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Informal Cross-Border Trade and Trade Facilitation Reform in Sub-Saharan Africa

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Author Info

  • Caroline Lesser
  • Evdokia Moisé-Leeman

Abstract

The informal sector still constitutes an important part of developing country economies. In Africa, it is estimated to represent 43 percent of official gross domestic product (GDP), thus being almost equivalent to the formal sector. While this phenomenon may provide short-term solutions to poor households, in the longer term, it can seriously challenge the economic development of African countries. This study explores one particular aspect of the informal economy, namely informal cross-border trade in selected Sub-Saharan African countries, and identifies which trade facilitation measures (such as those currently negotiated at the World Trade Organisation) have the potential to encourage traders to switch from informal to formal trade. The paper considers measures that help reduce direct and indirect trade transaction costs arising from mandatory import- and export-related procedures; mechanisms that simplify trade-related regulations and requirements for selected low value transactions; and policies that help enhance compliance levels with existing international trade regulations. In addition, the study explores a number of complementary measures (such as the provision of effective business support services to ?formal? traders and enhanced dialogue between traders and border agencies) which can further encourage firms to formalise their cross-border transactions. The paper does however not suggest that trade facilitation reform alone will help reduce informal cross-border trade nor that governments will be able to fully eliminate its incidence in the region.

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File URL: http://dx.doi.org/10.1787/225770164564
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Trade Policy Papers with number 86.

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Date of creation: 18 Feb 2009
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Handle: RePEc:oec:traaab:86-en

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Related research

Keywords: customs modernisation; informal trade; simplified trade regime; World Trade Organisation; economic development; trade facilitation; Sub-Sahara Africa; customs procedures;

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Cited by:
  1. Gamberoni, Elisa & Reis, José Guilherme, 2011. "Gender-Informing Aid for Trade: Entry Points and Initial Lessons Learned from the World Bank," World Bank - Economic Premise, The World Bank, issue 62, pages 1-4, July.
  2. Draper, Peter & Freytag, Andreas & Al Doyaili, Sarah, 2012. "Why should sub-Saharan Africa care about the Doha development round?," Economics Discussion Papers 2012-67, Kiel Institute for the World Economy.
  3. Mthuli Ncube & Zuzana Brixiova & Meng Qingwei, 2014. "Working Paper 198 - Can Intra-Regional Trade Act as a Global Shock Absorber in Africa?," Working Paper Series 2104, African Development Bank.
  4. Mthuli Ncube & Zuzana Brixiova & Qingwei Meng, 2014. "Can Intra-Regional Trade Act as a Global Shock Absorber in Africa?," William Davidson Institute Working Papers Series wp1073, William Davidson Institute at the University of Michigan.
  5. Douillet, Mathilde, 2012. "Trade policies and agricultural exports of Sub-Saharan African countries: Some stylized facts and perspectives," MPRA Paper 40962, University Library of Munich, Germany.
  6. Elisa Gamberoni & José Guilherme Reis, 2011. "Gender-Informing Aid for Trade : Entry Points and Initial Lessons Learned from the World Bank," World Bank Other Operational Studies 10086, The World Bank.
  7. Gor, Seth Omondi, 2012. "An Assessment of the Informal Sector Trade in Kenya," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 13(1).

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