NCJ Number
195180
Journal
World Economics Volume: 2 Issue: 4 Dated: October-December 2001 Pages: 159-173
Date Published
2001
Length
15 pages
Annotation
This paper describes some of the data on production and consumption in the global drug trade and summarizes the estimates.
Abstract
A review of current estimates of drug sales and international drug flows notes that the United Nations Drug Control program is the official source of estimates that world trade in illicit drugs is in the range of $300 to $500 billion. Very few have challenged this figure; however, this paper illustrates the problems with the UN's overall $400 billion estimate by analyzing the estimate for heroin, globally the most widely used of the expensive drugs. The UN figure is based on multiplying global quantity consumed by something approximating U.S. levels for prices. Most heroin is consumed elsewhere, however; approximately three-quarters of heroin is consumed in poor nations in Asia, where heroin prices are lower. In absolute terms, most of the value added in the supply chain accrues when drugs are distributed within consuming countries. In true trade terms, a more reasonable estimate of the total for illicit drugs -- cocaine, heroin, marijuana, and synthetic drugs -- is only about $20 to $25 billion annually (Reuter, 1998). This paper illustrates the logic of this estimate with heroin supplies. The UN claim that global trade in illegal drugs exceeds that for iron and steel is thus a gross exaggeration; it is only one-fifth the size of that industry's trade flow. Drugs are a modest contributor to total world trade. An analysis of the distribution of supply-chain activities and value added considers source country production, the tracking of value added in the supply chain, and a comparison of value added in agriculture and the illicit drug industry. A discussion of the limits of knowledge advises that the principal conceptual problem is that buyers cannot report a price in dollars per standardized unit, but only how much they spent on some quantity of white powder, the contents of which is unknown. Even after they have consumed their purchase, they cannot tell whether what they purchased was 30-percent pure or 70-percent pure. Still, this paper argues that for many purposes, rough approximations are enough. 13 references