Border trade

Border trade, in general, refers to the flow of goods and services across the international borders between jurisdictions. In this sense, it is a part of normal legal trade that flows through standard export/import frameworks of nations. However border trade specifically refers to the increase in trade in areas where crossing borders is relatively easy and where products are significantly cheaper in one place than another, often because of significant variations in taxation levels on goods such as alcohol and tobacco.

As well as border trade across land or sea borders, air travel with a low-cost carrier can be worthwhile for a short international trip to the same purpose, although baggage restrictions can limit worthwhile savings to those for small high-value goods.

Where border trade is done for tax evasion it forms part of the underground economy of both jurisdictions.

By region

Europe

Typical examples of this are the borders between Ukraine and Russia, between Norway and Denmark/Sweden/Finland/Russia, and between Denmark and Germany.

Border trading exists between Northern Ireland and the Republic of Ireland, with petrol being cheaper in latter and groceries, furniture and clothing cheaper in the former. Between the United Kingdom and France/Belgium, the booze cruise is a trip made specifically, or at least largely, to purchase cheaper alcohol and tobacco, and also goods offering different rates of VAT: laundry detergent, perhaps surprisingly, is a common purchase.

Croatians who live close to the border with Bosnia and Herzegovina or Serbia often purchase tobacco and other goods on the other side of the border.

North America

Cross-border shopping between the three countries in North America (Canada, USA, Mexico) is robust. The North American Free Trade Agreement (NAFTA) has reduced barriers and tariffs, facilitating cross-border trade. Each day 2008, $2 billion of cross-border trade was conducted between Canada and USA alone.^[1] Consumers take part in cross-border trading in order to broaden their product selection, gain access to a larger market place, or to take advantage of currency volatility. On-line commerce has taken a more prominent role in recent years and gives consumers a convenient platform for cross-border shopping. However, additional border costs such as duties, brokerage and shipping are not always disclosed up front or even known by the retailer, leading to situation where the final cost of the item can greatly exceed expectations. Dedicated cross-border shopping solutions such as Wishabi,^[2] and Canada Post’s Borderfree exist to mitigate these problem with varied success. In the end, caution is necessary to determine the final cost of goods before purchase.

East Asia

Many Singaporeans also travel to Johor Bahru in Malaysia or Batam in Indonesia, to take advantage of price differences and differing product availability. The Singaporean government has a law that requires a car leaving Singapore to have a fuel tank that is mostly full, to prevent it from being filled with fuel from outside Singapore.

Shenzhen, China, on the border with Hong Kong, also benefits significantly from border trade.

See also

• Tax avoidance and tax evasion
• Border checkpoint
• Border control

References

1. ^ http://www.cbsa-asfc.gc.ca/media/release-communique/2008/2008-07-02-eng.html
2. ^ http://www.wishabi.ca/cross_border_shopping