major gateways like Windsor, while critical to legitimate trade, continue to attract sophisticated smuggling operations that exploit gaps in inspection and monitoring, high cargo volumes and ongoing challenges for border agencies.

CME chief economist Alan Arcand, the report’s author, says illicit trade drains public revenue, funds organized crime, undercuts legitimate businesses and erodes confidence in Canada’s security.

“It’s not just a law enforcement issue — it’s an economic one,” Arcand said in an interview.

The report makes several recommendations, including expanding border enforcement beyond fentanyl and migration to target broader illicit markets, creating a national tobacco and nicotine intelligence centre, and strengthening intelligence sharing and joint enforcement with the United States.

It also calls for improved tracking of high-risk manufacturing equipment and supply chains, along with stronger enforcement against online illicit sellers and counterfeit marketplaces.

Arcand says closer co-operation with U.S. agencies would make enforcement more effective.

“Our relationship with the U.S. is a little challenged right now — that’s an understatement,” he said. “But there are areas where it does make sense to deepen co-operation, and this would be one of those.”

He added that eliminating illicit trade entirely is unrealistic, but governments can improve how they respond.

“You’re not going to catch 100 per cent of it… but it’s about being smarter,” Arcand said, pointing to the need for better technology at the border.

He said Canada lags behind the United States in adopting advanced tools, both in manufacturing and at border crossings.

The report estimates contraband tobacco accounts for up to half of cigarette sales in some provinces, costing governments at least $2.5 billion annually in lost tax revenue.

It also cites RCMP estimates of more than 50 illegal cigarette factories and more than 300 illegal “smoke shacks” operating in Ontario and Quebec.

Cargo theft losses in Canada and the United States reached an estimated $725 million in 2025, with Ontario accounting for roughly 85 per cent of incidents, the report says.

Meanwhile, the illicit cannabis market still represents about 30 per cent of national sales.