The 63,000 inhabitants of Andorra should all have dreadful smokers' cough. The tiny principality with a population of 63,000 imports more than 160 million packets of leading brand cigarettes annually - sufficient for every man, woman and child to smoke three packets a day, with plenty left over to supply the nine million tourists who visit each year. But Andorrans smoke no more than their fellow Europeans, the mountain views are not blurred in a haze of tobacco smoke, and Andorra remains a haven of tranquility nestling in the Pyrenees. It is a paradise for skiers in winter, hikers in summer and shoppers the year round; taxes are virtually non-existent, and a bottle of whisky or a packet of cigarettes costs less than half the price it would anywhere else in Europe.
Smuggling on a small scale across the border into France and Spain has traditionally played an important role in Andorran life, but in recent years it has shown worrying signs of expanding and turning the principality into a mecca for criminal gangs. They buy up millions of imported cigarettes and smuggle them back to their country of origin, particularly Ireland and the UK, where they sell them on the black market. The European Union is taking steps to investigate the problem. Tobacco smuggling has become as lucrative for the mafia gangs as the drug trade, a European diplomat in Madrid has claimed.
Officials from Uclaf, the EU anti-fraud squad, including representatives from Ireland and the UK, visited the principality in a mission to convince the local authorities to clamp down on the traffic. Their task has not been helped by the fact that Andorra, which only gained its full UN status five years ago, has virtually no taxation and no contraband laws. Europe's new open borders, under the Schengen Agreement, also make it easy for smugglers to transport their goods.
Andorra enjoys a somewhat anachronistic status, with its own government and ministers, who are theoretically overseen by the two historic co-princes, the President of France and the Bishop of Seu de Urgel in Spain.
For decades tobacco has followed closely behind tourism as one of Andorra's principal industries. Cigars and cigarettes are manufactured in the principality from imported tobacco and they also grow a small quantity of rather inferior "black" tobacco leaves. Many people - some in important positions in government - have long family traditions in tobacco and they are naturally reluctant to relinquish a main source of income.
At the end of last year Spain - which has long suffered as a result of Andorra's tax-free privileges as thousands of Spaniards crossed the border to buy tax-free luxury goods, tobacco or alcohol - imposed its own clampdown. Madrid sent in a squad of highly-trained civil guards, some seconded from anti-terrorist duties in the Basque Country, to seal off not only the main border crossings into Spain, but also the dozens of tiny mountain tracks and even underground watercourses. More than 550 smugglers from 23 different nationalities were arrested.
In one seizure last month in the Spanish town of Lleida, just south of the border, authorities intercepted a British-registered container truck carrying thousands of cartons of English cigarettes, valued before tax at £4 million. It is estimated that in a six-month period at the end of last year one Anglo-Irish gang smuggled some six million cartons of English cigarettes out of Andorra, and earned themselves a profit of £6 million.
The organised crime gangs from Ireland and Britain, and to a lesser extent, France, buy their cigarettes legally and almost tax-free in Andorra, smuggle them across the borders into France or Spain and transport it back across the Channel where they sell it on the black market.
The main losers in this dangerous cross-border trade are the nations' exchequers, which charge 70 or 80 per cent tax on cigarettes. It is estimated that one single container of smuggled tobacco could be worth more than half a million pounds in taxes in Ireland, which has the highest tax rate on cigarettes in Europe.
Some smarter operators are even indulging in what has been described as "virtual smuggling" by bending EU laws to their advantage and using Community Transit System (CTS) licences. The investigators are trying to establish how much of the tobacco never actually leaves the British Isles. "It is possible for people to buy tobacco in England, declare it for export to Andorra using the CTS documents, but never actually send it out of the UK," says one Madrid-based Customs officer.
Andorra authorities have promised to "co-operate" to try to stem the rising tide of contraband. Last month the Chief of the Andorra police, Antoni Aleix, announced that a number of those involved in the tobacco trade were being expelled from the principality - but only for breach of residency regulations and not for smuggling. One of the "co-operation" measures introduced is a small tax on tobacco and a slight increase in the retail price of cigarettes, but they still refuse to make contraband a penal offence. And so long as it remains legal millions of pounds of unpaid taxes will continue to go up in smoke.