Unofficial cross-border trade: globalisation in west Africa

Economic restructuring has encouraged an expansion of West Africa’s unofficial cross-border trade in consumer goods from world markets. Far from integrating West Africa into the global economy, however, unofficial trade reinforces the region’s economic marginalisation by depriving states of revenue from duties and taxes and doing little to promote trade in local products. New research argues however, that despite their limitations, cross-border trading networks offer useful institutional resources which should be incorporated into the formal economy rather than criminalised.

Research from the University of Oxford analyses how the free market economic reforms of structural adjustment have led to an expansion and deepening of West Africa’s unofficial cross-border trade. Economic restructuring was expected to limit unofficial trade but variations in the timing and degree of reform have created new legal gaps and weaknesses for traders to exploit.

Attitudes towards unofficial trade have changed dramatically. In the early 1980s the World Bank saw informal cross-border trade as a legitimate form of popular resistance to the failures of protectionist states. Since the late 1990s, however, commentators have become increasingly frustrated with the opportunistic practices of cross-border trading networks and concerned about the rise of corruption and criminality in many African states.

While recent attention has focused on the relationship between vice and cross-border trade – drugs, conflict diamonds, arms and people trafficking – in reality the main commodities are textiles, used cars, fuel, cigarettes and electronics. As local currencies have been devalued, officially imported consumer goods have become too costly for most West African traders and consumers alike. Poverty, rising formal sector unemployment and falling incomes have encouraged greater participation in unofficial trading networks.

Reduced levels of monitoring of financial transactions, combined with the increased speed of international and inter-continental currency movements, have reduced both the risk and the turnover time of cross-border activities. The author also describes how:

• West African groups known for their entrepreneurial flair are cutting out former Lebanese and European middlemen and dealing directly with suppliers in Western countries, the Gulf and East Asia.
• The organisation and survival of cross-border trade depends on state complicity: it supplements official incomes and allows well-placed civil servants to grow wealthy.
• Smuggled goods reach deep into national territories as cross-border goodsflow to neighbouring states: while cheap Nigerian petrol, grain and fertiliser used to be confined to the border areas of central Niger they are now traded across the country and onwards to Mali, Burkina Faso and Ghana.
• Trade in agricultural commodities has been declining in relation to unofficial trade in imported goods.
• Owing to political and media attention, the importance of narcotics or diamond smuggling in West African trading networks is greatly exaggerated, and based on weak and often narrativel evidence.

Although West African cross-border networks have facilitated global trade and private wealth accumulation, they have tended to undermine regional manufacturing, financial stability, and infrastructural investment. Thus instead of integrating West Africa into the global economy, in many respects cross-border trade has reinforced West Africa’s global economic marginalisaton. Policy-makers are left with two choices: cross-border trade can be suppressed and criminalised, or it can be brought into the formal economy.

For West African development, criminalisation is not the best option. For all it faults, cross-border trade remains the most efficient, organised and deep-rooted system of trade in the sub-region. The commercial skills, experience and organisational infrastructure of cross-border networks represent invaluable resources for the development of effective West African trade. What is needed is the incorporation of cross-border trade into the formal economy through more appropriate policy incentives to guide and redirect its activities.

Source(s):
‘A back door to globalisation? Structural adjustment, globalisation and transborder trade in West Africa’, Review of African Political Economy No.95:57-75, by Kate Meagher 2003

id21 Research Highlight: 18 November 2004

Further Information:
Kate Meagher
Nuffield College
University of Oxford
New Road
Oxford OX1 1NF
UK

Tel: +44 (0) 01865 278500
Contact the contributor: kate.meagher@nuf.ox.ac.uk

Nuffield College, Oxford University, UK

Other related links:
'The Greater Horn of Africa and Regional Trade' from ELDIS

'Methodologies for estimating informal crossborder trade in Eastern and Southern Africa : Kenya - Uganda border, Tanzania and its neighbors, Malawi and its neighbors, Mozambique and its neighbors' from ELDIS

'Integrating the unofficial economy into the dynamics of post - socialist economies : a framework of analysis and evidence' from ELDIS

'Unrecorded Cross-Border Trade Between Malawi and Neighboring Countries' from USAID

'Unrecorded Cross-Border Trade Between Kenya and Uganda: Implications for Food Security' from USAID

'The global dimensions of cross-border trade in the Somalia borderlands' from the University of Wisconsin-Madison