# Revisiting Trade Policy and Logistics

Evaluating options for export diversification of the MCNG economies first needs to acknowledge the high levels of informal trade that dominate intra-regional trade in agricultural-based products (Box 1). In developing GVCs, the MCNG countries should build progress to promote export diversification and intra-regional/global trade with a policy framework that nor only reduces their reliance on natural resources and fosters structural change but facilitates the integration of informal trade into formal markets with a proper incentive framework defined by tariff and other trade barriers that determine the allocation of resources. This chapter summarizes the key trade-related policy issues, challenges on export diversification, and policy recommendations that can best promote sustainable non-resource export growth in the region.

Exploring the right mix of trade policy prescriptions for formal export diversification of

**Box 1:** High Informality in Regional Trade in West Africa Intra-regional trade (mainly of agricultural products) in West Africa is largely comprised of three sets of trade flows of which much remains informal:

- _Cross-border trade_ , mostly by informal traders, around natural market sheds based on excess local supply and demand conditions (local horticulture and other products) and enabled by porous borders;

- Arbitrage trade, much of it smuggling or trade deflection from third countries (e.g. rice and poultry) to circumvent trade bans or highly restrictive tariff barriers and taking advantage of porous borders; and

- Trade based on complementarities, largely in staple foods where complementarities exist between production and demand (livestock, cereal grains and legumes, cassava) (World Bank, 2015)

A recent study estimates about 84 percent of Chad’s agriculture trade as informal (DTIS, 2015). Niger is largely an agrarian economy and much of its related trade--namely agricultural products and livestock--is informal and unrecorded (Raballand, et. al., 2017). Furthermore, Hoffmann and others (2015), describing the economic activity of border markets between Niger and Nigeria, estimate that the volumes of commodities traded informally between Nigeria, Niger and the rest of the SaharaSahelian region dwarf those of formal trade.

the MCNG economies should consider their regional integration. The four countries belong to 3 different and overlapping trade regimes, defined by their respective Regional Economic Communities (RECs). Niger and Mali belong to the West African Economic and Monetary Union (also known by its French acronym, UEMOA), together with Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Senegal, and Togo. Most of the WAEMU countries, including Niger and Mali, are members of the Economic Community of West African States ECOWAS, as is Guinea. Chad's trade is formally linked with the Economic and Monetary Community of Central Africa (CEMAC), along with Cameroon, the Central African Republic (CAR), the Democratic Republic of Congo, Equatorial Guinea, and Gabon, but not Nigeria, which is an ECOWAS member and perhaps the largest trading partner, at least for Niger and Chad. CEMAC countries, including Chad also belong to the Economic Community of Central African States (ECCAS), which has been established since 1983 but virtually defunct as it is yet to be ratified. Each of the three regions is at various stages of integration, but all include their own CETs.<sup>24</sup> Yet, despite the poor trade performance, there remains much unrealized potential. Despite their high market concentration (see Chapter 1), a gravity model controlling for key economic factors shows unexploited trade potential. This is the case, for instance, of Chad and Niger with regional trading partners, the wider SSA region and other major economies (Figures 10 and 11). Using available data for the two economies, Niger appears under-exporting with ECOWAS members like Benin, Burkina Faso and Nigeria, as well as with larger markets like France and China. In contrast, Niger’s exports to Togo, Senegal and Belgium are above what is expected from geographical and other factors, probably explained by proximity and trade complementarities as well as by its role as a re-export base for third countries. Similarly, despite that the United States and India are major trading partners for Chad, it is under-exporting with them, as well as with 8