are not conducive to competition. Participants in “tour de role” and 50-50 sharing type agreements oppose regional agreements because they want to stave off competition.

Competitive pressures also hold for government agencies. By offering institutional mechanisms through which border agencies can exchange information and benchmark each other’s performance, regional agreements offer more transparent regulatory competition that can foster more efficient border management. However, this is to be balanced with the other consideration that economies of scale and specialization justify one approach for the region.<sup>26</sup>

# _Regional negative and positive externalities_

Regional agreements can serve as a policy coordination mechanism to help prevent individual countries to opt for national strategies that are fall short of optimal global outcomes. For instance, countries of transit trade are often tempted to use trade restricting policies such as seeking to set revenue maximizing fees on transit, imposing compulsory transit routes and check points, or the use of mandatory securitized convoys. Fees and requirements will be above the cost of services provided (this includes the use of roads, provision of security, etc.) or strictly necessary for secure transit.<sup>27</sup> In the worst cases motives behind these policies are protectionists; often, this is the outcome of absence of consideration<sup>28</sup> of negative externalities imposed on neighbors. Such risk is particularly important when alternative transit routes are few as this often happens in Africa.<sup>29</sup> Domestic transport infrastructure constraints often have regional implications, justifying from an economic point of view port or regional airport hubs. Landlocked countries depend on the quality of the infrastructure of their neighbors.<sup>30</sup> A finding from the diagnostic on transport and trade facilitation in Uganda (Uganda DTIS, 2006) is that the most important transport and trade facilitation issues are outside of the country’s direct control. Tanzania and Kenya, its coastal neighbors offer poor trade facilitation: the port of Mombasa where 95% of Uganda’s external trade traffic is handled is congested, transit bond regimes are financially burdensome, rail transit does not offer a

> 26 The Tanzania DTIS (2005) raises this question about having regional accreditation organisations. In this case, the benefits of joint approach seem high enough to justify foregoing regulatory competition.

> 27 McTiernan (2006) for instance reports that Benin and Togo charge very high fees for transit which incites transport from Lagos to Accra to be done by ship.

> 28 Not merely oversight or neglect, but lack of incentives on the country of transit to internalise the costs of more efficient transit.

> 29 A counter example is Bolivia, which has several access roads to the sea (Schiff and Winters, 2002)

> 30 For instance poor road conditions and border crossing procedure between Kenya and Uganda at Malaba have made rail and water transport across Lake Victoria a competitive alternative; or because the route between Durban and Kampala is more reliable, some traders of high value goods prefer it to much shorter routes to Dar Es Salaam or Mombasa (Caron and Reichert, 2001).

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