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ICBT in Africa: Why and How Much?

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Fousseini Traoré
Virtual Event - Informal African trade: The hidden world of food flows
DEC 3, 2020 - 09:30 AM TO 10:45 AM EST

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ICBT in Africa: Why and How Much?

  1. 1. ICBT in Africa: Why and How Much? Fousseini Traoré (based on joint work with A. Bouët) IFPRI Markets, Trade and Institutions Division Informal African trade: The hidden world of food flows | December 3, 2020
  2. 2. Definition/Taxonomy (1/2)  What is ICBT?  No universal definition, depends on the institution (UNCTAD, AfDB, OECD…)  Is the term for trade or for traders? o For UNCTAD (2019), « Informal cross-border trade is trade between neighboring countries conducted by vulnerable, small, unregistered traders. Typically, it is proximity trade involving the move of produce between markets close to the border. The informality refers to the status of the trader (unregistered), not necessarily to the trade itself (captured or unrecorded by the official customs system) »  For Afrika and Ajumbo (2012) and AfdB, ICBT is “Trade in processed or non-processed merchandise which may be legal imports or exports on one side of the border and illicit on the other side and vice-versa, on account of not having been subjected to statutory border formalities such as customs clearance. »
  3. 3. Definition/Taxonomy (2/2)  OECD (Lesser and Moisé-Leeman, 2009) definition is interesting:  ABC approach  Informal unregistered traders or firms operating entirely outside the formal economy (definition A).  Formal (registered) firms fully evading trade-related regulations and duties by, for instance, avoiding official border crossing points (definition B).  Formal (registered) firms partially evading trade-related regulations and duties by resorting to illegal practices, such as under-invoicing or declassifying (definition C).  Here focus on ICBT of ag products
  4. 4. Why do we observe ICBT?  Poverty (Ama et al. 2014; Charalambides and Parker, 2016)  High import tariffs and export taxes (Bouët, Cosnard & Laborde, 2017; Kim, 2010)  Prohibitions/bans or quotas (Bouët, Laborde and Traore, 2019)  Complex regulations and standards, particularly SPS measures (Bouquet, 2003)  Inefficiency of custom procedures (Bensassi, Jarreau, & Mitaritonna, 2016)  Historical and cultural determinants? Little et al. (2010) and Tegegne et al. (1999)
  5. 5. How do we measure ICBT?  Indirect methods oUse mirror flows (BACI…) oEconometric approaches (gravity modeling) oSystem of national accounts oLimitations: bad declarations from both sides (mirror flows) and measurement errors in production and consumption for SNAs  Direct methods oBased on surveys oNeed good coverage in space and time to avoid missing border points, means of transportation and extrapolation issues (seasonality…)
  6. 6. Magnitude  No continent-wide initiative, only local or regional ones (CILSS, FEWSNET, UBoS…)  Some examples 0% 20% 40% 60% 80% 100% Ghana Niger Nigeria Togo Informal Formal Benin exports (selected partners) in 2010 Source: INSTAT (ECNE, 2010)
  7. 7. Uganda Ratio Uganda’s informal exports over total exports by destination – 2005-2015
  8. 8. Maize trade flows in West Africa
  9. 9. ICBT and COVID-19  Many countries have closed their land borders  Limited movement of people  But shipment of goods were allowed (trucking traffic) oMain beneficiaries: large operators oSome small scale traders aggregated their produce  Curfews and sanitary controls cause costly delays, oparticularly for fresh foods oLimited night travels to benefit from cooler tempetarture
  10. 10. Point of entry border closures and restrictions Source: IOM Displacement Tracking Index, Accessed November 23, 2020.
  11. 11. 0 200 400 600 800 1000 1200 Rice White Maize 2020 2019 2018 2017 2016 2015 The contrasted effects of COVID-19 0 100 200 300 400 Rice White Maize 2020 2019 2018 2017 2016 2015 Source: FSNWG Formal (right) and informal (left) trade at Isebania (Kenya-Tanzania border) – Volume - Weekly average over the January/August of each year (Metric Tons) Source: FSNWG
  12. 12. CBT flows in West Africa 0 1 2 3 4 5 6 7 8 9 2017 2018 2019 2020 Exports of Maize from Coted'Ivoire to Burkina Faso Exports of Maize from Coted'Ivoire to Senegal Exports of Fish from Ghana to Togo Source: CILSS Total over January/August of each year, US$ millions
  13. 13. Conclusion  ICBT is prominent in Africa oSource of income for poor households, particularly for women oContribution to food security  Monitoring is paramount oFor national accounts and policy planning (BoPs, FBS, impact of trade agreements…) oMalabo commitments : need a good baseline and monitoring process oComplementarity between actions is needed  Lowering trade barriers, improving the efficiency of customs procedures, and trade facilitation would help reduce the cost of ICBT (STRs).  More information is needed to assess the impact of COVID-19