Ethiopia, more or less, has an established cross border trade with its neighboring countries particularly countries in the Horn of Africa. Ethiopia, with countries such as Djibouti, Somalia, Somaliland, as well as Kenya, has been exchanging a number of commodities via cross border trade.
The country has, for so long, been engaged in the export of agricultural products and livestock to the aforementioned countries and in return import mostly industrial products such as electronic devices, tobacco as well as food items.
In fact, few researches indicate that there were a number of times where the cross border transaction made via informal channels – namely contrabands – would surpass those that came in to and leave the country via the formal channels.
For instance a policy brief document published under the title: “Hidden value in the hoofs: cross-border livestock trade in Eastern Africa” proved this fact.
“Around 90 percent of the cross border trade along five Eastern African borders, including Ethiopia-Somaliland, Southern Somali-North Eastern Kenya, Western Ethiopia- Eastern Sudan, Southern Ethiopia – Northern Kenya and Northern Uganda – Southern Kenya, is informal cross border trade,” reads the document.
In this regard looking at the East African Cross Border Trade Bulletin, main staple food commodities informally traded across borders in Eastern Africa are commonly wheat maize, sorghum, flour as well as sugar.
By the same token, back in October and December of 2017, 111 metric tons and 1,390 metric tons of maize is reported to have been sourced from Ethiopia and sold to Kenya and Somalia, respectively, via informal cross border trade. Yet again, the same bulletin indicated that back in January 2018 the export data shows an increase where traders from Ethiopia sold 461 metric tons of maize to Kenya and 1,480 metric tons of wheat to Kenya and Somalia, respectively.
Given the gravity of the situation, just last year, Intergovernmental Authority on Development (IGAD) Member States deliberated on a draft regional policy framework to deter and control informal cross-border trade and cross-border security governance.
The meeting, which was held in Kenya, was attended by Trade Ministers of the member states and other officials including Ethiopia’s.
The communiqué issued by IGAD following the meeting says that it “acknowledges the growing importance of informal cross-border trade as a lifeline for millions of vulnerable borderland communities with a great majority of them being women.
In this respect, the members agreed to adopt a policy framework which will help to better elucidate the contribution of such cross border informal trades among member states to their citizens.
Following such consensus among member states, the region has been going through a number of shifts where new countries, which were isolated from IGAD, are warming up to join the regional bloc. In this respect, following the normalization of relations between Ethiopia –a vocal member in IGAD – and Eritrea, the latter is expected to join IGAD.
Moreover, in addition to active political involvement, Eritrea is also expected to actively engage on the economic front as well. In this respect, Eritrea is going to commence trade with its neighboring countries which it has already begun with Ethiopia.
Particularly, following the opening of the border between Ethiopia and Eritrea, trade has been thriving for months. It is to be recalled that the normalization of the relations between the two countries and the opening of the borders took place in September 2018.
Since then, thousands have flooded in from both sides. Particularly, a number of reports indicate that a significant number of Eritreans were coming to Ethiopia, where some were seeking asylum.
In this regard, according to a report update from the United Nations High Commissioner for Refugees (UNHCR) reopening the border has resulted in an increase in number of people arriving from Eritrea. The average daily rate of arrivals has increased from 53 to approximately 390 individuals. For instance, since September 2018, more than 27,500 Eritreans were registered at refugee camps in Ethiopia. From this, 90 percent of the new arrivals are women, children and unaccompanied minors.
In addition to the influx of people, The Reporter has learnt that business activities along the borders of the two countries were also flourishing. During this time, traders from Ethiopia have been sending mainly agricultural products such as teff, grains, as well as flour. In addition, building materials such as cement and corrugated metal roofing were being sold in Eritrea. In return, the Eritrean market could only provide them with electronics such as TV and mobile phones as well as gold brought from Dubai, UAE.
Not only this, thousands of vehicles from Eritrea would come to different cities and towns of Tigray to buy fuel. In fact, according to the data gathered from Tigray Urban Development, Trade and Industry Bureau, on average, 1,000 vehicles arrive in Tigray with the figure sometimes going up to 2,000. The vehicles are mostly automobiles though there are a few freight vehicles as well as public buses.
There was even a time where such influx of vehicles created fuel shortage.
Despite the euphoria and hope, following the opening of business activities, the transactions were simply done without any legal backing; no tax, tariff or nothing was said about currency usage.
When it comes to cross border trade, especially among communities who live in the borders, Ethiopia has few legal frameworks. For instance, there is this one directive which has been under implementation to regulate trade conducted in a small scale level where traders will be provided with a license called “petty trader’s license. This license allows traders particularly Ethiopia/Kenya/Somaliland, etc. to import and export items with a specific limit.
When it comes to the cross border trading between Ethiopia and Eritrea, it was made to commence without any policy framework to regulate the trade activities. This has in fact created confusion which finally led to the abrupt closure of border crossing of Rama and Zalamabsesa.
Many commentators were in fact expressing their concerns over the lack of clarity in the trade activities between the borders of the two countries.
Yet again the two countries have decided to open another border along Humera-Humurjera crossing where no clarity was still given in the presumed trade activities that would come.
It is to be recalled that the Ethio-Eritrean was of the late 1990s broke out, among other things, because of lack of clarity when it comes to economic relationship between the two countries.
Their disagreement over the use of currency was also related with the aforementioned economic dispute.
Following, the closure of borders with Ethiopia, adjoining the Tigray Regional State, from the side of Eritrea; particularly Rama and Zalambsa there were reports that the two countries are planning to come up with clear direction to regulate the trade activities among themselves.
In fact, a group of experts and officials both from federal and regional government studied the activities and submitted a final report to Workneh Gebeyhu, Minister of Foreign Affairs. The report, which explores, among other things, issues on how to formalize the trade activities was also communicated with the Eritrean counterpart.
Once it is finalized the document is expected to give a clear direction on how to conduct the trade activities.