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Black Market Essay

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9 December 2011

Impact of Tobacco Smuggling and People Smuggling on U.S. Society

While Black Market is a broad notion applied to the system within which people either sell or buy illegal goods or foreign currency, it has its "thematic" subdivisions. Human trafficking and cigarette smuggling are the examples of the latter. While efforts have been made to combat cigarette smuggling on the territory of the U.S., many believe that it does more good than harm. There has not been a unanimous decision in relation to this. Similarly, people smuggling, which may often turn out to be an enslaving and dangerous experience of human trafficking, might have its own proponents, especially in the developing countries where people often regard it as the last chance to get out of economic deprivation. My goal in this paper is to find out a reply to the following question: "What is the impact of tobacco and people smuggling on the U.S. society?" To achieve my goal, I will explore both - cigarette smuggling and people smuggling - in terms of their impact on the American society. This will allow making conclusions regarding the primary question of the paper and the nature of modern American society.

Theoretical Background of Cigarette Smuggling and Human Trafficking

In their article "A Theoretical Analysis of Smuggling", Bhagwati and Hansen discuss the economic theory of smuggling which focused on smuggling as an economic activity whose aim was to substitute imports. Importantly, Bhagwati and Hansen explored the implications of this black market in terms of its impact on welfare. Contesting the popular belief that smuggling is beneficial for social welfare since private sector functions better than the public one, the researchers claimed that despite the fact that smuggling diverted money from state authorities to the private sector, it did not influence the rise in social welfare ratings (Bhagwati & Hansen 172). On the contrary, smuggling was recognized to distort people's welfare since legal traders were described finding themselves virtually squeezed out by illegal traders that earn by circumventing tariffs, yet operate under inferior trade conditions.

Contrary to the discussed research, Chowdhury spoke of the function of smuggling as an economic incentive. Specifically, he researched the economic background of smuggling and built a model of smuggling which was production-substituting with price disparity, being critically important as an incentive. Chowdhury is also known for his model of the relations between smugglers and local producers, known as antagonistic duopoly (Chowdhury, 2000).

In the research conducted by Pitt in 1981, the effects of smuggling are thought to be ambiguous. Discussing the problem of welfare consequences of smuggling, Pitt expresses an idea that legal and illegal trade (smuggling) coexist. This conclusion is based on awareness that firms are known to combine both legal trade and smuggling, the latter being thoroughly camouflaged. In his research claims, Pitt goes so far as to state that there exists positive correlation between smuggling and disparity in prices.

Finally, Martin and Panagariya (1984) along with Norton (1988) discuss costs involved in smuggling. Importantly, they come to the conclusion that the stricter law enforcement in the state is a deterrent to illegal trade or smuggling.

It is worth mentioning that the economic theory is generally positive about cigarette smuggling. The benefits for the economy are obvious. First of all, smuggling diverts money from the governmental sector to private sector, which is highly beneficial for the economy. Next, smuggling encourages lots of people to smoke, especially youngsters who can afford cheap cigarettes. At the same time, it helps to enhance brand loyalty in those states where restrictions on trade are expected to be lifted soon. Furthermore, international tobacco companies increase their profits by smuggling cigarettes to those countries where rules and regulations are strict (Rabinoff 161). In this respect, if governmental tobacco control is imposed strictly, so that no smuggling is available, it will have "undesirable economic consequences" fewer cigarettes will be bought (because of the high cost) and respectively produced. This will also cause thousands of job losses within the tobacco industry (Jha & Chaloupka 67).

As form people smuggling and human trafficking, theoretical research is scarce here. People smuggling or migrant smuggling refers to services of illegal immigration when a smuggler is paid to lead immigrants across the targeted state's border. The UN Protocol to Prevent, Suppress and Punish Trafficking in Persons which is a supplement to the UN Convention directed against Transnational Organized Crime defines trafficking in persons in the following way: as "the recruitment, transportation, transfer, harbouring or receipt of persons, by means of the threat or use of force or other forms of coercion, of abduction, of fraud, of deception, of the abuse of power or of a position of vulnerability or of the giving or receiving of payments or benefits to achieve the consent of a person having control over another person, for the purpose of exploitation." (United Nations Office on Drugs and Crime)

In relation to this, exploitation is about "at a minimum, the exploitation of the prostitution of others or other forms of sexual exploitation, forced labor or services, slavery or practices similar to slavery, servitude or the removal of organs." (United Nations Office on Drugs and Crime) It is evident that these definitions do not necessitate the physical transportation of people from one place to another. They refer to the provision, recruitment, harboring, or obtaining of a human for the exploitative purposes that have been mentioned above (Cicero-Dominguez, "Assessing the U.S.-Mexico Fight against Human Trafficking and Smuggling: Unintended Results of U.S. Immigration Policy").

Importantly, people smuggling should be distinguished from human trafficking. People smuggling, though being undertaken in dangerous conditions, deals with migrants who have agreed to smuggling. On the contrary, victims of human trafficking are known to have "either never consented or, if they initially consented, that consent has been rendered meaningless by the coercive, deceptive or abusive actions of the traffickers" (United Nations Office on Drugs and Crime).

In addition, smuggling is complete when the migrants arrive at the place of their destination. At



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