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I agree that regulated prostitution is a good thing, but that's not going to reduce demand for illegal prostitution or human trafficking. There are already stiff penalties for those crimes, but criminals do not expect to be caught.
I agree with your second point, as well.
Legalize prostitution would address sex trafficking and lower the numbers. Nothing is 100% but it would be a huge start.
Just like legalization of drugs, yes there will always be a black market for it but, we have dramatically reduced the numbers by giving a safe option. Legalize prostitution would also allow people that know something is wrong an ability to report it without fear of retaliation. It's a start not and end.
Legalizing prostitution hasn't lowered sex trafficking in any of the parts of the world where prostitution is legal. And I think it should be legal, but that's not the argument that gets you there.
Human trafficking is about controlling people, taking the desperate and controlling them for fun and profit. Yes, victims may avoid law enforcement for fear of prosecution, but that has more to do with attitudes towards women than it does with attitudes towards sex work. Compare the rights of a prostitute in New York, where it is illegal, with a prostitute in Bangladesh, where it is legal. It's not just the law, but the cultural attitudes towards human rights and equality that affect human trafficking.
But the expansion of the market just creates more demand, and more visible demand, which outpaces the reduction due to competition from legal prostitutes. In other words, just because it's legal doesn't mean women want to be prostitutes, and the demand for sex workers far exceeds the supply. Legalization allows pimps to go corporate, and pay taxes, while still exploiting vulnerable people with economic coercion and violence.