Tuesday, 3 March 2015

Rwando-Congolese border enforcement may alter trade patterns

Rwanda and the DRC are putting up boundaries marking the border between the two countries.  The boundaries apparently restore those installed a hundred years ago by colonial authorities.  The News of Rwanda comments:

"The demarcation of borders between these countries will end the confusion about the borders especially for Congolese soldiers. They are often arrested on Rwandan territory claiming they are on Congolese territory."

These sentences neglect the many grave consequences of porous borders for the two countries, no doubt intentionally.

Economically, borders have a strange effect, which I don't think has been fully explained by economists.  The effect is that trade drops off sharply when a border is crossed.  Even if two countries have no restrictions on movement across borders and a common language, the amount of trade by businesses and people within a country is much more than the trade by businesses and people across borders, after controlling for distance (there may be a more precise statement of this effect, but this is the broad idea).

It seems remarkable that sticking 22 posts in the Rwando-Congolese ground may alter trade patterns so dramatically.  I think that, for entrepreneurs, any changes in this direction should be monitored closely so that lost customers are not a shock, and potential new customers can be captured.

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