Border Effects on Spatial Price Transmission between Fresh Tomato Markets in Ghana and Burkina-Faso: Any Case for Promoting Trans-border Trade in West Africa?

Cross-border trade in food commodities within sub-regional economic blocks in Sub-Sahara Africa (SSA) is believed to be faster, cheaper, more convenient and welfare-enhancing than trade between SSA countries and the USA or EU. The difficulty of commodity arbitrage across borders in SSA is however a fundamental impediment to price transmission, market integration and the realisation of the welfare-enhancing role of cross-border trade. This study examines the impact of border and distance on price transmission between tomato in Ghana and Burkina-Faso. The analysis applies a linear and a regime-switching vector error correction model to estimate wholesale prices of tomato in four tomato markets in Ghana and a producer market in Burkina-Faso. The estimated parameters contain evidence of border and distance effects. This is expected since high transfer costs, including cross-border formal and non-formal tariffs are incurred by traders in moving tomato across the border. Moreover, the perishable nature of tomato, and the poor quality of roads and transportation facilities linking markets on both sides of the border imply additional risks, and constrain Just in Time delivery and price transmission from producing to retail and consuming markets. The findings have implications for interstate trade between landlocked and coastal countries in West Africa