Monday, June 21, 2010

Real Talk on Inter-Africa Trade

Besides iffy transportation systems, high tariffs and the electronic money transfer issues, what else hinders Inter-Africa trade? Gregory Simpkins does the knowledge.

One phenomenon that is involved in lower than possible intra-African trade may be the practice of transfer pricing. By over-pricing imports and under-pricing exports, multinational companies transfer profits, revenues or monies out of a country in order to evade taxes. This may seem to be solely a tax issue, but if neighboring countries aren’t in on these deals, wouldn’t they be locked out of trade in the goods in question? The OECD estimates that nearly two-thirds of global trade in goods and services takes place not on the free market, but rather between subsidiaries of the same multinational company. Global Financial Integrity, an organization that tracks illegal fund transfers, estimates that sub-Saharan African countries lost more than US$800 billion through techniques such as abusive transfer pricing between 1970 and 2008.

He's a U.S. flag-waver, and I have my doubts on AGOA (that's another post). Still, though, read the whole thing.

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