The opening of trade borders through the North American Free Trade Agreement (NAFTA) from 1994 onwards was accompanied by a significant increase in drug-related violence in Mexican regions that served as routes for drug smuggling. This is shown by a recent study by Erik Hornung, Professor of Economic History at the Faculty of Management, Economics and Social Sciences at the University of Cologne and member of the Cluster of Excellence ECONtribute of the Universities of Cologne and Bonn. Together with his co-authors Eduardo Hidalgo, Ph.D. (doctorate from the University of Cologne) and Professor Pablo Selaya, Ph.D. (University of Copenhagen), he concludes: In municipalities along strategic drug trafficking routes, the number of homicides of men aged 15 to 39 increased by 2.1 cases per 100,000 after the agreement entered into force, corresponding to an increase of 26 per cent.In municipalities without such routes, no comparable increase occurred.
Violence concentrated along strategic trade routes
The researchers examined how violence developed spatially after NAFTA entered into force in 1994. To do so, they linked municipal homicide data with optimally calculated smuggling routes. Using the so-called Dijkstra algorithm, they identified those routes that connected historical drug transhipment points in Mexico with US land border crossings using the existing road network.
The result: The increase in violence occurred almost exclusively in municipalities located directly along these calculated smuggling corridors. The effect was particularly strong along sections leading to US border crossings with high trade volumes and rapidly growing goods traffic as a result of NAFTA. In more distant regions, violence partially declined.
Drugs could be smuggled across the border more easily
After NAFTA came into force in 1994, Mexican exports to the USA, measured as a share of gross domestic product, doubled within a few years. At the same time, cross-border lorry traffic increased sharply, while inspection rates declined. Illegal drugs such as cannabis, opium and cocaine could more easily be concealed within legal goods flows and transported through heavily used border crossings. “This apparently increased the profits of Mexican drug cartels and the value of controlling the most profitable smuggling routes,” says Professor Hornung. “This led to intensified violent competition between criminal organisations for these corridors.”
The study also examined alternative explanations for the increase in violence. NAFTA significantly changed the Mexican economy, among other things through stronger import competition in the agricultural sector, especially for maize farmers. In theory, lower incomes could have made criminal activities more attractive if the alternative of legal work became less profitable. However, the analyses show that the observed effect of rising violence along smuggling routes cannot be explained by increasing trade competition. The smuggling routes do not overlap with regions affected by import competition. In addition, there were no effects among population groups outside typical perpetrator profiles and no increase in other causes of death such as accidents or suicides. The findings therefore clearly support what is known as a “greed effect”: Rising profits in the illegal sector led to violent competition over strategic smuggling corridors.
Municipalities along the identified smuggling routes also exhibited above-average rates of drug-related homicides throughout the 2000s. The violence is primarily attributable to conflicts between rival cartels, while confrontations with police or the military played a comparatively minor role.
“Our study shows that free trade can have unintended consequences despite all its advantages,” says Professor Hornung. “However, abolishing free trade is not the solution. Instead, we need targeted measures against drug-related violence.”
ECONtribute: Markets & Public Policy
The Cluster of Excellence ECONtribute, jointly supported by the Universities of Bonn and Cologne, addresses pressing societal and technological challenges such as global financial crises, rising inequality, political polarisation, digitalisation and climate change. Researchers from economics and related disciplines develop innovative approaches to analyse markets and public policy and to find answers to such challenges.
Content contact:
Professor Dr Erik Hornung
Faculty of Management, Economics and Social Sciences
Cluster of Excellence ECONtribute
+49 221 470 2331
hornung@wiso.uni-koeln.de
Press and Communication:
Maria John Sánchez
Science Communications Manager ECONtribute
+49 228 73 7859
maria.johnsanchez@uni-bonn.de