Why the U.S. Should Use Trade Policy to Stem Illicit Drug Imports



Kathleen J. Frydl | Washington Monthly

This spring, the new U.S. Trade Representative Katherine Tai acknowledged the obvious: Trade deals present negotiators with an opportunity to combat global warming. Incorporating emission reductions into these talks is a position long advocated by many environmentalists, who point out that global trade fuels and exacerbates climate change.  What Tai didn’t say is that global trade also deeply affects the traffic in illegal drugs to the United States.

For decades, the American government has waged a “war on drugs,” to no avail. It may be that something as simple as trade presents the superior tool to achieve the common-sense goals of drug policy.

Actually, Congress used trade to pursue such goals in the decades before 1956, at which point heroin was declared contraband. The Controlled Substances Act of 1970 extended the prohibition of heroin to other “Schedule I” substances deemed to offer no medical value, such as cocaine and marijuana. This statute, best known for enshrining drug prohibition at home, also ratified the United Nations Single Convention, a treaty mandating that all signatories prohibit these same drugs in their own countries.

Since that time, the global regime of drug prohibition set in place by the Controlled Substances Act has utterly failed. We stand in the midst of the most lethal drug crisis in U.S. history, and the deluge of illegal drugs only grows worse. Despite the money and manpower invested in prohibition, today heroin—to take one important example—is more potent and more plentiful than ever. Worse yet, heroin is often adulterated, or totally displaced, by stronger chemical cousins such as fentanyl.

Global drug prohibition is not simply futile; it is a failure, rich in incentives for the wrong things. Traffickers over-produce supply to compensate for interdiction; they increase potency to keep a product competitive as middlemen dilute their shipments. Each law enforcement operation coaches drug dealers on how to evade detection or avoid more serious charges; every high-profile arrest and extradition persuades other traffickers to invest more in bribes to public officials.

Yet none of the drug reformers who catalogue these appalling failures offer an alternative proposal to curtail illegal drug supply. Instead, to explain the staggering number of drug overdose deaths in the U. S., they point to the hardship that drives what economists Anne Case and Angus Deaton call the “deaths of despair.” Though essential, this demand-focused analysis is inadequate unless it covers supply. The work of economist Christopher Ruhm is particularly important to consider. He demonstrates that, although crippling economic conditions prevail in many places, overdose deaths concentrate most where dangerous opioids do. To reduce overdose fatalities, we must reckon with an inescapable fact: drug supply matters.

You would not know it to listen to prohibitionists, who seem content to live with abject failure on the matter of supply—provided we acknowledge that, in theory, they strive for something else. Stuck between the inertia of the drug war and an incomplete vision for its reform, mainstream politicians and Washington think tanks devote no discernable effort to crafting alternative tactics to manage illegal drug supply.

Donald Trump shrewdly capitalized on this silence from the political establishment, tying his support for a successor to the North American Free Trade Agreement (NAFTA) to Mexico’s willingness to “do much more on stopping drugs from pouring into the U.S.” True to form, Trump never did more than talk. As the Senate Finance Committee ​put it​, Trump “did not follow through on his threat” to condition NAFTA renewal on a reduction in illegal drugs, though they went on to note that his gambit made the U.S. a “less reliable trading partner in the eyes of many nations.” But the Senators upbraiding the former president might be surprised to find that trade, not punishment, was once the standard for U.S. drug policy.

Before widespread use of the federal income tax, calibrating the tariff, the major source of revenue for the federal government, was a cornerstone of partisan alignment. Tariff hearings sometimes attracted hundreds of public witnesses. In 1930, Chairman Willis Hawley registered (and heard) over one thousand—the initial stage in crafting the famous Smoot-Hawley tariff, signed into law by President Herbert Hoover later that year. Hawley’s crowded hearing room carried with it a recognition that trade policy was not solely the preserve of financial elites; it also shaped the lives of millions of ordinary Americans.

Not surprisingly, tariffs and trade played an outsized role in the formulation of early drug policy. These interventions typically took the form of a quota, where shipments counted were capped, then tracked via a tax collected (and stamped) all along the points of distribution, up until the product’s end-user. This provided authorities with a paper trail to inspect to ensure the legality of any particular package. Congress opted for this regulatory approach because its power to tax structured many federal policies, but more so, when it came to the drugs at issue—opium or its derivatives, or cocaine—because the finished product relied upon imported raw materials. Simply put: Drugs were a trade, and it made sense to treat them as such.

Narcotics import policy was often negotiated in the context of a dedicated global conference. Absent a relevant round of negotiations, sometimes a change to drug policy was tacked onto tariff legislation. Congress propped up its most important drug policies as stand-alone tax-and-tariff legislation (the 1914 Harrison Narcotics Act; the 1922 Narcotic Drug Import and Export Act). With these tools, lawmakers hoped to contract the supply of these drugs to only that which was medically necessary.

Surprisingly, the United States sometimes relied on trade policy to implement non-financial aspects of its drug policy—as in 1947, when it threatened to cease pharmaceutical exports to Cuba if the government there failed to expel notorious organized crime kingpin Lucky Luciano, who used the island nation as a platform for organized crime. Luciano was sent packing the next day.

Surveying this pre-prohibition history, we don’t need to call a thousand public witnesses to tell us that trade matters. It was predictable that NAFTA, which loosened trade restrictions, would usher in a record heroin supply. Likewise, it was inevitable that prohibition would spawn an entrenched and sophisticated underground drug network from seed to sale. Markets carry opportunities, not all of them welcome; they also come with costs.

That said, a lucrative underground economy hosting violent criminal networks presents a substantially different policy target than the drug companies against which the policymakers of the pre-prohibition era squared off.  Nevertheless, drug traffic is still first and foremost a trade. That’s how supply should be conceptualized, and the context in which it should be handled.

Any trade talks with a source country, like Mexico or China, should set drug supply reduction goals, along the same lines as environmentalists urge that these negotiations incorporate emission reductions. These should be scaled, graduating over time. Reductions should not be measured by attempting drug interdiction at the border, because all this does is encourage suppliers to produce more, as well as provide an incentive to bribe border officials (a non-trivial problem). Instead, to measure progress, American policymakers should look to the price and potency of drugs on the street, first and foremost in those places ravaged by overdose deaths.

Failure to meet reduction goals would invoke trade penalties, either in the form of additional tariffs on imports—or, in dire instances like the case of Lucky Luciano, withholding of exports.

In theory, this approach mirrors the activism of the environmental groups on trade negotiations over the course of the past decade.  The inclusion of climate change policy objectives in trade negotiations can be characterized in familiar terms: rewards and punishment, or carrots and sticks. For example, the Canada-European Union Comprehensive Economic and Trade Agreement eliminates tariffs for items known to benefit the environment, so-called “green” goods, services, or technologies. Less frequently, agreements contain measures to “discipline” or penalize fossil-fuel subsidies. The vibrant debate among academics regarding whether and how best to use trade levers to tame global emissions simply has no parallel in the drug policy discussion, but it should.

Applying these same tools to drug policy allows negotiators to vest the “winners” of global trade in any given source-country to care more about the cost of their success—in effect, deputizing an influential set of ambassadors to pursue reform in their own country, using the power already at their disposal.

In terms of the global traffic in illegal drugs, the seismic shift here involves replacing guns and badges with calculators and economists, and American-dictated policy compliance for a source-country’s own initiative. Even more important, it entails moving from output or procedurally-focused drug policy to one premised on outcomes that matter: price and potency, the truest reflection of the amount of supply in circulation.

One of the most damning features of prohibition is its inability to affect, let alone reorient itself to, exactly these measures. Drug prohibition is a procedural tool, a means to an end.  As such, it is a remarkably bad one:  not unlike a greedy and unskilled drug dealer, taking more than his cut, while idling in his duties. A middleman like that would not last very long in the world of drug traffic, yet we’ve tolerated it in drug policy for decades. The extradition and trial of El Chapo Guzmán—the signal achievement of U.S. drug policy over the last twenty years—did nothing to curb illegal drug supply. In fact, we have acclimated ourselves so thoroughly to the drug war’s failure that none was even suggested.

Using trade, we change the focus from performative outputs to meaningful outcomes. For ordinary Americans, the real enemy is Guzmán’s business, as opposed to Guzmán the man, and its true nemesis is not the DEA in partnership with the Mexican military, but a methodical trade negotiator armed with data.

Such demands at the negotiating table could be construed as heavy-handed, to say nothing of the obvious limits to this approach. It’s difficult to prod China when Beijing holds more than $1 trillion in U.S. debt. In any given trade relationship, the U.S. cannot assume that it holds unilateral advantage, nor should any country be approached as a supplicant.

But trade talks with source countries (or important transit countries in Central America) furnish a more iterative and targeted set of instruments than military and law enforcement action. It is the war on drugs—in many ways, a relic of the Cold War—that assumes or requires a posture of fealty from our partners. Prior to World War II, during a more multilateral era when the U.S. was one power jostling with others, American drug policy relied on taxes and tariffs, not crime and punishment. And so it should again.

It follows that the necessary partner to such efforts is the decriminalization of possession of illegal drugs, harm reduction policies like needle exchange, and the shift away from the police and prison in favor of the doctor’s office and evidence-based treatment.

It should also be anticipated that, if the U. S. were to wield the tools of trade to achieve trade-related policy objectives, others would respond in kind. For example, the Mexican government might ask corn farmers enriched by NAFTA and its successors to regard the smuggling of guns to Mexico as among their most important concerns. From the perspective of a Washington establishment accustomed to controlling the political agenda, this might be construed as a problem. From nearly any other perspective, it would be welcomed as an advance.

Finally, and somewhat paradoxically, if we take a more encompassing approach to trade agreements, we wind up enhancing the nation-state as the primary agent of policy, shifting the gaze of grievance politics away from easy scapegoats. For too long, the asymmetry between what we ask of trade agreements and what they actually deliver has nurtured a vilification of symptoms over and above identification of a problem. We build ineffectual walls to repel vulnerable migrants rather than build policies to stem violence, corruption, and climate changes wreaking havoc in the Northern Triangle. This kind of “politics of scapegoating” replaces a diverse and dynamic policy register with only the tool of punishment, applied solely for the purpose of retribution.

“The war on drugs is one of the best examples of this counterproductive conflation of symptom with cause, and the orchestration of end-stage, punitive interventions over problem-solving at its source.  This in turn implicates the political equation established by the drug war in the growth and appeal of global authoritarianism—a point which may sound obvious to any close observer, but one that bears mention in this context. In the end, we can either revisit Hawley’s crowded committee room by expanding our trade priorities or face a world where democratic politics can no longer touch the problems we must address.

Kathleen J. Frydl is an assistant professor of history at the University of California, Berkeley, and the author of The G.I. Bill and The Drug Wars in America, 1940-1973.

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