By Stephanie Nebehay

GENEVA, Feb 15 (Reuters) - Nearly 130 countries have taken the first steps towards a new treaty to combat tobacco smuggling, blamed for higher consumption and up to $50 billion in lost tax revenues each year, officials said on Friday.

The officials, from several international agencies, were speaking after the first negotiations under the World Health Organisation (WHO). They called for the pact to be ready for adoption by 2010, adding political will was needed.

They discussed a protocol to the WHO international treaty on tobacco control, which already bans sales to minors and tobacco advertising and sponsorship.

The United Nations agency estimates 5 million people die each year of tobacco-related diseases.

Many countries said the new pact should include a licensing system for suppliers and distributors, a "tracking and tracing regime" to monitor cigarettes through the supply chain and stronger law enforcement with stiff penalties, officials said.

"We need a protocol that is practical, effective and strong," Ian Walton-Georges, who chaired the weeklong talks, told a final news conference. "A start has been made and we will ensure momentum will be continued."

Further negotiations are expected in October and in 2009 before a draft text is presented in 2010 to the 152 countries which have ratified the Framework Convention on Tobacco Control.

Tobacco smugglers divert legally-traded cigarettes to black markets in all countries, especially rich ones, according to Walton-Georges, who works at the European Anti-Fraud Office.

"These are organised criminal gangs whose profits from illicit trade are ploughed into money-laundering, VAT fraud and other criminal activities," he said.

"Countries of Europe are particularly targeted because so much money can be made there. Last year in the European Union, we probably lost 6 billion euros or $9 billion, and that is what we know about," he added.

Illicit trade in tobacco products significantly contributes to death and disease caused by tobacco consumption and to the rise in tobacco consumption by making cigarettes "cheaper, more accessible and more difficult to regulate", according to WHO.

Activists welcomed progress, but insisted industry must be kept from influencing the negotiations and public health policy.

Philip Morris/Altria <MO.N>, British American Tobacco <BATS.L> and Japan Tobacco <2914.T> were among manufacturers closely following the week-long talks, they said.

"Smugglers are now on notice that their days of making vast profits with little chance of being caught, and if they are caught they are given negligible penalties, are coming to an end," said Deborah Arnott, of the Framework Convention Alliance which links 300 non-governmental organisations in 100 countries. (Editing by Matthew Jones)

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