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Border Markets: An Introduction

Olivier Walther

Abstract

The objective of this issue of Articulo – Journal of Urban Research is to examine the characteristics of border markets in a comparative perspective. In this introductory paper, I first discuss what makes African border markets different from other markets, and examine several factors that explain their unequal economic development: the presence of a trade community, the combination of trading and productive activities, and the relative porosity of borders. In a second part, I examine how border markets on the U.S.-Mexico border must simultaneously guarantee the security of the state while favoring regional trade. The last part of the paper argues that more policy attention should be paid to border markets which, despite being at the margin of states, are a vital component of their economy. Fifty years after most West African states became independent and just as NAFTA turns 20, it is high time to challenge the conventional wisdom and put border markets at the center of trade policies.

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Border market of Gaya, NigerFull size image
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At the margin of states1

  • 1 This paper is part of a larger research agenda, initially developed in Luxembourg and in the U.S. w (...)

1Border markets are different in important respects from other markets. While regional and national markets draw their wealth from their hinterlands, border markets owe their existence to the presence of border differentials and thrive at the point of convergence of transnational networks. Whereas most markets evolve slowly, border markets experience sudden booms or declines due to variations in price differentials, exchange rates between currencies, taxes between countries, and bans of imports and exports. Unlike other markets that primarily owe their importance to the size and qualifications of their labor pool, border markets are dependent on the business opportunities offered by their peripheral location.

2Because of these unique characteristics, border markets are stimulating cases for reassessing some of the assumptions of the social sciences, about such factors as centrality, power or hierarchy, and rethinking the action of nation-states in border regions. The objective of this issue of Articulo – Journal of Urban Research is to examine the characteristics of border markets in a comparative perspective through the lens of six original papers. Like border markets, which temporarily bring together a variety of traders from different cultural backgrounds, our thematic issue relies on a wide range of academic and policy experts from various disciplinary fields, including history, geography, economics, and criminal justice.

3In this introductory paper, I first discuss what makes African border markets different from other types of markets, and examine several factors that explain their unequal distribution and economic development: the presence of a trade community, the combination of trading and productive activities, and the relative porosity of borders. In the second part, I examine how border markets on the U.S.-Mexico border must simultaneously guarantee the security of the state while favoring regional trade. The last part of the paper argues that more policy attention should be paid to border markets which, despite being at the margins of states, are a vital component of their economy.

Africa – Why do border markets flourish?

4In Africa, one might believe that the mere presence of a border and a city is sufficient to create the conditions of a bustling cross-border activity. Nothing is further from reality: many border regions experience only little cross-border trade, and many cities actually turn their back to the border rather than transforming into global bazars. A recent study conducted by the Sahel and West Africa Club (Walther 2014a) shows for instance that the 130 border markets identified from Senegal to Chad are unequally distributed: while several clusters of border markets can be found along some portions of the Nigerian borders, in the Senegambia, between Southern Togo and Benin, and between Côte d’Ivoire and its Northerner neighbors, many border regions are virtually deprived of border markets.

5So why do some border cities turn into dynamic border markets and some don’t? The following sections explore three factors that impact on the economic development of border markets: the presence of a skilled community of traders that can successfully exploit border differentials, the combination of trading and productive activities that rely on market and transport infrastructure, and the relative porosity of borders, which provides business opportunities.

Trade communities

6It might sound obvious, but the success of border markets is primarily linked to the people involved in trade. Without an innovative community of traders involved in transnational business networks, border towns and cities can hardly pretend to be border markets. It is these entrepreneurs that will, on a daily basis, exploit the various differentials that continue to characterize border regions, and try to make a profit of connecting different nationally-organized markets (Walther 2014b).

7Throughout history, these business communities have been crucial to the prosperity of market places. Many markets that flourished before colonization have vanished or dramatically declined in the 20th century, such as Salaga in Ghana or Kong in Côte d’Ivoire, because they no longer served as crossroads along regional trade routes or because their political support disappeared. In some places, such as in Gaya in Niger, the remembrance of a prior history of long-distance trade has completely disappeared from migration-and-settlement narratives, despite the fact that the city was located on one of the main trade routes developed between Hausaland and Asante in the 19th century (Lovejoy 1986). Inversely, some of the more dynamic contemporary border markets are products of colonialism, strategically placed along the new transportation routes created by colonial powers, such as Malanville, the Beninese market located on the Niger River banks.

8In his contribution Cross-Boundary Traders in the Era of High Imperialism, Allen H. Howard (2014, this issue) masterfully illustrates this issue. Building on several decades of fieldwork and archival research in the Sierra Leone-Guinea region, he shows how the structure of trade has been radically transformed by colonization. Some African traders successfully adapted to the new spatial order imposed by the French and the British. African kola traders, for example, quickly realized the advantages of using steam ships to develop new networks to other colonies and of relying on telegraph to follow prices and deliveries. A number of “smugglers”, as the colonial powers started to call them, also crossed the newly established borders in search of higher prices for local products and to respond to the increasing demand for imports from the rest of the world. Cattle traders also prospered after having moved to new rail centers. Other African traders, however, couldn’t compete with European firms, especially long-distance traders, whose social networks had been affected by the restructuring of the trade route, as caravans sponsored by African states were replaced by colonial railways.

Circulation and production

9Another important factor in the development of border markets is their ability to combine trading and production activities. As market places, African border markets are intimately linked to the trade flows in raw materials, commodities and services that connect the globalized world. Border markets can therefore be seen as places of convergence for the transnational movements of goods and people (Dobler 2009, Zeller 2009). But border markets are more than places of flows; they also play a crucial regional role for the organization of agricultural activities. In Africa, border markets combine, on the same site, a variety of products that transit only briefly through the market, such as second-hand cars, cigarettes or fuel, and, simultaneously, a number of agricultural products, such as onions or cereals, for which the border market serves as a place of storage before being distributed regionally. In other words, it is in border markets that the two different spatial strategies of transnational circulation and regional production converge (Walther 2012).

10The presence of a reliable market and transport infrastructure is crucial for trade communities and producers because it allows the combination of trading and production activities to conjointly benefit the regional economy. In precolonial times, trade routes were known to be mobile as were human settlements. Howard (2014, this issue) shows, for example that trade corridors connecting Futa Jallon to the Atlantic Ocean and along the coast of the Gulf of Guinea were composed of several routes. Smaller routes crossed corridors, creating a grid. Resources of trade were diverted by traders into developing the centrality of their towns, by securing trade routes, hosting traveling traders, building facilities, and creating a dense network of clients. The construction of railways lines by the colonial powers considerably perturbed those trade corridors, as some markets lost their centrality. On both sides of the colonial border, rail systems were developed to extract crops and channel imports to Conakry in French Guinée and Freetown in Sierra Leone. Both colonial infrastructures remained separated. As a result, the dendritic system imposed by colonization and oriented towards regional centers progressively replaced the grid upon which traders had relied until the 1890s.

11Today, many trade policies focusing on building road and rail infrastructures have been developed in Africa. Recent examples include the Trans-African Highway network which aims at rehabilitating and developing transnational road axis on the continent and the new West African rail loop that should interconnect Cotonou with Abidjan via Niamey and Ouagadougou. Another related aspect of these policies is the recent building of Joint Border Posts by the West African Economic and Monetary Union (WAEMU) to accelerate border clearance, such as between Niger and Benin (Malanville), Burkina Faso and Togo (Cinkansé), or Burkina Faso and Mali (Hérémakono). As Dobler (2014) argued, the impact of such transport corridors and joint posts will probably vary according to the scale of activities and level of involvement in formal activities of traders. Because these initiatives aim at reducing barriers to trade, and hence the frictions caused at checkpoints, they might encourage firms in the formal sector to trade regionally and result in a significant reduction of cross-border opportunities for local traders. Border markets could lose some of their revenues if goods no longer wait before crossing border checkpoints, if informal bargaining is reduced to a minimum between traders and state officials, and if traders invest less locally. But joint posts and transport corridors are probably not a great threat to small and/or informal traders, who don’t use the formal procedures and infrastructures anyway and for whom crossing the border is likely to remain a profitable business as long as they can develop strategies that exploit the porosity of the border.

Porous borders

12Another factor that can determine the success of border markets is the relative porosity of borders. The degree of openness of the border greatly varies between cases and generates specific flows of goods and people. Borders that are officially closed to a number of products to protect national production but functionally open to informal flows thanks to the collusion between traders and state authorities offer a stimulating environment for cross-border trade. This phenomenon is particularly visible on the Nigerian borders, where the state has continuously resisted the harmonization of external tariffs and removal of barriers to trade promoted by the Economic Community of West African States (ECOWAS), a supranational organization founded in 1975 (Golub 2012). As a result, while most Francophone countries in the region have embraced free-trade policies, Nigeria continues to prohibit the import of several goods, such as second-hand cars or clothes, whose illegal trade has considerably enriched long-distance traders.

13Markets on both sides of the Niger-Nigeria border, for example have flourished from the trade of various commodities and agricultural products which the Nigerian economy could not produce any more, that were heavily subsidized, or that could be purchased for a lower price on global markets. The partial harmonization of customs regulation which imposed import and exports bans on a range of staple food grains and manufactured products further increased re-exports from the world markets that formally arrived in Benin, transited trough Niger, and entered the Nigerian market illegally.

14Differences in tax policies and subsidies harmonization are also known for stimulating informal trade patterns in North Africa. As Lofti Ayadi, Nancy Benjamin, Sami Bensassi and Gaël Raballand (2014, this issue) show in their article An Attempt to Estimating Informal Trade Across Tunisia’s Land Borders, the main motivation of informal traders at the Tunisian borders is to benefit from differences in tax burden and in the resulting consumer sale price in a number of commodities, starting with fuel. An interesting result of this study is that the structure of trade networks differs whether trade takes places across the Algerian or Libyan borders. Trade with Algeria is mainly organized through a linear chain of actors in which Algerian wholesalers hire transporters to bring the goods ordered by their Tunisian counterpart to a storage owner on the Algerian side of the border. Close family and cultural ties between traders on both sides of the border then facilitate the crossing of imported goods to another storage owner in Tunisia. Imported goods from Algeria are then picked up and delivered to local wholesalers, until they reach the final consumer. This situation share similarities with what Howard (2014, this issue) observed in the precolonial Sierra Leone-Guinea trade system, where goods carried over long distances were traded through people’s private networks and locations and not in open market places.

15In comparison, the structure of trade between Tunisia and Libya is more circular. The supply chain starts when Tunisian wholesalers order a certain quantity of goods from Chinese, Turkish, or Libyan suppliers, possibly with the help of a financier. Once the goods arrive in Libya, they are received by a Libyan agent, who arrange for the goods to be transported to a border entrepot. The goods are then stored until a Tunisian transporter comes to deliver them to a wholesaler, who will finally reimburse his financier if needed and sell the goods to the end customers.

16Fuel is also at the heart of Hugh Lamarque’s (2014, this issue) article Fuelling the Borderland, which studies the distribution of petrol in the borderland between the Congolese city of Goma and the Rwandese city of Gisenyi. The article shows that differences in prices and national regulation strongly determine the informal trade of gasoline across the border. Rwandan authorities strictly police the distribution of gasoline in the country, while the deregulated Congolese market leads to more favorable prices (and more opaque activities). Gasoline follows a tortuous path until it reaches the tanks of the cars circulating in Eastern Congo: usually imported via Rwanda with permits that avoid import duties, the relatively cheaper gasoline is distributed to the official stations of Goma, before being either re-exported to Rwanda illegally or resold to privately owned stations and individuals, known as Kadhafis, named after the late Libyan colonel. Organized within the Association des Petits Pétroliers du Nord Kivu (A.P.PE.NO.KI), the Kadhafis have progressively established a monopoly over Goma’s second-economy gasoline trade and developed a structure that mimics local state institutions while operating parallel to them. The relationships developed in the borderlands between A.P.PE.NO.KI and local officials, the author argues, compete with powers at the center of the Congolese state and have the potential to undermine its already fragile statehood and cohesion.

North America – A gated world

17Nowhere is the current paradox between the necessity to combine security and trade more evident and controversial than at the border between the United States and Mexico. In the gated world that has supplanted the utopian borderless world of the 1990s, modern borders must simultaneously provide a barrier to the flows of criminal, terrorist, and illegal activities that might enter the state and foster cross-border trade. The tension between the need for better national security and the development of transnational flows, which has always been present since the adoption of the North American Free Trade Agreement (NAFTA) in 1994, has significantly increased in the post 9/11 period. The border is now guarded by the U.S. Customs and Border Protection, a federal agency whose aim is both to keep terrorists and criminals out of the United States and facilitate international travel and trade. Simultaneously, the increase of trade caused by NAFTA has also made it necessary to channel a growing amount of goods through border controls. Borders have then become huge interfaces that filter, scan, and channel millions of trucks, some heading North with manufactured goods assembled in Mexican maquiladoras, some heading South with American goods en route to the Mexican market. Each of the two papers published in this issue illustrates one side of the coin.

18In their article Trade Flows Between the United States and Mexico, Ismael Aguilar Barajas, Nicholas P. Sisto, Edgardo Ayala Gaytán, Joana Chapa Cantú and Benjamín Hidalgo López (2014, this issue) show that trade between the two countries soared following the signature of NAFTA in the mid-1990s. An interesting finding of this long-run study is to show that, if the overall value of goods crossing the U.S.-Mexico has increased dramatically – 390 billion dollars in 2012, up from 97 billion in 1995 – most trade patterns have remained stable over the period. The authors show that trade is not only important for border states, such as Texas, but also for more distant states, such as Michigan or Central Mexico, which have maintained close relationships with the neighboring country through road corridors. The contribution of neighboring American states to the economy of Northeastern Mexican states is particularly strong for assembly sectors, such as the textile, wood, chemical, and machinery industries, which feed maquiladoras. The study also documents the effects of the liberalization of trade at a more local level, an aspect that has been studied less frequently than import or exports flows or foreign direct investment at the macro level. The authors highlight the crucial role of some border posts, such as Laredo in Texas, the first NAFTA port of entry with 1.8 million truck crossings every year.

19The article Transnational Entrepreneurs and Drug War Violence Between Ciudad Juárez and El Paso by Maria Cristina Morales, Pamela Prieto and Cynthia Bejarano (2014, this issue) documents another kind of border crossing. While many studies dedicated to the U.S.-Mexico border focus on illegal crossings and impoverished Mexicans, the authors study how wealthy business owners and their families migrate from Ciudad Juárez to the American city of El Paso in search of a less violent environment. Building on a corpus of interviews with members of La Red, a business network, the article explains the many obstacles faced by Mexican business owners in their own country, starting with the omnipresent risk of being kidnapped or killed or having to pay “rent” money to the drug cartels. As a result of the 2006 drug war initiated in Mexico, the authors argue, the business environment has deteriorated so much that hundreds of thousands of people and thousands of shop owners – the precise figure is unknown – have fled to the American side of the border. Interestingly, the authors show that many Mexican business owners established in the U.S. – sometimes with the help of the American government – have maintained close professional relationships with their own country. This has led to a bi-national business model where Mexican managers travel back and forth between El Paso and Ciudad Juárez to supervise their business ventures.

At the center of trade policies

20African and U.S.-Mexico border markets are, as Nugent (2012) argued, extremely different. If in Africa most border markets thrive in a context of weak states and low territorial disparities, border markets located on the U.S.-Mexico border are characterized by strong historical antagonism and high disparities. While the main concern of African states is to try to formalize, as much as possible, the informal sector that flourishes at their margins, the U.S. and Mexico are primarily occupied with the apparent contradiction of securing a border while enhancing lawful travel and trade.

21If the contributions gathered in this issue have something in common, it is to show that border markets shouldn’t be viewed as a marginal, and sometimes exotic, part of the national economies any more. Like other border towns, border markets are “geographically peripheral (but) economically pivotal” to use Nugent’s (2012: 568) words and their development should be of great concern to the states around the world. In both Africa and North America, border markets have received a strong impetus from the liberalization of trade that has characterized the last decades. In both regions, however, it must be recognized that state investments in infrastructure and human capital have been much more limited than what their importance for national economies would suggest.

22In Africa, despite a revival of interest for cross-border trade from international organizations (OECD 2009a, McLinden et al. 2010, African Development Bank 2012, World Bank 2009, 2013, USAID 2014), relatively few trade policies are applied with explicit consideration to space and target border markets. The issue is different between the United States and Mexico, where billions of dollars have been spent on the walls and on the border guards that secure America but relatively less money has been dedicated to eliminate congestion and improve the degrading infrastructure that allows free movements of goods and people. As Aguilar Barajas and colleagues (2014, this issue) note in their conclusion, “strains on border crossings facilities and needed improvements in infrastructure and customs formalities” are a recurrent topic of concern for urban dwellers and businessmen that experience the delays and financial losses associated with border crossings.

23I see at least two reasons why more policy attention should be paid to border markets.

24The first reason is demography. In many parts of the world, border regions are heavily populated. As recently shown by the Sahel and West Africa Club (Walther 2014a), 38% of the urban population of West Africa is located less than 100 km from a national border. This represents a population of 53 million urban dwellers in 2010. On the U.S.-Mexico border as well, border regions have experienced a stronger demographic growth than the rest of the United States or Mexico (Aguilar Barajas et al. 2014, this issue). Of course, not all borderlanders are actively engaged in cross-border activities and not all border cities are border markets. However, the fact that borderlands and border cities, far from being marginal, concentrate a significant – and sometimes growing – proportion of the population should invite trade policies to consider border markets as a fundamental component of national economies.

25The second reason is that border markets are not just places where truck drivers wait endlessly with their vehicles because of administrative red tape, corruption, and lack of basic standards. They are important for local communities and local producers as well. Place-based policies, based on the idea that local actors and institutions shape the development potential of regions (OECD 2009b, c), could fruitfully be mobilized to foster economic development in such places. Instead of considering border markets as unnecessary obstacles along transnational roads, place-based policies that see them as market places in their own right could benefit the state as well as the regional economy. Such policies could build on some of the determinants discussed in this paper: invest in the people that make trade communities, invest in the places that combine trade and production, and support the positive aspects of the openness of borders.

26Policies focusing on border markets could aim at supporting local entrepreneurs that sustain cross-border activities. In those regions where most cross-border traders are illiterate, as in Africa, this could be achieved by improving the qualifications of the young professionals and providing structured training and development programs to those already engaged in trade. Formalizing the formal, as is intended by ECOWAS’s Regulatory Informal Trade Program, could also lead to train businessmen to use practices that do not circumvent the state and accounting procedures that facilitate their business registration.

27Place-based policies targeting border markets could also aim at helping border municipalities develop market and transport infrastructure that can simultaneously encourage trade and production activities. An example of such a strategy has been adopted by the Illela border market in Nigeria, which is undergoing rehabilitation and reconstruction works and has designed a website promoting its unique location between Sokoto and Niger (This Day 2013). As discussed earlier, border markets flourish when the profits of small and long-distance trade can be invested locally, in manufacturing activities or agricultural production.

28Finally, place-based policies could aim at maximizing the positive consequences of border settings while minimizing their negative consequences. This agenda can only be achieved by encouraging both dimensions of regional integration: the functional dimension, which requires to develop social and economic interactions between people, firms, markets and regions separated by national borders, and the institutional dimension, which requires to develop cross-border cooperation between policy-makers. Thus far, as the Council on Foreign Relations (2014) recently argued, markets are more deeply intertwined than policies when it comes to regional integration.

29Fifty years after most West African states became independent and just as NAFTA turns 20, it is high time to challenge the conventional wisdom and put border markets at the center of trade policies.

Corrections

30This article has been edited on May 18 to reflect changes in the content of the published issue.

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Bibliography

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Notes

1 This paper is part of a larger research agenda, initially developed in Luxembourg and in the U.S. with the support of the National Research Fund of Luxembourg (CROSSTRADE C10/LM/783313 and WANETS MOBILITY/12/4753257) and, later, by the Sahel and West Africa Club at OECD in the framework of its West African Futures Program (2013-14). I thank Al Howard for his continuous support, Philipp Heinrigs and Marie Trémolières for their constructive comments, and Gregor Dobler for his input on the opportunities and constraints of border markets.

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References

Electronic reference

Olivier Walther, « Border Markets: An Introduction », Articulo - Journal of Urban Research [Online], 10 | 2014, Online since 08 October 2014, connection on 26 March 2017. URL : http://articulo.revues.org/2532 ; DOI : 10.4000/articulo.2532

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About the author

Olivier Walther

Olivier J. Walther is an Associate Professor at the Department of Border Region Studies at the University of Southern Denmark and a Co-Editor of Articulo – Journal of Urban Research. Email: ow@sam.sdu.dk

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Creative Commons 3.0 – by-nc-nd, except for those images whose rights are reserved.

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