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Border economics

Borders undermine economic activity and development by reducing trade activity.

The presence of borders often fosters certain economic features or anomalies. Wherever two jurisdictions come into contact, special economic opportunities arise for border trade. Smuggling provides a classic case; contrariwise, a border region may flourish on the provision of excise or of import – export services — legal or quasi-legal, corrupt or legitimate. Different regulations on either side of a border may encourage services to position themselves at or near that border: thus the provision of pornography, of prostitution, of alcohol, fireworks, and/or of narcotics may cluster around borders, city limits, county lines, ports and airports. In a more planned and official context, Special Economic Zones (SEZs) often tend to cluster near borders or ports.

Even if the goods are not perceived to be undesirable, states will still seek to document and regulate the cross-border trade in order to collect tariffs and benefit from foreign currency exchange revenues. Thus, there is the concept unofficial trade in goods otherwise legal; for example, the cross-border trade in livestock by pastoralists in the Horn of Africa. Ethiopia sells an estimated $250 to $300 million of livestock to Somalia, Kenya and Djibouti every year unofficially, over 100 times the official estimate.

Human economic traffic across borders (apart from kidnapping) may involve mass commuting between workplaces and residential settlements. The removal of internal barriers to commerce, as in France after the French Revolution or in Europe since the 1940s, de-emphasizes border-based economic activity and fosters free trade. Euroregions are similar official structures built around commuting across boundary.