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Marquette University

Defining the Human Trafficking Market

Principles of Supply and Demand

Cody Moreland

IA Capstone

Professor Friman

4-25-14

INTRODUCTION

In recent years, human trafficking has been identified as a form of modern

slavery, a threat to human security, and one of the greatest human rights challenges of our

time. According to US government estimates, 600,000 to 800,000 persons are trafficked

across international borders annually (GAO, 2006). The demand for these victims to be

trafficked stems from a variety of reasons including, but not limited to: forced labor,

domestic servitude, prostitution, organ removal, and war (UNODC Trafficking in

Persons). While there have been many forums of discussion regarding the issue of human

trafficking, there has been little discussion on the market forces driving this phenomenon.

Throughout the course of this paper, I will look to fill this gap so that the international

community can have better recognition of the underlying economic variables that drive

human trafficking.

Recently, human trafficking has become a popular topic of international

discussion. As a result many global initiatives calling for cooperation and collective

action in terms of addressing supply and demand related issues have been created. The

2000 UN Protocol for Trafficking in Persons Article 9, section 5 calls for state parties:

To adopt or strengthen legislative or other measures, such as educational, social

or cultural measures, including through bilateral and multilateral cooperation, to

discourage the demand that fosters all forms of exploitation of persons, especially

women and children, that leads to trafficking”.

The Report shows that in the past few years the number of Member States

seriously implementing the Protocol has more than doubled (from 54 to 125 out of the

155 States covered). However, there are still many countries that lack the necessary legal

instruments or political will to ratify the protocol. For the issue of human trafficking to be

tackled, more governments around the world need to participate in the forum of

international cooperation. The United Nations Global Initiative to Fight Human

Trafficking created their founding principle around a similar view in that, “human

trafficking is a crime of such magnitude and atrocity that it cannot be dealt with

successfully by any government alone” (UN.GIFT 2014). Going forward, a multi-lateral

strategy encompassing transparent evidence and statistics from countries all over the

world will lead to a more effective response.

The scope of this paper will focus primarily on the economics behind

transnational sex and labor trafficking, as this has become an important issue for

countries all around the world. In this paper, I refer to those who victimize others in order

to make a profit, as human traffickers. In contrast, I refer to those who are exploited for

labor or sex, as victims. Throughout the paper, I will illustrate the relationship between

the two economic agents through the principles of supply and demand.

Over the course of the next decade, crime experts expect human trafficking to

surpass drug and arms trafficking in the areas of “occurrence, cost to human wellbeing,

and profitability to criminals” (Schauer and Wheaton, 2006: 164–165). Existing

trafficking organizations in the drug and arms trade may look to diversify their operations

into human trafficking, as there is currently a market opportunity for high profits and low

risk. In order to gain a better understanding of this upward trend of trafficking activities,

governments of the world must go beyond the supply and demand factors and analyze

other market forces that drive human trafficking.

There are many social and economic ramifications felt by the victims of human

trafficking around the world. Kevin Bales estimates that there are 27 million people

trapped in modern day slavery across the world (Bales 2010: 3). The costs of human

trafficking and modern slavery are experienced on the individual, community, national,

regional, and global level (Shelley, 2010: 59). It can be seen that the capacity of the

human trafficking business is now global in scope. According to a 2005 study by the

International Labour Office, the global business of human trafficking is estimated to have

a global worth of $32 billion (ILO 2005: 5). According to the report, trafficking in

industrialized states accounts for $15.5 billion. Additionally, Asia accounts for $9.7

billion. It is clear that profit is the ulterior motive driving these human trafficking

operations. The large amounts of profit traffickers currently enjoy stem from a high level

of demand in the world economy. In response to the demand, traffickers are making

efforts to increase the supply of trafficked victims in their network. Furthermore, the

motive behind this issue is purely an economic one. As people become vulnerable to

exploitation, and businesses continually seek to lower the cost of labor, trafficking human

beings generates profit and a market for human trafficking is created.

Additionally, traffickers currently exploit not only victims, but also the

marketplace, largely due to high profitability, relatively low risk, and market arbitrage.

The low risk stems from the lack of political will to enforce trafficking laws and

implement domestic legislation, which as a result, allows modern day slavery to continue

on an upward trend. The lack of political will can be illustrated through the small number

of convictions for trafficking in persons. Notably, of the 132 countries covered in the

2012 UNODC Global Report on Trafficking in Persons, 16% did not record a single

conviction between 2007 and 2010. Ultimately, to solve this problem, it is essential to

increase government enforcement and participation in preventing human trafficking.

Additionally, the international community at larges needs to address supply and demand

driven factors, as well as alter the overall market incentives of high-profit margins and

low-risk factors that traffickers currently exploit.

THE MARKET

Viewing human trafficking from a business perspective can be somewhat

shocking. This perspective requires that we consider the relationship of supply and

demand of human beings to the driving force of profit. First, human trafficking is fueled

by a demand for cheap labor, commercial sex, and a higher standard of living. Secondly,

in order to supply this demand, human traffickers look to exploit vulnerable people and

traffic them for both labor and commercial sex. In this market, vulnerable individuals (the

commodity) are traded globally between traffickers (the sellers) and employers (the

buyers).

From an economics perspective, the business of human trafficking can be seen as

a monopolistically competitive industry (Schauer, Wheaton, 2010: 119) with many sellers

(human traffickers) offering many buyers (employers/individuals) differentiated products

(vulnerable individuals). The product differentiation (Bales. 2005: 158) can be broken

down further to supply the buyers demands of price and preferences, such as children for

labor, specific traits of a female (hair color/nationality), or even the degree of

vulnerability. Despite the large number of suppliers in the market, product differentiation

allows monopolistically competitive sellers to have control over the price of their

products on the global market (Schauer, Wheaton, 2010: 118).

In this monopolistically competitive market, human traffickers act as

intermediaries by connecting the supply of labour in source areas with the demand for

labour in destination areas. Traffickers are able to choose from a surplus of individuals in

source markets where there are high rates of vulnerability. Generally, this vulnerability is

due to lack of employment opportunities, corruption, and poverty, among other issues

around the globe (Aronowitz 2009). Traffickers feed off the low costs these vulnerable

members of the global population provide by selling them for high profit margins.

Traffickers are able sell there product for excessive prices due to the high demand for

their services in markets such as the U.S. and Europe. In the book titled, The Economics

of Human Trafficking, Schauer and Wheaton refer to this phenomenon as arbitrage, or the

ability to take advantage of an imbalance between two markets (Schauer and Wheaton

2010: 165). This market arbitrage allows traffickers to have high rates of profitability

because the cost of labor does not trade at the same price on all markets.

Furthermore, traffickers are now exploiting the international trade system set up

through the Washington Consensus. With trade liberalization occurring worldwide,

borders are more accessible, goods move more quickly and efficiently, and transportation

costs have been reduced. As globalization has made the world more interconnected,

traffickers are now able to recruit, exploit, and transport their victims with relative ease.

Additionally, corruption in politicians and law enforcement officers contribute to

both the lack of accurate information on human trafficking and the ease with which

traffickers transport and exploit victims. In countries such as Thailand, the profits

generated from trafficking help fund political parties and campaigns in order for

organizations to continue their operations (Shelley, 2010: 59). Furthermore, in cases

when governments do crack down on certain areas known for trafficking, the traffickers

adapt tactics to evade detection and operate in zones of impunity (Trafficking in Persons

Report 2013: 8). Going forward governments need to reduce corruption and improve

recognition of zones where traffickers currently exploit vulnerable individuals.

LABOR TRAFFICKING

Supply Factors

Traffickers look to recruit victims by using a wide variety of exploitative tactics.

The recruitment of individuals for the purpose of labor or sex is much easier during times

of economic crises, natural disasters, and conflict when there is a ready supply of

vulnerable individuals. During these times of crisis, the supply is increased, costs for

traffickers are lower, and as a result, profits are higher. In Africa, for example, large

numbers of individuals seeking new job opportunities are trafficked by boats from Africa

to the Canary Islands. According to UNODC, this trafficking business operating from

Mauritania, Gambia, Senegal, and Morocco to Europe nets the trafficking organizations

415 million dollars annually (Brothers, 2007). Human traffickers promise opportunities to

individuals who lack the financial means necessary to provide for themselves and their

families. The prospect of jobs and financial opportunity in places like the United States or

Europe is generally very hard for these impoverished individuals to turn down, mainly

because they lack the knowledge to understand the exploitative tactics of traffickers.

Furthermore, traffickers feed off depressed areas by recruiting these people into

forced or bonded labor. Bonded labor, also known as debt bondage, is a form of modern

slavery and can be defined as “an arrangement whereby a person is forced to pay off a

loan with direct labor in place of currency, over an agreed or obscure period of time”

(Princeton, cit. 17). Many individuals become victims of debt bondage when traffickers

exploit the initial agreed upon term of employment. In most cases, the trafficked

individual will only make enough money to pay for basic survival necessities such as

housing and food. In this sense, they have no disposable income to rid themselves from

the debt they incurred to the buyer.

Furthermore, in many cases, the trafficked individual does not have the right to

decide whether to work, how many hours to work, or what kind of work to do (Bales,

1999: 9). Examples of debt bondage are widespread and can even extend to different

generations. This is usually due the failure to pay back debts accumulated and highly

inflated rates of interest on loans (Zakhari, 2005: 141). For example, in India 81% of

individuals trapped in bonded labour took out a loan from a landlord, as they did not have

enough money to provide for basic necessities (Anti-Slavery.org - cit. 18). Furthermore, a

forced labour expert, Siddharth Kara, estimates in his book, “Bonded Labor: Tackling the

System of Slavery in South Asia that there are, “approximately 18 to 25 million bonded

laborers in the world, with roughly 84-88 percent of whom are in South Asia” (Kara,

2012: 3). This high amount of bonded laborers account for more than half of the worlds

slave population (Kara, 2012: 3).

Demand Factors

The high demand for labor trafficking stems from a variety of factors including,

low costs, ease of manipulation, and vulnerability. As businesses look to make profits

they cut costs in labor by exploiting individuals who are vulnerable and easy to control

(See Figure 1, supply/demand for labor). In her book, Slavery and Gender, Beth

Herzfield argues that the individuals that are generally trafficked for labor are children

because they are “easier to control, cheaper, and less likely to demand better working

conditions” (Herzfeld, 2002: 52). These children laborers provide labor flexibility and

increases in productivity for businesses by working long hours under all types of

conditions. Children have been trafficked for the use of labor in a wide variety of jobs

including, but not limited to: fighting for war lords in Africa, prostitution in United

States, and even for production and trafficking of drugs as seen in South America. These

forms of employment are easily brought to the public attention through the use of

information politics by trans advocacy networks. However, the problem is that

information from the largest form of girl’s employment, domestic servitude (Herzfeld

53), is less globally diffused. This can be seen as a result of social norms where people

fail to care or understand the background of these servants and human trafficking in

general.

Other parts of the world have different dynamics when it comes to the demand of

human trafficking. Herzfeld uses the example of the demand for children to be used as

camel jockeys in the Middle East. In her example, she illustrates how young boys are

trafficked from Pakistan, Bangladesh, and parts of Africa to be camel jockeys because

they are “small, light, and not paid” (Herzfeld 53). While this may seem like a minor

form in comparison to other trafficked laborers, nevertheless there are cases of severe

injuries and even death. Other areas of the world, like Africa, and specifically Uganda,

children are demanded by warlords to fight (boys) or act as sex slaves for soldiers (girls).

All of these forms of work and enslavement endanger the health, safety, and future

prospects of children throughout the world. Therefore, if human trafficking for labor

purposes is to be reduced, it is necessary to increase awareness, improve wages and

quality of life, and lastly, build government capacity to make a difference.

SEX TRAFFICKING

Demand Factors

Currently, U.S. federal law defines sex trafficking as “the recruitment, harboring,

transportation, provision, or obtaining of a person for the purpose of a commercial sex

act” (TIP Report 2013). According to the report, the most common form of human

trafficking is sexual exploitation at a near 80% of all trafficked victims. The US

Department of State holds the stance that there is a significant nexus between prostitution

and human trafficking. They argue that, “prostitution is inherently harmful and

dehumanizing and fuels the demand for trafficking” (Trafficking in Persons National

Security Presidential Directive, 2003). In terms of economics, prostitution can be seen as

the commodification of the human body and of human sexuality.

The phenomenon of sex trafficking is felt in all regions throughout the globe. The

victims of sexual exploitation are predominantly women and young girls as they are most

vulnerable and easiest to control. In 2013 the UNODC reported that there were an

estimated 4.5 million victims of sex slavery in the world at any given time, estimating

that 98% of these victims are women and girls (UNODC Report on TIP 2013).

In order to help this victims escape the chains of slavery the world needs to focus

on the root cause, the recognition that without men’s demand for and use of females for

sexual exploitation, the global prostitution industry would not be able flourish and

expand. (Ekberg 2004: 1189). In 2013, the TIP Report stated definitively that, “If there

were no demand for commercial sex, sex trafficking would not exist in the form it does

today. This reality underscores the need for continued strong efforts to enact policies and

promote cultural norms that disallow paying for sex.” (2013 TIP Report). Therefore, the

focus needs to shift to governments abolishing prostitution and thus the demand for

human trafficking. Because legal prostitution fuels human trafficking, nations that

maintain a legal model of prostitution are not making ‘serious and sustained’ efforts to

reduce demand for commercial sex, but instead are making serious and sustained efforts

to increase that demand.

Supply Factors

In the European Union, most trafficking is for the purpose of sexual exploitation

in prostitution. Victims are usually trafficked into brothels or strip clubs or even to pimps

which fuels the demand of trafficked individuals by concealing the intentions of sex trade

traffickers. Since the fall of communism in Europe, many individuals have been exploited

due to their vulnerability. High levels of unemployment and financially depressed

populations as a result of political and economic instability provide a wide pool of

victims to choose from. Traffickers recruit these vulnerable individuals into the sex trade

by advertising through websites or job fairs that look like legitimate employment

opportunities including modeling or waitressing. Furthermore, the ability to transport

these individuals in the European Union is very easy for traffickers due to laws to

promote labor mobility. In Europe over half of the trafficked victims come from the

Balkans (32%) and the former Soviet Union (19%), with 13% originating in South

America, 7% in Central Europe, 5% in Africa, and 3% in East Asia (UNODC:

Trafficking in Persons to Europe for Sexual Exploitation, 2010). It can be seen that in

most cases victims are trafficked across international borders but often remain intra-

regional.

In South Asia traffickers exploit vulnerable individuals who lack the financial

means to support themselves by promising them high paying jobs as domestic servants in

big cities. These people generally end up into prostitution through the use of coercion or

drug abuse by traffickers. The most common sex trafficking route in Asia according to

Sawnee Hunt, in his book Deconstructing Demand: The Driving Force of Sex

Trafficking, is from Nepal, Myanmar, and Bangladesh across the Indian border via land

routes (Hunt 2013: 2). These trafficked victims generally wind up as prostitutes in

Mumbai brothels or Karachi sums before being trafficked to the Gulf States (Hunt 2013:

2). It can be seen that sex trafficking has become global and can extend beyond just intra-

regional locations.

Sex trafficking is also widespread throughout the United States. According to the

National Report on Domestic Minor Sex Trafficking, as many as “100,000 to 300,000

children are bought for sex in America every year” (2009). The U.S. Department of

Justice reports that more than 80% of cases they have investigated have resulted in

identifying U.S. citizens as the victim’s rather then foreigner immigrants (Estes, Weiner,

2002). The domestic problem in the United States has gone largely unnoticed.

Furthermore, through the use of websites such as backpage.com or Craigslist,

traffickers have innovated new methods for sales, advertising, and protection. In

monitoring these sites, law enforcement officials have observed that as the date of major

sporting event nears, ads for escorts and commercial sex services increase on a weekly

basis (Hunt 2013: 2). The increase in demand is usually seen surrounding events such as

the Superbowl, World Series, PGA events, NHL playoffs, horse races and many other

sporting events (Report on Human Trafficking and Major Sporting Events, cit.23). The

Superbowl, for example, has been described by Texas Attorney General Greg Abbot as,

“the single-largest human trafficking incident in the United States” (Hunt 2013: 3). To

supply the increasing demand that accompanies sporting events like the Superbowl,

traffickers bring in thousands of women to be prostituted. Law enforcement agencies

have taken note, and have increased enforcement around these events. For example,

during the 2014 Superbowl, twenty-six law enforcement agencies worked together in

fifteen different states, by conducting operations on the street, in hotels, in brothels, via

the Internet and other channels. As a result of the operations, 1832 potential sex buyers

were arrested and were charged with more than $1 million in possible fines

(demandaboliton.org). While this was a big improvement in terms of enforcement, there

is still need for more punishment to raise the risks associated with participating in the sex

trade.

PREVENTION: REDUCING SUPPLY & DEMAND

The endless supply of trafficking victims will never be reduced unless the demand

for trafficking is combatted. The general consensus in regard to exploitative sex demand

issues is that the sex sector needs to be eliminated and demand needs to be reduced in

sectors where trafficking occurs. Reducing demand for commercial sex by criminalizing

the purchase of sexual services reduces the market for sex and thereby reduces trafficking

in persons for sexual exploitation.

Furthermore, the demand for exploitative labor needs to be reduced by increasing

awareness around the world, improving wages and quality of life, and lastly, building

government capacity to deal with human trafficking issues. Other tactics to reduce

demand can be used as well. For instance, creating legal migration channels for workers

so they do not have to use other measures to find job prospects. Secondly, improving

working conditions and labor laws will improve quality of life and reduce the likelihood

of exploitation in the workplace.

In conclusion, I believe that by not participating in prostitution or cheap labor

practices, the demand for trafficked individuals will decrease. By reducing demand, it

will lower the price in which traffickers can sell their product on global markets and as a

result the number one motive for traffickers, profit, will be reduced.

Supply side considerations also need to be taken into account when looking to

prevent human trafficking. The worlds supply of vulnerable individuals need the prospect

of improving their quality of life through employment. Governments need to be proactive

in improving income inequality, employment levels, and poverty reduction to meet this

demand. Poverty levels are extremely high and need to be improved around the world in

order to reduce the number of vulnerable individuals.

Government

The international community at large is beginning to realize the economic and

social effects of human trafficking. According to the 2009 UNODC Global Report on

Trafficking Persons, the number of countries having anti-trafficking legislation more than

doubled between 2003 and 2008. The first step in reducing human trafficking around the

world is to realize that trafficking not only exists but that it also has a negative impact

towards society as a whole. This step has been taken, however, now there is a need to

take a step further and address other market factors. Factors such as poverty levels and

immigration policies that have a direct impact on the supply and demand of trafficked

individuals need to be accounted for. In this sense, governments can reduce the mobility

of individuals that globalization has created by further securing borders. Additionally,

market dynamics centered on trafficking organizations need to be analyzed including, but

not limited to: business strategies, advertising, profit margins and goals, use of violence

and corruption, and the educational level of traffickers (Shelley, 2004: 114). By having a

better understanding of the market factors that influence human traffickers decision

making process, the international community and law enforcement agencies can put there

resources to the highest valued use. In terms of enforcement, by cracking down on large

criminal organizations as well as small-scale operations, the risk for profit will be

increased and the supply of their operations will decrease.

To date, the international community has been very unsuccessful in reducing

human trafficking. However, there have been some improvements noticed around the

world. In 1999, Sweden implemented the Sex Purchase Act to address the demand of

human trafficking. The Swedish law made buying sex a criminal offense; however selling

it still remained legal. In this sense, pimps and buyers were targeted rather than the

women providing the service of sex. By 2003, the new law began paying off. During this

year, Gunilla Ekberg notes in her book, Violence Against Women, that there was a “300%

increase in arrests” due to what she referred to as a “deeper comprehension of conditions

that make women vulnerable to being trafficked and better investigation methods”

(Ekberg 2004: 1196). This improvement correlates to a major problem with the

enforcement of human trafficking around the world. Law enforcement officials generally

lack the specialized knowledge needed, such as the ability to distinguish trafficking from

migrant smuggling. Going forward, governments need to take notice of Sweden’s

proactive measures by educating law enforcement officials in regards to trafficking

indicators.

Since Sweden began education officials and prioritizing demand reductions, the

results have been shocking. Street prostitution has declined by 65% and purchasers of sex

have decreased by over 80% in a span of ten years (Atamenenko 2013). This reduction in

demand can be seen as a result of higher risk due to punishment. As Ekberg notes, “when

the buyers risk punishment, the number of men who buy prostituted persons decreases,

and the local prostitution markets become less lucrative” (Ekberg 2004: 1187). Other

countries in Europe, specifically Iceland and Norway, have taken notice and implemented

similar legislation to reduced demand side dynamics. Now this phenomenon needs to be

globally diffused so that the demand for human trafficking can be reduced around the

world.

Additionally, increasing international cooperation through the use of NGO’s and

international organizations will diffuse the norm reducing demand for human trafficking.

Moreover, by sharing information from “the man on the spot,” to use Hayek’s term, the

decision making entities among state and non state actors will be able to make informed

and well calculated decisions when creating and implementing preventative human

trafficking policies.

Individuals within trans advocacy networks can work with these government

organizations and NGO’s to take action to reduce the demand of human trafficking.

Individual norm entrepreneurs can bring attention to the issue of human trafficking

through what Finnemore and Sikkink refer to as “strategic social construction”

(Finnemore and Sikkink, 1998). This strategy frames the issue, in this case human

trafficking, to be more efficiently diffused around the world. Furthermore, as Dong Wook

Kim argues in INGOs and the Global Diffusion of National Human Rights Institutions,

these norm entrepreneurs can use Transnational Advocacy Networks (TANs), NGO’s,

and IO’s for political voice opportunities and global diffusion (Kim, 2013: 505). Using

Kim’s framework, the issue of human trafficking can be tackled if these groups can work

together to “mobilize shame internationally”. By mobilizing shame, states will fear the

backlash from not adopting trafficking policies, and as a result will take action to

improve their situation. An example of an NGO that looks to prevent human trafficking is

Anti-Slavery International. This NGO works at the local, national, and international

levels to eliminate slavery around the world. They are able to “mobilize shame

internationally”, to use Kim’s term, by transmitting information to the international

community about governments that do not enforce existing human trafficking legislation.

Furthermore, through the use of these TANs and NGOs human trafficking prevention

laws will become “internationalized and universally accepted” (Finnemore and Sikkink,

1998: 898).

The term Transnational Advocacy Networks (TANs) came from Keck and

Sikkink's book, Activists Beyond Borders. They argue that, “TANs are organized to

promote causes, principled ideas, and norms, and they often involve individuals

advocating policy changes that cannot be easily linked to a rationalist understanding of

their interests” (Keck and Sikkink 1998: 8). These TANs can use information, symbolic,

leverage, and accountability politics to persuade powerful governments to take action

against human trafficking.

CONCLUSION

Ultimately, from my analysis on the supply and demand of human trafficking I

saw that the supply of vulnerable individuals is big factor when looking at the amount of

trafficked individuals. However, I believe that the demand for cheap labor and sexual

services is what ultimately influences the amount of trafficked individuals. I argue that

reducing demand is the best way for governments to take action against human

traffickers. However, unless the degree of poverty and quality of life is improved around

the world, there will always be a surplus of vulnerable individuals that traffickers and

buyers can exploit.

While accepting the need to address demand, it is important to acknowledge the

limits of a term that is not properly defined, is under-researched and is still subject to

debate and confusion. The commodification of workers through demand-based discourses

ignores the fact that trafficked persons, migrants and workers are people who are trying

to access labor and migration opportunities for themselves and their families, and who

often try to resist or escape exploitative situations.

In conclusion, no matter how many victims are rescued at the end of the day,

modern slavery will continue if the supply, demand, and profit remain unchanged. In

order for this to change, society must fundamentally alter the equation and make the

business of human trafficking the opposite of what it is today: a high-risk, low profit

crime.

Source: Schauer & Wheaton, 2010: 120 19

Source: Schauer & Wheaton, 2010: 120

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