The volume of ICBT is often estimated to be many multiples of official cross-border trade. For example, World Bank (2013) found that bilateral Cameroon-Nigeria trade of domestically-produced goods was $230 million, compared to officially-recorded flows of $10-$40 million. Including re-exports, ICBT rises to about $1 billion. Similarly, ICBT in West Africa and the Horn of Africa vastly exceeds reported bilateral trade. (Golub, 2014, Little 2005, 2010) In addition to longstanding practice of trade along traditional routes, ICBT is strongly influenced by large price differences across borders. These are usually caused by cross-border differences in trade policy measures, such as tariffs, subsidies, and product-bans. The trade prompted by these price differences is facilitated by government’s limited capacity for monitoring or enforcement of regulations along porous borders, along with widespread corruption. And while cooperation between customs and tax authorities would facilitate enforcement, such cooperation is often resisted by the respective agencies.

ICBT has been found to be a highly significant component of the local economies of border communities. This is particularly the case in certain poor communities in the Sahel and border regions of the Maghreb (discussed below). The lack of alternative livelihood in these poor border communities, and the relation between them and the formal customs service, need to be taken into account in any development of policy recommendations.

# **2. Maghreb**

Informal trade is known to be pervasive in the Maghreb. While trade policies in the region are fairly similar, domestic subsidy policies differ substantially across countries, especially between oil exporters and importers, leading to strong cross-border price differences. This section is drawn from a study of cross-border trade between Tunisia and its neighbors: Estimating Informal Trade across Tunisia's Land Borders (Ayadi et al., 2013).

Although informal trade accounts for only a small proportion of Tunisia's total trade, it plays a significant role in bilateral trade with Libya and Algeria, and in certain sectors. It accounts for more than half the country's trade with Libya, and an estimated 20% of the fuel<sup>6</sup> consumed in Tunisia is from informal imports from Algeria. The main reasons behind this large-scale informal trade are differences in the levels of subsidies on either side of the border as well as the varying tax regimes.<sup>7</sup> For example, the price of fuel is around one-tenth in Algeria of that in Tunisia.

The growth in this type of trade has a significant impact on several aspects of the Tunisian economy. Fuel is cheaper, but government revenues are reduced, not only because goods are not subject to customs duties at the Tunisian border, but also because traders avoid paying value-added tax (VAT) provided they remain within the informal network. This loss of revenue can be significant.

Moreover, this type of trade has an important economic and social impact in border regions. In many of these regions, informal trade is one of the most important economic activities—if not _the_ most important—as is the case, for example, in Ben Gardane. Numerous individuals and organizations are

> 6 This is based on data from STIR showing fuel imports of 2,790 million tons as against national fuel consumption of 3,746 million tons (source: www.stir.com.tn). We used an estimated weight of 0.792 tons per cubic meter of fuel (source: www.unitjuggler.com).

> 7 This confirms findings of ICG (2013).

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