Global Economy
August 14, 2013

World drug trade: $50 billion?

By Edward Gresser

THE NUMBERS: Worldwide users of –

All illicit drugs ~200 million*
Marijuana/hashish ~180 million
Amphetamines/MDMA ~54 million
Cocaine ~17 million
Heroin/other opiates ~16 million

* Estimate by U.N. Office of Drugs and Crime; more precisely, the estimate is “between 165 million and 315 million people ages 15-64.”

WHAT THEY MEAN:

How big is the narcotics trade?  One option is to look it up.  America’s official civilian trade statistics for 2012 show 41 kilos of cocaine and amphetamines arriving from four countries – India, Switzerland, Australia, Japan – via the ports of Dallas/Fort Worth, New Orleans, and Philadelphia last year, for a total of $70,299. Cannabis imports came to $126,000, mostly from Romania and Nepal; lysergic acid, $3,504 worth from Italy in 2011. Heroin, morphine, and opium are lumped in with codeine and other legal prescription opiates, which totaled $267 million, arriving mainly from the UK and Australia in medicinal form.

This approach is not a success.  Presumably these are legal imports for medical or scientific use. Two reports, from the United Nations and from the White House’s Office of National Drug Control Policy, offer ways to guess at the scale of global narcotics markets and trade:

Within the United States, ONDCP’s 2012 Estimates of Drug Expenditures, Consumption, and Supply guesses that toward the end of the last decade, Americans were spending about $100 billion on illegal drugs. This included $37 billion on cocaine, $34 billion for marijuana, $11 billion for opiates, and $18 billion for amphetamines and MDMA, commonly termed “Ecstasy.” No estimates appear to exist for hallucinogens (whose use is rarer) or for new ‘designer drugs.’ In estimating imports and global market value, cocaine – intensely studied both within the U.S. and internationally – is a useful place to start. The UN research, drawn from the World Drug Report 2013, is as follows:

1. Coca leaf: Growers in South America produced about 246,000 tons of coca leaf in 2012, which earned them about $1.1 billion.

2. Cocaine: Via dryers and laboratories, this leaf created about 1000 tons of cocaine ( a relatively stable figure over the last decade), with nearly half lost to gang wars and police operations before arriving in the United States.

3. Transit: The amount that evades police and mafia wars to arrive in the United States seems to be 105 tons per year. At the border, just before reaching the U.S., this was worth about $3.3 billion.

4. Users: In the United States, cocaine has about 2.3 million regular users and somewhere above 2 million occasional users. If the $37 billion spending figure has remained stable since the last decade – though it is likely a bit lower – this would imply a 12-fold markup from border to user.

5. Worldwide: The UN guesses that there are 17.1 million cocaine users, supporting a global market of $88 billion. This would mean Americans account for 27% of users, but 40% of spending.

Under these assumptions, with some discounts for locally grown marijuana and locally made amphetamines, America’s $100 billion domestic spending on narcotics might reflect a $10 billion import bill for narcotics. This is roughly comparable to annual imports of jewelry, paper, fresh fruits and nuts, or cell phones.

A larger estimate across drugs requires two assumptions: (1) Markups for narcotics from border to buyer are similar to the 12-fold markup for cocaine within the United States, which seems at least plausible, based on the UN’s similar estimates for heroin trafficking into the European Union; and (2) all narcotics are moved across borders, as with cocaine from its Andean sources to the world at large. This is clearly not true – the UN’s report suggests that much of the marijuana and amphetamines consumed worldwide are respectively grown and synthesized locally. But it is correct for heroin and other opiates, which originate from opium grown mainly in Afghanistan, likely for many newly invented ‘designer drugs,’ which the UN believes are primarily made in Asia.

America’s share of drug users is highest in cocaine. Among other major drugs, Americans account for 20 percent of the world’s 16.5 million opiate users, 15 percent of the 180 million marijuana and hashish smokers, and 12 percent of the 34 million users of amphetamines. If U.S. users, as with cocaine, spend about 50 percent more per capita than users elsewhere, world consumer markets for heroin and other opiates, marijuana, and amphetamines would be about $380 billion, with a question mark for ‘designer drugs.’ Cross-border international trade, then, might be $30 billion to $50 billion. By comparison, world clothing exports are $375 billion annually, and telecom equipment $630 billion, and energy $3.5 trillion. As an international trade item, narcotics would fall somewhere between the $23 billion in annual coffee exports and the $60 billion in fish.

FURTHER READING:

From the Office of National Drug Control Policy, estimates of drug consumption within the United States: http://www.whitehouse.gov/ondcp/research-and-data/estimation-drug-expenditures-consumption-supply

And the National Drug Control Strategy for 2013: http://www.whitehouse.gov/ondcp/2013-national-drug-control-strategy

The United Nations’ World Drug Report 2013, citing especial alarm over use of new ‘designer’ chemicals as opposed to traditional marijuana, cocaine, opiates, and amphetamines: https://www.unodc.org/unodc/en/frontpage/2013/June/2013-world-drug-report-stability-in-use-of-traditional-drugs-alarming-rise-in-new-psychoactive-substances.html

And the State Department reports on narcotics use, trade and policy by country:  http://www.state.gov/j/inl/rls/nrcrpt/2013/index.htm

Data by drug –

According to the World Drug Report 2013, about 200 million people used at least one of the four big illegal drugs at least once in the last year. (More precisely, the UN’s guess is “between 167 million and 315 million people aged 15-64.”) Production and use break down as follows:

Cocaine: Coca leaf is cultivated in Bolivia, Colombia and Peru. The 2012 crop was estimated to produce 246,000 tons of dried coca leaf, which in turn yielded between 776 tons and 1051 tons of cocaine. This total has been stable over the last decade, with use falling in the U.S. – the market has contracted from $130 billion in the 1980s to the $37 billion estimate for 2007 – but growing in Asia. The 17.1 million users include about 5 million in the US and Canada, 4.6 million in Europe, and 3.3 million in South America.

Opiates: Grown historically in a belt from Turkey through Iran, Central Asia, India, and mainland Southeast Asia to China, Turkey, opium is now cultivated mostly in Afghanistan (and within Afghanistan, mostly in Helmand, Kandahar, Uruzgan and Farah Provinces.) Afghanistan is said to have produced 74 percent of the world’s 4900-ton heroin supply in 2012, and by the UN’s estimate a likely 90 percent in 2013. Shipping routes are south via Pakistan or west via Iran by truck, then by small boat or even container to the Middle East and Europe. Heroin and other opiates are thought to have about 16.5 million users worldwide, led by about 10 million in Asia, especially Afghanistan and Iran. The United States estimate is about 1.3 million users; Europe’s is about 3 million. The UN’s estimates for heroin markups from Afghanistan to the EU are as follows:

In Afghanistan $2,500/kilo
Turkey/Bulgaria border $8,000/kilo
EU ‘street’ value $75,000/kilo

Marijuana and hashish: Growing is worldwide and less well-tracked, with total production perhaps in a range of 13,000-60,000 tons of marijuana and 2,150-10,000 tons of hashish and cannabis resin. The UN estimates the world user population at 180 million (or more precisely, between 129 and 230 million), a much larger figure than those for other drugs. This divides as follows: 33 million in the U.S. and Canada, 15 million in Latin America, 32 million in Europe, 54 million in Asia and 44 million in Africa. The highest rates of use, though, are at 12.4 percent of the adult public in West Africa, and 11.0 percent in Australia and New Zealand; the largest acreages are in Afghanistan, Morocco, and Mexico.

Amphetamines, MDMA, etc.: Amphetamines, MDMA (“Ecstasy”) and other synthetic drugs are produced worldwide in laboratories, also perhaps mainly for local use. The with a world user estimate of 19 million for MDMA and 34 million for other amphetamines, with about two-thirds of users in Asia. Estimates for the United States are 4 million, Europe and Africa 3 million each, and Latin America 2 million.

And some reporting & policies abroad –

Uruguay takes a different approach, legalizes marijuana: http://www.theguardian.com/society/2013/aug/01/uruguay-first-legal-marijuana-market

From USAID, efforts to convince Peruvian coca growers to switch to alternative crops: http://peru.usaid.gov/alternative-development

Bangkok-based APAIC (Asia-Pacific Amphetamine Information Center) reports on methamphetamine use and law enforcement in Southeast Asia: http://www.apaic.org/

Mexico – The El Paso Times on drug cartels and targeting of police, across the river in Juarez: http://www.elpasotimes.com/news/ci_23834537/ju-rez-police-arrested-four-men-connection-attack

The New York Times on opium in Afghanistan as of 2013: http://www.nytimes.com/2013/04/16/world/asia/afghanistan-opium-production-increases-for-3rd-year.html?_r=0