metadata: authors: 0: author: Lopez Calix,Jose Roberto
1: author: Pitigala,Nihal
count: Mali,Chad,Niger
docna: 0: docna: Trade Policy to Catalyze Export
            Diversification : What Should Landlocked Fragile Countries
            Do ? The Cases of Mali, Chad, and Niger
docty: Policy Research Working Paper
subtopic: International Trade and Trade Rules,Export Competitiveness,Transport Services,Food Security,Trade and Multilateral Issues
teratopic: Transport,Agriculture,International Economics and Trade
abstracts: cdata!: The landlocked and fragile countries
            Mali, Niger, and Chad have suffered, to varying degrees,
            from Dutch Disease, with high export concentration in
            natural resource commodities and in a few foreign markets,
            and little development of their non-resource economies. The
            three countries' ability to create a sustainable path
            to economic growth and poverty reduction is inextricably
            linked to their connectivity with external markets, in the
            region and beyond. Thus, Mali, Niger, and Chad are first
            challenged by their geography -- their landlocked nature
            creates a barrier to market access beyond their immediate
            neighbors, while their vast and thinly populated lands serve
            to isolate the most vulnerable communities from external and
            internal markets. Adding to these geographic disadvantages,
            the incentive environment -- defined by high and variable
            customs common external tariff regimes resulting from
            multiple overlapping regional trade arrangements -- places a
            wedge between domestic and international prices that
            provides a disincentive to exports in favor of non-tradable
            and domestic-oriented sectors. By bringing greater coherence
            and convergence between the many common external tariff
            regimes in operation and the rationalization of their
            structures, and improving connectivity within and between
            markets, Mali, Niger, and Chad can better promote the
            reallocation of resources toward tradable goods and
            services, putting the countries on a path toward greater
            economic inclusion and sustainable growth.
geo_reg_key: 517196,517191,1927320
repnme: repnme: Trade Policy to Catalyze Export
            Diversification : What Should Landlocked Fragile Countries
            Do ? The Cases of Mali, Chad, and Niger
display_title: Trade Policy to Catalyze Export
            Diversification : What Should Landlocked Fragile Countries
            Do The Cases of Mali, Chad, and Niger
listing_relative_url: /research/2019/10/31463997/trade-policy-catalyze-export-diversification-landlocked-fragile-countries-cases-mali-chad-niger
topicv3: Agriculture and Food Security m1326205 435,Transport m1326661 135,Trade m1326924 698,Trade Policy and Integration m1327407 775,Diversification of Production and Exports
            m1504147 2615
publishtoextweb_dt: 2019-10-08T00:00:00Z
historic_topic: Transport,Agriculture,International Economics and Trade
no_of_pages: 29
author_keys: 0: author_key: 96866
model_extractions: Policy Research Working Paper 9036 Trade Policy to Catalyze Export Diversification What Should Landlocked Fragile Countries Do? The Cases of Mali, Chad, and Niger _Jose Lopez-Calix Nihal Pitigala_ Africa Region October 2019
Policy Research Working Paper 9036

# **Abstract**

The landlocked and fragile countries Mali, Niger, and Chad have suffered, to varying degrees, from Dutch Disease, with high export concentration in natural resource commodities and in a few foreign markets, and little development of their non-resource economies. The three countries’ ability to create a sustainable path to economic growth and poverty reduction is inextricably linked to their connectivity with external markets, in the region and beyond. Thus, Mali, Niger, and Chad are first challenged by their geography—their landlocked nature creates a barrier to market access beyond their immediate neighbors, while their vast and thinly populated lands serve to isolate the most vulnerable communities from external and internal markets. Adding to these geographic disadvantages, the incentive environment—defined by high and variable customs common external tariff regimes resulting from multiple overlapping regional trade arrangements—places a wedge between domestic and international prices that provides a disincentive to exports in favor of non-tradable and domestic-oriented sectors. By bringing greater coherence and convergence between the many common external tariff regimes in operation and the rationalization of their structures, and improving connectivity within and between markets, Mali, Niger, and Chad can better promote the reallocation of resources toward tradable goods and services, putting the countries on a path toward greater economic inclusion and sustainable growth.

This paper is a product of the Africa Region. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The authors may be contacted at jlopezcalix@worldbank.org and nihalpitigala1@gmail.com.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
**Trade Policy to Catalyze Export Diversification: What Should Landlocked Fragile Countries Do? The Cases of Mali, Chad, and Niger**

Jose Lopez-Calix and Nihal Pitigala<sup>12</sup> JEL Codes : F 13, 14 and F 15. Keywords : trade policy, empirical studies on trade, economic

> 1 This paper is a product of the AFCW3 departments in the Africa region of the World Bank. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The author may be contacted at jlopezcalix@worldbank.org and nihalpitigala1@gmail.com.

> 2 The authors are grateful to Lars C. Moller, Jean Christophe Maur and Roula Yazigi for helpful comments and valuable suggestions.  All remaining errors are the responsibility of the authors.
# Abbreviations and Acronyms

|AGOA|Africa Growth and Opportunity Act|
|---|---|
|ASYCUDA|Automated System for Customs Data|
|CAR|Central African Republic|
|CFTA|Continental Free Trade Area|
|CEMAC|Economic and Monetary Community of Central Africa|
|CET|Common External tariff|
|CGE|Computable General Equilibrium|
|DB|Doing Business|
|DTIS|Diagnostic Trade Integration Study|
|ECOWAS|Economic Community of West African States|
|FCFA|Franc Communauté Financière Africaine|
|GDP|Gross Domestic Product|
|GVC|Global Value Chain|
|ICT|Information and Communication Technology|
|NTBs|Non-Tariff Barriers|
|RCA|Releveled Comparative Advantage|
|REC|Regional Economic Communities|
|ROW|Rest of the World|
|SME|Small and Medium Enterprises|
|TFA|Trade Facilitation Agreement|
|WAEMU|Economic and Monetary Union for West Africa|
|WBG|World Bank Group|
|WTO|World Trade Organization|

i
# Background and Overview

After several unsuccessful attempts at diversifying exports since the 1990s, Mali, Chad, Niger and Guinea— so called MCNG countries—have deepened their dependence on natural resource commodities, mostly minerals: bauxite in Guinea, uranium in Niger, gold in Mali and oil in Chad. However, the experience of other countries, in Africa and other parts of the world, shows that while large-scale production of natural resources offers great opportunities, it also comes with major shortcomings. These include the tendency to grow beyond potential in cycles of booming international prices; high GDP growth volatility that translates into a fragile fiscal stance; a resource curse (Dutch disease) that favors production of nontradable goods; and a growth pattern biased toward rent-seeking activities, all of which prevent the expansion of competitive products and inclusive job-creating activities. Not surprisingly, all recent National Development Plans—Mali’s Vision 2025, Chad’s Vision 2030, Niger’s Vision 2035 and Guinea’s Vision 2040—acknowledge that the countries have little choice but to create a ‘competitive and diversified economy. Export diversification is a way out of this curse in their path of economic diversification and structural change.

Major structural challenges have contributed to the failure of past diversification efforts in the MNCG countries: Key among them is the high frequency of political instability and violent conflicts that have prevented private investment, destroyed infrastructure and disrupted trade. The 2016 fragility index combines political and socio-economic indicators such as the presence of fractionalized elites, group grievance, refugees and internally displaced populations (IDP), uneven development, demographic pressure and poverty among others.

Other serious structural challenges have also prevented a rapid pace to diversify exports from new productive activities. Mali, Niger, and Chad face adverse geography to develop exports, as only Guinea is not landlocked. Poor internal connectivity and low access to power conditions, given multiple infrastructure and logistics gaps, have made exporting costs high and access to markets quite difficult even with neighboring regional markets. Security threats have kept private and foreign investors away from some areas of the country and disrupted labor flows. Low human capital accompanied by rapid population growth and low quality of education have translated into a majority of low-skilled population. High export product concentration and limited foreign market diversification have led to low insertion into global value chains and FDI inflows mostly concentrated in extractive industries and, only recently for some countries, in specific backbone services. So far, the countries have received neither FDI in greenfield (startup) agriculture nor in efficiency-seeking projects commonly associated to export diversification.

_“Indeed, there are several compelling reasons for MCNG countries to urgently diversify their exports as their present growth model based on natural resources has reached its limits.”_ These reasons point to the importance of inclusive growth _._ The growth model based on natural resource dependence has several shortcomings. Mining activities are capital intensive, and this prevents most poor people living in the rural sector from benefiting from their growth acceleration spillovers, and limited job creation and skill-enhancing effects. Mining extraction is highly dependent on international prices and its booms and busts translate into similar cycles in the non-tradable economy, which affects high growth sustainability. Countries also need to create jobs in the agricultural sector, which has high population and poverty rates, untapped job creation potential in agribusiness and possibilities of expanded insertion in global markets. In addition, natural resource-dependence also does not foster development of human capital/skills that are the hallmark of every modern economy. Finally, MCNG’s domestic markets are too 1
small and fragmented to attract specialized foreign investment in the quantities needed for stimulating the development of an incipient private sector. FDI oriented to reach global markets is also badly needed to catch up on technology change and productivity enhancements.

# _“And perhaps the most important reason is that export diversification would give them a chance to reach the expected high, sustained and inclusive growth aimed in their Visions.”_

Theory also supports the existence of a positive correlation, at the cross-country and national levels, between export diversification and higher growth. And while correlation per se does not imply that diversification causes growth, literature supporting this positive relationship is abundant. There is indeed strong evidence on how export diversification makes the economy less vulnerable to terms of trade shocks and reduces the volatility of growth (which, in turn, could in the long run foster growth) (see Imbs and Wacziarg, 2003; de Ferranti et al. 2002; and Lederman and Maloney, 2012, among others). A more comprehensive treatment of the topic is found in Newfarmer et. Al (2009) and Al Marhubi (2000), and its overall conclusion is that countries with more concentrated production and export structures typically have lower income levels compared to countries that are more diversified. More recently, McIntire et al. (2018) find that among small states, those countries with more diversified exports reach lower output volatility and higher average growth rates than the others less diversified. For their part, Calderon and Cantu (2018) investigate the effects of trade openness, diversification, and the role of natural resources on growth in CEMAC countries, also including Chad. Two important findings emerge from the analysis: First, trade openness has a positive, significant and causal relationship with growth. Conversely, export product concentration (and share of natural resource exports in total exports) has a negative and significant relationship with growth.

High Customs tariffs resulting from regional trade arrangements and non-tariff barriers (NTBs) keep MCNG’s economies highly protected. All countries but Guinea have little independent control over the two traditional instruments of trade policy--the exchange rate and tariffs. Since 1960, Mali, Niger and Chad have a common currency, the CFA franc whose parity is linked to the euro. And as member countries of WAEMU, CEMAC or ECOWAS, member states have agreed to adopt a common external tariff (CET) which has been in effect since the end of the 1990s. While the recent depreciation of the CFA has favored Niger’s export competitiveness, high tariffs, numerous exceptions and high tariff escalation make diversification harder. And despite ongoing nominal tariff reductions agreed under the regional arrangements, Mali, Niger and Chad’s applied tariffs remain not only higher than those of most regions, but their projected level of protection under the CET will not decrease significantly at the end of the transition period. To make matters worse, tariffs are subject to considerable distortions arising from either a multiplicity of _ad hoc_ border taxes and fees or non-tariff barriers (NTBs) such as misapplication of rules of origin and of health and sanitary standards; which encourages informal trade and corruption. Renegotiating the CET in regional fora, eliminating inefficient exemptions, and removing parafiscal taxes and fees and NTBs are obvious policy priorities.

The trade facilitation agenda would also need to include significant streamlining of Customs procedures so as to reduce opportunities for corruption arising from opaque and antiquated administrative procedures, and lack of modern systems. Underway reforms are moving only slowly. After many years, the full adoption of ASYCUDA World is expected to be completed and operational in most Customs offices by end-2019. Work on a National Single Window at Customs, which will expedite the harmonization of import and export documents is at early stages. There is also need to introduce regulations enabling customs automation, as this also reduces opportunities for corruption, and revise the Customs Code to integrate e-payments. Other desirable initiatives include a harmonized application of the WTO Trade Facilitation Agreement (TFA).

2
<!-- Start of picture text --> Market potential, inhabitants [number of cells]<br>> 5 milion[32] mm 2 - 5 million[258] =m 1 - 2 million [379] |= 500 000 - 1 million (460) | 200 000 - 500 000 [541] < 200 000 (269)<br>Sources : Africapolis: www.oecd.org/swac/topics/africapolis and Prieto Curiel, R., P. Heinrigs and |. Heo (2017),<br>“Cities and Spatial Interactions in West Africa: A Clustering Analysis of the Local Interactions of Urban Agglomerations”,<br>West African Papers, No. 05, OECD Publishing, Paris. © 2017. Sahel and West Africa Club Secretariat (SWAC/OECD)<br><!-- End of picture text -->
<!-- Start of picture text --> Fig. 2 Degree of Export Diversification<br>1<br>—*<br>aoa5og “en, 7 * «* ® .* bad.<br>- a5 Ua * o” oa9 Mat sy‘, hall* al * *<br>ou | * + ag<br>ao e*e foes ia<br>u a .+ 8 @ ae Be Meee,<br>5 a * * +<br>Se ee *<br>av 2 a5 * * * * * .<br>so 04 .<br>=x = *<br>os<br>= 03<br>uw<br>= 0.2<br>— 4 5 6 Fi B 9<br>Log (Labor Force)<br><!-- End of picture text -->
<!-- Start of picture text --> Growth in Resource and Non-Resource Exports<br>4500 150%<br>4000 \ /- 100%<br>3500 een<br>50%<br><53000 ‘i % . a i”<br>=<br>E 20 \ ‘ verte 0%<br>E 200 \, . “50%<br>“ \ \<br>- 1500 100%<br>1000<br>500 “150%<br>° PeAAR aes<br>ARR AR RRR RRR RAR AA<br>Resource Nor-Resource = = = Growthin Resource<br><!-- End of picture text --> <!-- Start of picture text --> so Resource Exports and Growth in Non-Resource soos<br>60.00%<br>2000<br>40.00%<br>:<br>= 10 20.00%<br>*E 1000 0.00%<br>v<br>20.0%<br>300<br>-20,00%<br>a o / \ 60.00%<br>BSS134392988 RESRR388838RRR RRR<br>—Cunies ——Mali ——Nigee ——Growthin Nor-Resouce (Guniea Mali, Niger)<br><!-- End of picture text -->
<!-- Start of picture text --> Regional Trade of Selected Selected Regions<br>50.3<br>35.9%<br>30.%<br>25.30<br>20.%<br>15.%10.%10.%<br>59%<br>fm ~ an ms<br>5s 56 6s 6865s 8 &B S288 85 8 42 8<br>aoofo&#ofo&# FR &A A A FR A A A A RR A A<br>meee Seo) meme CEM AC AC ee FAC ee ECOWAS «© eee WAEML<br><!-- End of picture text --> <!-- Start of picture text --> ooo World Export Shares of Selected Export Shares of Selected Shares of Selected of Selected Selected Regions (2002-2016) (2002-2016)<br>8.00%<br>800%<br>5.00%<br>4.00%<br>3.00%<br>200%;; ee<br>1.00% ee eww ww ww 8 ow www en<br>eeso8so88 2 ge 8 8 eats —————2s2s a g<br>8 8 8 & 8 & RRR RR RR RA<br>ma ASEAN me CEMAC ee EAC ee ECOWAS mee VIERCOSUR me WAEMU WAEMU = == 3 regions regions<br><!-- End of picture text --> <!-- Start of picture text --> ooo World Export Shares of Selected Export Shares of Selected Shares of Selected of Selected Selected Regions (2002-2016) (2002-2016) Regional Trade of Selected Selected Regions<br>8.00% 50.3<br>800% 35.9%<br>5.00% 30.%<br>4.00% 25.30<br>3.00% 20.%<br>200%;; ee 15.%10.%10.%<br>1.00% ee eww ww ww 8 ow www en 59%<br>eeso8so88 2 ge 8 8 eats —————2s2s a g fm ~ an ms<br>8 8 8 & 8 & RRR RR RR RA 5s 56 6s 6865s 8 &B S288 85 8 42 8<br>aoofo&#ofo&# FR &A A A FR A A A A RR A A<br>ma ASEAN me CEMAC ee EAC ee ECOWAS mee VIERCOSUR me WAEMU WAEMU = == 3 regions regions meee Seo) meme CEM AC AC ee FAC ee ECOWAS «© eee WAEML<br>és. 4550 i : Oil exporters<br>2 40 I = Non-oil resource-intensive counties<br>Ez 35 I e @ Rest of Sub-Saharan Affica<br>3 8 30 I © ‘“ TM Comparator countries<br>CS 25 i . e © 1991-95 average t<br>ees 20 I q e é ee<br>S38 15 I 1 P J<br>‘GeS 40 1 aan | : ec<br>no eeeeewoo Qe2RgxessgegasoeoSS SESE SRE GS SESS° SBSaARSLSESCASSSESSSOSLSHYESSEVNLGRDSS ESSE ESERIES SSSRERESESZ ESBS?<br>ReEesges-sezxs&SSSS5 2E8< = Su SS 7TMS.65 FOS2ZLO2 HES CHEE<br>sc 33S gugz=%as Op SES 838 P§°S g 85s g°> Pses<br>DNs“© HK °o Ss& a=N 8 ==Es as = ero2.3 a2 baoS Presetas<br>5 Fs 2 = 388<br>ea32 8 8 SEs32<br>Sources: Eora database; and IMF staff calculations. o5<br>Note: See the list of country groups in Annex 3.2. =<br>1 Excluding sub-Saharan African countries. -<br><!-- End of picture text -->
<!-- Start of picture text --> 50<br>TM<br>4<br>Ni 40 s¥’ iso<br>Ka sYC<br>z us<br>i eo. VAN<br>3S cPV<br>& 30<br>Fs ETH NEWA<br>s Tz4 BDI RIVA<br>8 38MB / LS<br>3 20 KENTGO<br>: “yee<br>x ZMB a<br>=) CODs| ae<br>= tat Moz Oil export<br>eo 10 BCR Hl Exporters<br>oa Snot Resource-intensive non-oil<br>3 a Rest of the region<br>£ Comparator countries<br>oF<br>0<br>0 10 20 30 40 50<br>Share of foreign value added in countries’ exports,<br>average 1991-95<br>Sources: Eora database; and IMF staff calculations.<br><!-- End of picture text -->

Sources: Eora database; and IMF staff calculations.
# 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
<!-- Start of picture text --> ty<br>FRA® NGA®<br>ARE@ ghne<br>fisie<br>3° PAK oraeo °<br>£ sv ° owe ow Pus!<br>>2 syy SGP BEWSBEX‘ 0.0. ° "5° R<br>3 wom Bz Re sy acai! seme<br>Bolg og MWA 2Mamceag® PE mpi age<br>106 ae Ong<br>Bo wEWaGe<br>2 cM<br>2 4 6 8<br>Observed Trade<br>——@ — Itrade_1000_usdFitted values = ® Itrade_1000_usd<br><!-- End of picture text --> <!-- Start of picture text --> Ww<br>a @USA<br>OUPN elND<br>@ARE<br>o OOFRA ch<br>2 = biti<br>b=}=iy ocze THA OGBRDEU<br>Zn OAUS<br>8 ocun OAVBSGP—" oFsE.<br>o |oBHRORWA ounIW TZCote HKGBBkezaF one<br>° oOsvK<br>osvN euGOi<br>i)5 0 5 10 15<br>Observed Trade<br><!-- End of picture text -->
percent) or other taxes (2.4 percent) (World Bank. 2017).

Furthermore, the additional tariff band of 35 percent implemented under ECOWAS (e.g., by Guinea) exceeds the WTO bindings; yet, estimates indicate that eliminating it would have a negligible impact on revenues. Since 2015, the members of ECOWAS adopted the CET—for 90 percent of tariff lines, the ECOWAS CET was based on the WAEMU CET, which pre-dated it since it was implemented in 2004, but the remaining 130 tariff lines are subject to a higher 35 percent tariff rate, which has had only a negligible impact on tax revenues (IMF, 2015). More important, the ECOWAS CET exceeds bindings at the WTO for all member States except for Guinea-Bissau and Togo. Moreover, numerous other duties and levies imposed by member States are in fact bound at zero, posing a contradiction with bindings. An observation of the latest available applied MFN tariff for 2017 at the 6-digit level, shows Niger and Mali applied tariff lines with deviations from the CET, amounting to 100+ discrete tariff rates spread across the entire tariff schedule (if not bands), some with minor deviations from the 5 band (0, 5, 10, 20, 35) structure, while other deviations are significant.

Table 2: Average Tariff Rates in Niger

|Tariff Line|Average<br>Tariff<br>Rate|
|---|---|
|1. Simple average applied MFN rate|18.1|
|Agriculturalproducts(WTO definition)|22.4|
|Non-agriculturalproducts(WTO definition)|17.4|
|Agriculture,hunting,forestryand fishing (ISIC 1)|23.6|
|Extractive(ISIC 2)|11.2|
|Manufacturing (ISIC 3)|17.8|
|2. Effective Applied Tariffs*|18.6|
|3. Tariff lines dutyfree(% of all tariff lines)|0.6|
|4. Simple average rate(lines dutiable)|18.2|
|5. Non-ad valorem tariffs(% of all tariff lines)|0.0|
|6. Tariffquotas(% of all tariff lines)|0.0|
|7. National tariffpeaks(% of all tariff lines)a|0.0|
|8. International tariffpeaks(% of all tariff lines)b|48.1|
|9. Overall standard deviation of applied rates|9.6|
|10. Applied rates "nuisance" (% of all tariff lines) c|0.0|

_Source_ : Pitigala et al. (2017, 2018 a, b).

Some simulations on the adjusted CET rates in WAEMU find significant trade and welfare costs. The revision of the CET with the additional 35 percent band has potentially important consequences, as it may increase the cost of living for households from 7 to 10 percent and therefore decrease their welfare from 2 to 5 percent (Gourdon and Maur, 2014). In the case of Guinea, due to differing consumption patterns of households and the nature of the tariff structure, tariffs are regressive across the income distribution both for the 4-band UEMOA tariff and the ECOWAS CET. For the former, average tariffs range from roughly 12 percent for the poorest to 9 percent for the richest, and for the CET from 13 to 10 percent. The impact on households is also regressive in the case of the ECOWAS CET: poor households are disproportionately affected—the consumption-weighted average welfare cost amounts to 5 percent for the lowest 5th percentile compared to 3 percent for the 95th percentile.

10
In addition, the applied CEMAC, WAEMU and ECOWAS CET rates display an escalating (differential resulting from higher import duties on semi-processed products than on raw materials, and higher still on finished products) structure, distorting away from tradable toward non- tradable, and are misaligned with peer regions. CEMAC duties on intermediates and capital goods necessary for any industrial activity are above other regions and significantly above EAC and other regions such as ASEAN, the latter of which is now among the most diversified and prolific exporters of industrial products and deeply integrated into global value chains (Table 3). Providing increasing neutrality in incentives and aligning closely with world prices have been foundations of ASEAN structural transformation. In contrast, the CET of the 3 MCNG regional blocs shows much higher tariffs on final products than on primary and intermediate inputs, a structure that is designed to promote outdated import substitution by providing tariff protection to the industrial production of final goods. High CET tariffs on consumer goods, with an aim of creating incentives for regional substitution, may encourage greater regional production, but at a high cost to consumers and at the expense of export diversification, both within the regional market and into global value chains. And while escalation is common across most African countries, variation is less pronounced in the Sahel than in other SSA countries and regions, including EAC (Figure 12).

Table 3: Comparative Simple and Weighted Tariffs in Regional Groupings (2016)

|Region|Type<br>of<br>Goods|Simple<br>Average|Weight<br>ed<br>Averag<br>e|
|---|---|---|---|
|EAC|Primary|9.64|3.58|
|EAC|Intermediate|8.75|5.35|
|EAC|Consumer|17.07|7.72|
|EAC|Capital|4.97|4.48|
|ECOWAS|Primary|13.42|19.11|
|ECOWAS|Intermediate|9.96|9.37|
|ECOWAS|Consumer|18.36|13.78|
|ECOWAS|Capital|7.69|7.79|
|CEMAC|Primary|18.09|10.04|
|CEMAC|Intermediate|14.87|12.2|
|CEMAC|Consumer|24.84|19.99|
|CEMAC|Capital|12.68|12.82|
|SADC|Primary|4.37|0.65|
|SADC|Intermediate|4.49|2.26|
|SADC|Consumer|11.96|8.71|
|SADC|Capital|2.82|2.16|
|WAEMU|Primary|17.76|25.38|
|WAEMU|Intermediate|10.70|11.50|
|WAEMU|Consumer|17.51|14.47|
|WAEMU|Capital|7.94|7.76|
|ASEAN|Primary|5.33|2.72|
|ASEAN|Intermediate|4.49|4.08|
|ASEAN|Consumer|9.39|6.16|
|ASEAN|Capital|4.89|1.96|
|EU|Primary|5.64|n.a|
|EU|Intermediate|0.03|n.a|
|EU|Consumer|2.34|n.a|
|EU|Capital|0.00|n.a|

_Source_ : Pitigala et al. (2017, 2018a,b).

11
Figure 12: Tariffs by Stage of Production <!-- Start of picture text --> %<br>Cha d Central African ... Kenya Rwanda Burundi Tanzania Uganda Benin Burkina Faso Mali Niger Senegal Togo Ghana Nigeria Vietnam Indonesia Lao PDR Malaysia Brunei Singapore<br><!-- End of picture text --> _Source_ : Pitigala et al. (2017, 2018).

The presence of a myriad of complex para-tariffs in MCNG countries results in increasing unpredictability and reduced transparency, while exacerbating the protective effect of tariffs. For example, Chad applies a range of other duties and levies such as Community Integration Tax (CIT), Community Integration Contribution (CIC), Organization for the Harmonization of Business Law in Africa (OHADA) levy, Statistical Fee levied on all imports, regardless of origin—all adding between 5 percent to 8 percent ad valorem. In Niger, various border taxes apply: (a) a statistical import charge (RSI): 1 percent; (b) a value- added tax set at 19 percent in WAEMU directives; (c) a WAEMU community solidarity levy (PCS): 1 percent; (d) an ECOWAS community solidarity levy (PC): 1 percent<sup>25</sup> ; (e) a special import tax (TCI) on some agricultural products: 10 percent of floor price; (f) an excise tax: between 15 and 45 percent depending on the product (for example, cigarettes and alcoholic drinks); (g) an import verification tax (TV1): 1 percent of the value of the goods, to finance fees paid to COTECNA; (h) a pre-shipment inspection service; (i) an advance on the tax on industrial and commercial profits (BIC): 5 percent of the value of the goods for operators who have no tax identification number (N.I.F.); and (j) a 3 percent tax for operators with a N.I.F. (DTIS, 2015). Similarly, a community solidarity levy of 1 percent, imposed by WAEMU member States on imports from countries outside ECOWAS, the ECOWAS community levy of 0.5 percent; and the statistical tax of 1 percent are also imposed by Niger. The absence of a domestic equivalent for these added duties and levies increases the protective effect of tariffs and exacerbates the escalated tariff structure, resulting in even higher rates of effective protection than suggested by the escalated tariff structure.

The currently applied tariff structures in MCNG economies worsens poverty and disincentivizes agriculture exports. This is so because high tariffs, amplified by para-tariffs imposed on basic agricultural goods, adds a substantial cost to consumers, especially the poor households that spend disproportionately on food. This may protect these West African farmers against imports from outside the customs territory but gives little protection for countries where the imports are largely non-competing within respective regional arrangements. Thus, Chad, Mali, Niger and Guinea have considerable opportunities to increase and diversify their agro-exports products and, in some cases, to export processed products of high quality. A necessary condition to promote higher value-added processing is for inputs to production, including tools and equipment, be allowed to enter at very low tariff rates, which also minimizes inter-sectoral distortion. And if the export is in highly competitive markets, which could be the case for meat and hides and skins, 12
zero or low tariffs on imports of inputs can generate sufficient competitiveness to their exports.<sup>3</sup> Similarly, the high tariffs on manufactures and on intermediate goods provide little by way of protecting producers in the Sahel, because the contribution of domestic manufacturing of tradable goods is quite small, as is their capacity for efficient import substitution. Those perceived as infant industries, e.g. fruit juice, textiles, or cement adding up as the supply capacity of the CEMAC region is not even sufficient to meet demand in Chad; leading to extra-regional imports entailing a substantial welfare loss from the high CET rates to consumers in Chad. Hence, the justification of maintaining the high degree of escalation should be reviewed and linked to the performance of the industry in terms of competitiveness, otherwise it should be phased out over time.

In addition to tariffs and other ad-hoc tariffs, a number of non-tariff barriers impact trade: barriers at the border through bans or quotas that are occasionally applied to sectors with domestic competing products. These largely apply to food products and can be imposed seasonally to protect local producers and industries. Some ECOWAS members have, on occasion, imposed export restrictions, usually on grains, and largely short term to help cope with temporary food security problems. Perhaps the most significant nontariff barriers are the complex, duplicative, and often unnecessary Customs procedures (based on outdated manual systems). This complexity provokes and facilitates collusion and favors corruption among traders, officials, and intermediaries. It also provides incentives for extensive smuggling and informal trade. Customs officials also extract payments for goods in transit, as well as force lengthy procedures for clearance at border crossings, holding up shipments for days or even weeks. Even though ECOWAS made regional commitments to eliminate the need for certificates of origin for food products, some members continue to require them. And despite ECOWAS countries signed technical agreements for mutual recognition of sanitary and phytosanitary certificates, border officials still require traders to obtain duplicate certificates. This may in part be due to lack of information but may also be in the interest of creating an opportunity to collect fees or bribes. Finally, efforts at regional harmonization, such as for seeds and other agriculture inputs, have not been fully implemented requiring duplicative certifications, while the lack of harmonized grades and standards on grains and legumes impedes the movement of staple foods from surplus to deficit regions and hurts the potential for agri-based global value chains.

# Landlocked Countries with Distance to World Markets: What Does Nigeria Offer?

Countries close to large world markets should strive to benefit from proximity to high economic density and become an extension of the large markets. Mexico, he Caribbean, the European Union (EU) accession countries, and the Republic of Korea are linked, respectively, with the U.S., EU, and Japanese markets.<sup>4</sup> Closer integration with Nigeria, mainly by Niger and Chad, could contribute to MCNG trade growth in goods and services. The West Africa market is dominated by Nigeria, followed by Ghana, Côte d’Ivoire and Senegal—together these countries account for 80 percent of regional GDP and 75 to 80 percent of agriculture imports and exports. Nigeria is the largest economy in Africa that is set to double in size by 2030. The size of the Nigerian economy, diversity, demographics, and projected growth trajectory are likely to offer the greatest market potential in agriculture trade for MCNG Sahelian countries. Anecdotal evidence points to much two-way informal exports, but staple foods and livestock exports dominate the flows from Sahel countries to Nigeria and exports of millet and sorghum from Nigeria to its neighbors. The scale of informal trade provides de facto evidence of strong complementarities that exist between Nigeria and the prospects for market synergies, positive externalities and scales that improve efficiencies and better

> 3 This is more critical for agriculture-based products as recent estimates of real exchange rates based on agriculture prices, among SSA countries, found that the level of real appreciation is highest for Mali, Niger and Chad (Zafar, 2018). 4 WDR (2009).

13
allocation of resources. And while free trade should take place in ECOWAS, countries do not apply it, meaning that ECOWAS exporters have to pay duties and taxes when exporting within the region. Hence, rather than concentrating on tariffs, multilateral free trade arrangements should mainly correct burdensome and expensive NTBs and transit arrangements, which unearth the true potential for multilateral trade between Nigeria and its neighbors, especially Chad and Niger. With such agreements, if they span areas of services, including air connectivity, commercial collaboration, and financial services, some of the deeper integration facets will likely benefit both countries.

Although Nigeria has potentially large markets, growth has not yet been sustained long enough and Nigeria’s own domestic distortions remain. Integration with them runs a risk of exposing a neighbor to volatility and of importing inefficiency from the large neighbors’ domestic structures. But because their market potential is attractive to enterprises in Europe and Asia as large emerging economies like Nigeria add considerably to the market access potential of their immediate landlocked neighbors. For countries in these neighborhoods, division is compounded by distance. Appropriate instruments include institutional and infrastructure development, including regionally shared utilities, transport corridors and hubs, and a range of other regional public goods.

In parallel, there is an opportunity to streamline cross-border trade flows through border bazaars, which have been implemented along parts of the India-Bangladesh and China-Kazakhstan borders (Box 2). These bazaars, also known as haats main objective is a simplified regime for trade transactions (with near absence of formal processes and duty- and tax-free transactions). Facilities also provide needed services, expand the reach of local markets, and create a direct stimulus for income generation and employment. Successfully adopted haats have allowed the transition from subsistence level farming to small-scale commercial farming and related trade activities, including the eventual integration into more formal supply chains for export, especially for cross-border communities along the vast borders between Niger, Chad and Nigeria such as Maradi/Zinder/Diffa/Birnin Konni/Tahoua.

**Box 2.** Role of Border Haats (Bazaars)

Bazaars (or haats) have played a vital and historical role along the India-Bangladesh border. In 2011, the Governments of Bangladesh and India revived the border bazaar concept and opened a pilot haat near the Kurigram-Meghalaya border. The haats are makeshift bazaars held once a week, allowing border residents to trade eligible products free of customs duties as long as consignments do not exceed an agreed-upon threshold. Eligible products include local agricultural and horticultural products, spices, minor forest products (excluding timber), fresh and dry fish, dairy and poultry products, cottage industry items, wooden furniture, and handloom and handicraft items. Such products are also exempt from local taxes. Since the pilot, a total of four border haats are operational along the India-Bangladesh border in Meghalaya and Tripura. India has now proposed 27 new border haats across the 443 kilometer-long border.

The border bazaar model has been replicated in other regions, as well. The Korgas bazaar, on the Kazakhstan- China border, is an exemplary case study. It is one of the region’s largest cross-border bazaars, servicing some 1,300 traders per day. The bilateral regime allows visa-free entry for traders entering for the day and limited duty- free privileges (on up to US$1,000 of cargo, with a flat rate applied thereafter). On the Kazakhstan side of the border, cross-border trading has become the most important source of employment in Jarkent, the largest border city in the district. Conservative estimates indicate that 10 percent of the local population works directly in cross- border trade activities. Estimates suggest that each trader generates employment for an additional one to two persons engaged in warehousing, local transport, or sales within the bazaar. The existence of the bazaar has generated spillover effects, creating new retail and other commercial opportunities (Kaminiski and Mitra 2010). _Source: Bangladesh DTIS, World Bank, 2013._

# Efficacy of Trade Logistics Linking Markets

Geography adds dramatically to the export diversification challenges of landlocked countries like those of 14
<!-- Start of picture text --> 400<br>3.50<br>2.50 EB Fs<br>1.50 4 Ba<br>oso H i:<br>o.00 es EB<br>ua ou a a a] al<br>5 z 52 35 5 ao 2<br>al 3 g 2 aa oo = a<br>3 = LE oF | =<br>oS a _ 2 "W es =<br>fa 2s Ze a= =<br>== = mozeua Ee<br>gCameroon w@NER me Libya om MLI m Sudan TCD mg Peer (Ken, Uga, Tza)<br><!-- End of picture text -->
of the country’s low performance in terms of documentary and border compliance costs. Compared to other landlocked and Sahelian countries in the West African region, Mali's cost performance is below that of Burkina Faso but superior to that of Niger.

Table 4: Trading across border indicators

||Time to export:<br>border|Cost to export:<br>border|Time to export:<br>documentary|Cost to export:<br>documentary|Time to import:<br>border|Cost to import:<br>border|Time to import:<br>documentary|Cost to import:<br>documentary|
|---|---|---|---|---|---|---|---|---|
|Cameroon|202|983|66|306|271|1407|163|849|
|Chad|106|319|87|188|242|669|172|500|
|Central African Republic|141|280|48|60|98|209|120|500|
|Guinea|36|310|48|105|72|405|32|37|
|Côte d’Ivoire|239|423|84|136|125|456|89|267|
|Libya|72|575|72|50|79|637|96|60|
|Mali|48|242|48|33|98|545|77|90|
|Niger|48|543|41|39|78|462|156|457|
|Nigeria|135|786|131|250|284|1077|173|564|
|Senegal|61|547|26|96|53|702|72|545|
|Sudan|162|950|190|428|144|1093|132|420|
|Peers (Botswana, Kenya,<br>Uganda)|33|249|36|157|113|473|75|159|

_Source:_ World Bank’s Trading Across Border—time and cost--Index in Doing Business Indicators 2019.

Despite the multiplicity of ineffective bilateral and regional agreements,<sup>29</sup> several major issues prevent the availability of efficient transit corridors in order to connect to other countries. These are summarized below.

- Road Infrastructure is poor. In Niger, the transport infrastructure depends strongly on partly paved roads that suffer from lack of maintenance. The entire network is approximately 19,000 kilometers, of which less than 4,000 are paved. The Cotonou-Niamey corridor, almost entirely paved, is by far the most utilized, accounting for more than 65 percent of goods traffic but also very long. At 1,050 kilometers, the corridor is shorter than Lomé-Niamey. The Chadian road network is 42,000 km, out of which 6,200 km are primary roads and only 996 km are asphalted roads, which seem to be in poor condition, especially in the north and east of the country. Unpaved roads are often inaccessible during the wet season, especially in the southern half of the country. The N'Djamena to Douala port route (1,800 Km.) is currently the main way to open-up Chad. Nearly 90 percent of the total volume of international freight uses N'Djamena- Douala corridor.

- In relation to road infrastructure development in West Africa, is the PraiaDakarAbidjan-Lagos Corridor, which is 1,080 km in length, which is part of the Trans African Highways No. 7, and seeks to connect to Mombasa through Yaounde, Bangui, Kisangani, Kampala and Nairobi in East Africa through Central Africa. Part

16
of this corridor is also referred to as the Trans-Sahelan Highway stretching over 4,400 kilometers, of which 50% of the network has been paved. Paving of the missing link between Salo (in CAR) and Quesso in the Democratic Republic of Congo would benefit Chad in terms of access to the coast and other transit countries. However, delays to attention on the missing links have been attributed to the relevant states not according the corridor the same level of priority.<sup>5</sup>

- Landlocked countries’ internal and external access depends to the degree which its neighbors improved the quality of their transport logistics and customs procedures: it is estimated that a one standard deviation improvement in a landlocked country’s logistics together with one standard deviation improvement in its neighbors’ logistics would raise the landlocked country’s exports by 74 percent.<sup>6</sup> Beyond-the-border institutional reforms facilitating trade and transport in a neighborhood can greatly increase the efficiency and reliability of logistics chains. Exploring corridor approaches that have worked well elsewhere, as in Southeastern Europe would be an avenue through which landlocked countries in the Sahel can mitigate their geographic disadvantage.

- Roads harassment by a multiplicity of control points that collect significant illegal payments is generalized. The Improved Road Transport Governance (IRTG) initiative's report shows that, in the West Africa region, these hindrances – in terms of number of checkpoints, bribes, and delays during the shipments of goods from gateway to the place of delivery – are more important in Mali, even though their magnitude has significantly decreased over the recent period (Table 5). Individual payments (bribes) at each check point, though small, add up sufficiently to deter traders with small volumes, especially the poor and women traders, which results in many such traders engaged in informal trade.

Table 5: Road harassment in selected West African countries

||Number of<br>per 100 km|Road Controls<br>|Bribes per 1|00 km|Delays per|100 km Trip|
|---|---|---|---|---|---|---|
||2005|2013|2005|2013|2005|2013|
|Burkina Faso|5.5|1.6|4,410|2,140|22|17|
|Côte d’Ivoire|-|1.9|-|2,675|-|8|
|Ghana|2|1.8|1,960|679|21|18|
|Mali|4.6|2.6|12,250|3,775|38|26|
|Senegal|-|1.3|-|1,614|-|14|
|Togo|1.5|0.9|1,470|597|16|7|

_Source:_ World Bank, 2018 calculations using IRGT Initiative data

- Cross-border trade is expensive and inefficient due to the difficulty of obtaining import and export licenses. It takes an inordinate amount of time to file for licenses, and bribes or informal payments may be expected.

- Unorganized and Fragmented Domestic Transportation Market: The transport sector in these three countries is dominated by a large number of individual or

> 5 UN-OHLRSS (2019).

> 6 Behar and Manners (2008).

17
family-type transporters, with generally aged and in poor maintenance fleet. Freight companies are estimated to only account for less than 20 percent of transporters in Mali. The international freight-sharing quotas schemes signed with the coastal transit countries, coupled with the queuing system and cartels practices, constitute strong obstacles to increased market access and undermine transport service quality. The codes of conduct and rules of drivers are at a nascent level. This engenders a lack of reliability and predictability that are essential factors in the logistics supply chain. The result is a vicious circle of further informality.

The recently ratified WTO Trade Facilitation Agreement (TFA) provides its members, like Mali, Niger, Chad, Guinea, and its neighbors a robust, time-sensitive opportunity to address issues on regional and international trade. It does so by expediting the movement, release, and clearance of goods including transit issues across the region. All of them, WAEMU, CEMAC and ECOWAS have been actively involved, as trading blocs, in the TFA. All three institutions received mandates from their respective Member States to negotiate and have played a key role in the preparatory stages and the negotiation of the TFA. However, key trade partners, like Nigeria and Cameroon still need to ratify the TFA.

18
# Policy Options

The key to export diversification and facilitating a competitive tradable sector is to refine the incentive structure defined by trade, tariffs and non-tariff barriers. Such policies would help MCNG countries better identify and exploit economic diversification opportunities, while also creating sustainable employment opportunities and promoting an active role for the private sector in both domestic and international markets. Therefore, an active trade policy should be an integral part of the strategy. As the current trade regimes are excessively protected, an adequate sequencing should be done, in parallel with actions oriented to simplify the tariff structure, eliminate cumbersome NTBs, improve Customs procedures, while introducing other reforms and regulations that deal with perceived constraints to the business environment. The following paragraphs summarize the key policy options.

- Explore means of refining CEMAC and WAEMU CET closer to peers as means of reducing distortions and stimulating trade diversification. Restoring the WAEMU CET to four bands (e.g., 0, 5, 10, and a luxury goods rate of 20 percent) is recommended as a means of reducing welfare costs as well as reducing anti-export bias as a step towards bringing them closer to more competitive incentive structures in peer regions. A recent DTIS (2015) also recommended CEMAC CET adopt the four-band regime as proposed above.

- Phase out exemptions. Recent estimates on Niger suggests that Customs collects one-third of what it should, due to tax exonerations and smuggling. Phasing out exemptions while improving revenue significantly reduces incentives for rentseeking and improves transparency.

- Eliminate para-tariffs. Eliminate all para-tariffs with a phase-out period of 2-3 years or integrate levies such as statistical fees into existing tariff bands to reduce costs and improve transparency. Anything less than 2 percent is considered nuisance tariff as their implementation cost generally tends to exceed the benefit and should be eliminated in the short run.

- Eliminate import and export restrictions. Import restrictions have affected crops such as maize, wheat flour, cassava, sugar, vegetable oil, rice, frozen and chilled fish, beef and poultry. Export restrictions are mostly applied to cereals, particularly maize, millet and rice. Important reasons for governments to impose them are short-term food security concerns, in periods of (expected) food shortage. Indeed, a large number of countries in the region banned exports during the 2007/2008 food crisis. However, while it allows food to stay in the country in the short run, it can negatively affect investment decisions of value chain actors and thus have an adverse effect in the long run.

- Promote implementation of regional standards. Traders in agricultural products would profit from a clean implementation of WAEMU/ECOWAS rules on agricultural products, allowing tax-free transit for local products and regional recognition of product standards.

- Promote a bilateral free trade agreement with Nigeria. When countries like Chad and Niger (small, landlocked, undiversified economies) share borders with Nigeria (a more diversified coastal country) to an extent the incentive regimes deviate i.e. higher consumer goods tariffs create sufficient rents for informal arbitrage both for bilateral and third country trade as seen from recent diagnostics where large

19
informal imports from Nigeria to Chad in consumer goods. Moreover, the presence of large informal trade with Nigeria due to both trade and other transactions costs suggests unexplored mutually beneficial trade. It is therefore in the interest of Niger and Chad to consider mitigating/eliminating trade and transactions costs by negotiating a comprehensive free trade arrangement with a robust transit framework.

- Create border bazaars to promote cross border trade, especially for poor traders and women. Given the geography or spatial markets in between Nigeria and Chad and Niger, a regime to ease the movement of goods and people engaged in subsistence levels of trade needs to be encouraged using a border bazaar model. Border bazaars enable cross-border transactions with minimum formalities (limited to security protocols) to encourage retail trade between border communities and can encourage the development of post-harvest infrastructure that would reduce harvest waste and increase returns to local communities. Participation in bazaars should be made easier—for example, through visa-free entry, exemptions of border taxes, reductions in documentation requirements, and adoption of good practices in agencies dealing with them to ease movements between bazaars. Successfully implemented in India-Bangladesh border regions, such an initiative could be piloted at Maradi/Zinder/Diffa/Birnin Konni/Tahoua based on density of communities along the border. A joint security arrangement in the piloted border regions will likely protect cross-border trade and maintain access to the productive territory around Lake Chad likely to ease the burden of cross-border trade, while reducing rent seeking that impacts border communities, particularly female traders, who are often more susceptible to security risks and harassment.

- Under the second _rung on the ladder_ of diversification, all countries would benefit from making a concerted and comprehensive effort to deepen their regional and bilateral trade, and especially with Nigeria. Nigeria, as the largest market in the ECOWAS region, can be just on itself, an engine of MCNG countries, and more in particular Mali, Niger and Chad’s export growth. Whereas there is room for a comprehensive free trade agreement, its focus should be at reducing transaction costs, complement investments in regional transport and energy infrastructure, and improve logistic services. To unlock such strategic move, a first unavoidable step would be to assess the mutual benefits to both parts from mutually lowering tariffs and NTBs on key staple varieties; and in this way, remove their barriers to trade in agricultural and livestock products. These measures should be discussed under both the ECOWAS forum and CEMAC channels. Greater joint efforts in security, bringing increased protection for people, land and livestock along the lengthy border with Nigeria are also needed to expand access to productive territory. Finally, these efforts could include guaranteed access to the Lake Chad shores to promote the fishing sector.

- Explore new emerging markets. Develop institutions to facilitate commercial information of targeted Africa and Asian countries through overseas missions as well as capabilities of respective export development agencies to explore value chain opportunities on the upstream side to export cotton to Bangladesh, India, Korea and Indonesia. In Europe, Germany, Switzerland, Austria, and Portugal are worth exploring in depth. This includes development of an Action Plan to promote

20
agriculture products from Sahel to targeted destinations highlighted above, especially in livestock, cotton, as well as shea butter and peanuts. There is also a need to explore the feasibility and competencies to transition towards the next tier of industrial ascendance for countries like Niger and Chad such as in chemicals and plastics products derived from petroleum. Experience suggests rather than attempt to promote overall exports, export promotion campaigns that have a sector orientation in its campaigns tend to pay-off. The promotion efforts should be supported by export promotion agencies and private sector organizations with identification of exhibitions and trade fairs, as well as support for inward trade missions. In terms of resources, empirical evidence suggests that effort should be focused on large firms that are new or not yet exporters, rather than on small firms and established exporters. For agricultural products, the successes of Global Shea Alliance and African Cashew Alliance in integrating into international markets through export promotion, value-addition, and improved standards provide examples of regional models that could be replicated.

- Improve trade logistics so as to facilitate their entry into global value chains. Improving trade and transport logistics, business environment (esp. rule of law), infrastructure, (telecommunication, roads, ports) and wage competitiveness are key determinants to enter into GVCs. The service sector plays a crucial role in the competitiveness of manufacturing firms, represents a key source of value added that could help to diversify Sahel and affects the chances of countries adding value and climbing GVCs. Conditions to leverage existing/nascent comparative advantages in manufacturing and services need to be supported by technology and knowledge transfers from other countries—most often in the form of FDI. Sectoral initiatives to promote integration with GVCs, includes developing product quality and standards to connect with global players, establishing regional production networks, reducing NTBs, and increasing tariff liberalization.

- Niger needs a two-pronged strategy to address the illegal payments and associated road harassment in transit routes. First, in coordination through WAEMU and ECOWAS, countries like Niger and Chad should negotiate a set of ‘principles” and ‘guidelines” on transit traffic specifying applicable service fees for transit traffic. Second, in conjunction with WAEMU and ECOWAS develop and launch an awareness campaign to inform transporters/traders the set guidelines a noncumbersome mechanism for reporting illegal fees. Southern Africa’s NTB reporting mechanism provides a best-practice robust guide to reporting NTBs, including transit related harassments.

- The recently ratified WTO Trade Facilitation Agreement (TFA) provides the region a robust, time-sensitive opportunity to address issues on regional and international trade. It does so by expediting the movement, release, and clearance of goods including transit issues across the region. Both UEMOA and ECOWAS have been actively involved, as trading blocs, in the TFA. The two institutions received mandates from their respective Member States to negotiate and have played a key role in the preparatory stages and the negotiation of the TFA. In addition, the two institutions regularly organize national and regional seminars to build awareness of the provisions and to harmonize the application of the common rules. Implementation of the TFA by Togo and Nigeria, both original signatories, will likely

21
boost prospects of both bilateral and transit trade for Niger. Once Benin and Burkina Faso become its members, it will create a seamless transactions environment along the existing trade corridors and open new mutually beneficial market opportunities for all countries in the region.

- Major interventions in Customs modernization and simplification of procedures, personnel training, and increased automation are needed. Together, these can significantly reduce rent-seeking and reduce time and cost of trade. Customs officials would benefit from increased trade flows arising from the support of automation, communication, improved personnel management, and better data on actual trade transactions. Selected interventions that would support TFA implementation and facilitate regional trade include: Computerization of existing systems, including infrastructure to allow the transmission of data between Customs agencies to facilitate transit trade; implementation of a new code of ethics, such as that drafted by Chadian customs; training of Customs officials; and provision of IT infrastructure at key Customs points and other main transit points.

Table 6.further summarizes key interventions in major areas.

22
Table 6: Matrix of Policy Interventions

|Objectives|Recommendations/ Actions|Lead Institutions|Results Indicators|
|---|---|---|---|
|_Consistent_<br>_CET_<br>_structure_<br>_across_<br>_Sahel_|Introduce CET 0, 5, 10, 20 across WAEMU/ECOWAS, and include<br>CEMAC as an<br>interim step towards further rationalization and consistency.|Ministries of trade and Regional<br>bodies|Improved<br>trade<br>environment,<br>reduced smuggling|
|_Improve_<br>_governance/_<br>_efficiency_<br>_of_<br>_incentives_|Give authority to one inter-ministerial committee to approve tariff<br>exemptions. Phase out inefficient tariff exemptions|Ministries of Finance, Customs and<br>Trade|Increased<br>revenue/Improved<br>efficiency|
|_Eliminate_<br>_para-_<br>_tariffs_|Incorporate all para-tariffs into the existing CET|Ministries of Finance & Trade|Reduced<br>transactions<br>costs/Improved transparency|
|_Stable commodity_<br>_prices_|Eliminate import/export restrictions on agriculture trade.|Ministries of Agriculture & Trade|Increased investment in agriculture<br>value chain|
|_Develop_<br>_ECOWAS/Nigeria_<br>_trade/export_<br>_development_<br>_program_|Undertake cost benefit assessment of reducing tariffs bands to<br>four as well as tariff exemptions, NTBs and parafiscal levies under<br>ETLS. especially with Nigeria. Present findings to the negotiation<br>committees at both inter-ministerial ECOWAS<br>committees,Heads of Commerce meetings and other forums.|Ministries of Trade & Commerce;<br>and export promotion agencies.|Expanded<br>regional trade<br>in agriculture esp. staple<br>foods.|
|_Increase_<br>_regional_<br>_and_<br>_extra-regional_<br>_markets_<br>_in_<br>_agricultural_<br>_products_|Define a strategy for a marketing program appropriate for each<br>strategic sector for different regional and international markets.|Ministries of Trade, Agriculture,<br>Foreign Affairs, export agencies|Increase export values, volumes and<br>share of agri-exports to<br>countries|
|_Promote_<br>_diversification_<br>_of_<br>_exports to Asian_<br>_markets_|Develop Capabilities of Chambers of Commerce, Industry and<br>Crafts to gather commercial information.<br>Develop capabilities of commercial counsellors in respective<br>overseas missions|Ministries of Trade and Commerce<br>and export promotion agencies.|Expanded exports to East Asian<br>markets|
|_Establish leadership,_<br>_implement WTO TFA_|Establish the mandate of the NTFC and its lead role to steer TFA<br>action plans,<br>with mechanism for interagency coordination, and public-private<br>dialogue.|MF/MC/PSP/CCIAN/SGG|New AFE standards promulgated,<br>implemented|
|_Take_<br>_steps_<br>_to_<br>_operationalize_<br>_the_<br>_National_<br>_Single_<br>_Window_|Expedite the harmonization of import and export documents<br>among all relevant agencies and initiate business process re-<br>engineering of all trade- related processes and procedures.|Prime<br>Minister<br>Office,<br>Minis..Justice,<br>Commerce,<br>Economy, Finance, and Urban<br>Development|Initial steps in establishment of the<br>Single Window|
|_Simplify_<br>_border_<br>_controlprocedures_|Streamline data entry by eliminating the repetitive records.<br>Delete the systematic scanning and the books by adopting risk<br>managementprinciples.|Customs|Reduced time of passage in borders|

23
|Objectives|Recommendations/ Actions|Lead Institutions|Results Indicators|
|---|---|---|---|
|_Streamline Customs_<br>_regulations,_<br>_proceeds_<br>_and set automation_|Introduce legislation necessary for: a) rationalization of<br>documents and declarations and the development of tele-<br>transmissions<br>Allow the electronic transmission of early the transit declarations.|Ministries of commerce and justice|Decrease<br>in<br>the<br>number of<br>transactions<br>based<br>on<br>paper<br>documents|
|_Include transit trade_<br>_into computerization_<br>_of Customs proceeds_|Develop infrastructure for Informatics and strengthen the<br>centralized connectivity of all Custom offices (imports/exports<br>and transits).<br>Ensure the migration to Asycuda World of UNCTAD.|Ministries of Finance and Customs|Activation<br>of<br>centralized<br>connections of customs offices for<br>deployment of<br>ASYCUDA World|
|_Eliminate illegal fees_<br>_and levies on trade_<br>_corridors_|Launch an awareness among traders of the ECOWAS/UEOMA<br>protocols with regard to transit traffic<br>Establish a reporting mechanism for traders encountering road<br>harassment.|Prime Minister Off., Minist. Trade,<br>Justice,<br>Agriculture,<br>regional<br>bodies|Enhanced trade especially exports<br>by SME and Women traders|
|_Promote_<br>_a_<br>_competitive_<br>_and_<br>_efficient transport_<br>_sector_|Implement harmonized regional rules of access to and the<br>exercise of professions based on competence, training and<br>companies’ solvency.<br>Apply sufficient transitions time to gradually integrate the<br>informal sector.|Ministries of Transport|Improved transport performance &<br>reduced logistics costs|

24