Chapter 3


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 Box 3.3 The Benefits of Increased Trade between Neighbouring Countries

 In a study for IFPRI, Ulrich Koester estimated hypothetical import and export parity prices for major crops
 for selected countries in southern Africa, on the assumption that all trade occurred with major markets
 outside of the region. The import parity price is the world purchase price plus the cost of transport to the
 region and the export parity is the same world purchase price minus the cost of transport to deliver the grain
 on the world market. Some of the results are shown in the table below.

 Import and export parity prices for maize and wheat in selected locations ($/ton)


 Maize Wheat
 Location Import Export Import Export
 Parity Parity Price Parity Price Parity
 Price Price

 Maun, Botswana 270 39 277 46

 Lichinga, Mozambique 256 53 263 60

 Tabora, Tanzania 220 89 227 96

 Lusaka, Zambia 254 55 261 62

 Harare, Zimbabwe 214 95 221 102


 The major divergence between the two prices is a result of the very high transport costs from southern Africa
 to the major international commodity markets. These prices indicate that it is very unlikely that these
 countries will export grains to the major international markets, say in the USA and that imports are unlikely
 except in extreme emergencies. This means that these countries are effectively cut off from major world
 markets. However. conversely there should be large potential gains from expanding intra-regional trade with
 neihbourin countries. These links have been hindered in the past by poor transport links, partly because
 colonial transport systems tended to be linked to the colonising country, and partly because of disruption of
 transport routes by war and civil unrest. Investment in regional transport could stimulate trade in the region
 and potentially improve food security by allowing countries to import grain at lower cost from neighboring
 countries with surpluses.




 The nineteenth century patterns, of Europe and North America exporting commodities which
 are consumed domestically, and developing countries exporting commodities for which there
 is a minuscule home market, still holds with relatively few exceptions, and those mainly
 among the fast developing countries of East Asia. Developing countries still trade primarily
( with the developed world, rather than amongst themselves, in spite of the advantages that
 could arise from greater regional trading in food commodities as Box 3.3 examines. It is
 argued that this kind of specialisation in production, leading to greater integration into world
 markets, can increase national wealth. In the next sub-section, this argument will be
 examined.