Hamza Meddeb
Tunisia’s informal trade networks reflect growing trends: the country’s progressive shift away from Europe, and the rise of Turkey and China as major trade partners.
PART (I)
Summary
Despite the heavy-handed approach to security that has been adopted at Tunisia’s land borders, informal cross-border trade continues to thrive.
Land corridors have been shut down, but the continued dynamic activity in maritime corridors has compensated for this loss, allowing Turkish and Asian consumer goods adapted to the declining purchasing power of the Tunisian population to penetrate local markets.
The dynamism of Tunisia’s maritime corridors owes much to the emergence of small entrepreneurs and underprivileged outsiders who operate informally through trade networks connecting Tunisian and Asian ports.
Some well-established firms also have adopted informalization strategies to circumvent trade barriers and restrictions against bilateral trade between Turkey and Tunisia.
The rise of these informal networks and approaches reflects a growing trend: the progressive shift of Tunisia’s trade away from Europe and the rise of Turkey and China as major trade partners.
Introduction
Since 2013, the deterioration of the security situation in Tunisia—most notable in the assassinations of Tunisian politicians Chokri Belaid and Mohamed Brahmi in 2013 and the terrorist attacks on foreign tourists in 2015—has led to an increased securitization of the border areas between Tunisia and its neighbors.
However, even with more stringent border controls, the Tunisian authorities have been unable to reduce informal cross-border trade relations.
In fact, Tunisia’s economy increasingly has been penetrated by flows of goods imported illegally or fraudulently, whether through the land corridors connecting Tunisia with its neighbors (namely Libya and Algeria) or through maritime corridors connecting Tunisian ports with Asian markets.
Over the years, the Tunisian government and observers usually have focused on the security issues involved in the rise of smuggling through land corridors. Yet this approach overshadows the importance of informal trade occurring through maritime corridors.
According to a former Tunisian minister of trade, land corridors represent only 15 to 20 percent of the country’s total informal trade. The predominance of maritime corridors is not a new phenomenon; many already were operating under the regime of former president Zine el-Abidine Ben Ali.
However, after the closures and restrictions on land corridors—notably at the Tunisian-Libyan border, in response to the deteriorating security situation in Libya and the crackdowns on smuggling networks linked to terrorist groups—maritime corridors have become Tunisia’s preeminent illicit cross-border trade routes.
The rise of these maritime networks likewise highlights the emergence of China and Turkey as Tunisia’s major trade partners over the past decade.
Since 2011, informal cross-border trade has been evolving and adapting to the security and regulatory changes on the ground. Tunisian authorities in the border regions, looking at the situation with a simplistic, naïve perspective that conflates informal trade with smuggling and terrorism, have responded with heavy-handed measures to suppress informal trade activity.
Although this approach has reduced cross-border flows, it has had two major and counterproductive consequences: cross-border networks in the border regions have become more adept at evading state controls, and ports have become more important areas for informal trade.
Beyond the resilience displayed by informal (as well as illicit) trade networks, the less visible but equally noteworthy development is that maritime routes and informal trade through ports have been key to supplying the Tunisian economy with more competitive equipment and consumer goods from China and Turkey.
The dynamics of these maritime trade routes reflect a strategic and progressive shift in Tunisia’s trade relations toward Turkey and China and a progressive decoupling from Europe.
Cross-Border Trade Under Ben Ali’s Regime
Informal trade flows have long been a driving force in the Tunisian economy, not least because of their illicit connections with government power and influence.
During the twenty-three years of Ben Ali’s regime, two main informal trade routes (along with smaller smuggling operations) ensured the supply of imports for Tunisian consumers: one over land, one at sea. The first route, known as “the line” (al-khat), was the land route connecting Tunisia with Libya.
A vibrant trading route since the end of the 1980s, al-khat functioned as a system in which customs officers deliberately underassessed the tariff value of goods in exchange for kickbacks from the merchants who imported them.
At times, the goods were never registered at all, meaning that their value was never assessed, and the only payments made for them were bribes from the importer to border officials. Al-khat played a significant role in supplying the Tunisian economy with a wide variety of goods, including household appliances, clothing, equipment, and electronic devices, though fuel from neighboring Libya was perhaps the most vital commodity.
These goods transited fraudulently through the Ras Jedir border post in northwestern Libya, near the Mediterranean. Informal trade was not exclusive to the Tunisian-Libyan border. The Tunisian-Algerian border witnessed similar dynamism through smaller trade routes and smuggling operations.
This land route shaped the Tunisian-Libyan border economy. Although it was tightly controlled, the security services tolerated the informal cross-border trade. This tolerance was part of a low-cost governance approach pursued in the border regions.
Given the border areas’ overall lack of government-supported development, if the customs authorities and the police had refused to be flexible and instead opted to fight against informal cross-border trade, these regions would have become hotbeds of instability and protest.
Aware of these constraints, the Tunisian security services saw al-khat as a safety valve that could prevent social protests and keep unemployment and poverty under control in border regions that otherwise had very little public investment.
For a population suffering from the state’s prolonged social and economic neglect, the incomes they derived from informal trade often were the only viable substitute.
The security services’ tolerance also functioned as a necessary component of a patron-client approach that encouraged cronyism among traders and currency dealers. Permission to conduct trade through al-khat was tied up with traders’ acceptance of an informal system characterized by clientelism and corruption.
As a result, informal cross-border trade was integral to the social pact binding Ben Ali’s regime to the local populations, and was a key contributor to ongoing stability and state control in the borderlands.
For decades, the focus on land smuggling routes and the potential security challenges of illegal cross-border flows of goods and people overshadowed Tunisia’s second informal trade route, the maritime networks—even though these structures were and still are the dominant channel of informal inflows of goods and finance.
Much as with the land routes, many maritime traders sought to evade import tariffs on the maritime routes by underreporting the prices, quantities, and qualities of commodities brought into the country. Under Ben Ali’s regime, maritime networks rose and prospered for multiple reasons.
Those who imported goods by sea could trade higher volumes of goods than could be brought in by land, with even more lax reporting requirements and enforcement, and with additional opportunities to pay fewer taxes through underinvoicing.
Maritime networks could also benefit from overinvoicing imports as this facilitates capital flight in strong currencies, which in return permits illicit accumulation of capital in strong currencies that gives more power to import more goods.
Maritime networks also could generate bigger profits for the elites and firms that operated in the sophisticated, politically connected networks related to the president and his family.
With Ben Ali’s near relations and cronies acting as brokers with the customs and the state administration, companies and entrepreneurs who wanted to avoid institutional rigidities, nontariff barriers, cumbersome procedures, and tight regulations and administrative controls could pay those brokers to circumvent restrictions in port and enable their smuggling operations.
Together, the customs duty evasion and massive underinvoicing of imports benefiting the regime’s cronies represented a form of “technical smuggling,” in which more commodities are brought into the country through formal border posts than what is officially declared.
Both the al-khat system operating through the border post of Ras Jedir (along with smaller smuggling routes on the Algerian border) and the “technical smuggling” conducted through politically connected economic elites at Tunisian ports were central to the political economy of Ben Ali’s regime.
These two channels used bribery and kickbacks to circumvent law enforcement and regulatory oversight. From a political economy perspective, they enabled Ben Ali and his supporters to maintain a broad co-optation strategy aiming at controlling the population in the disadvantaged border regions and to secure the loyalty of cronies involved in the transnational informal trade.
According to a 2015 World Bank report, during Ben Ali’s period of governance, evasion gaps—defined as the difference between the value of exports to Tunisia reported by the exporting countries and the value of imports reported by Tunisian customs—were correlated with the imports made by politically connected firms.
This association was especially strong for commodities subject to high tariffs and driven by underreported prices, such as electronic appliances, automobile equipment, or tobacco products. The prices that these politically connected firms reported to customs officials were lower than those declared by other firms.
An estimation of illicit financial flows made by the United Nations Economic and Social Commission on West Asia in 2018 showed that these flows represented 16 percent of Tunisia’s foreign non-oil trade between 2008 and 2015—the highest amount in the Arab region.
This figure can be explained by the fact that Ben Ali needed a supply of consumer goods adapted to maintaining a development model based on low-wages competitiveness. Goods from China imported through maritime informal routes allowed him to meet these requirements by keeping the country’s inflation rate under control and providing the population with affordable goods at the same time.
Cheap consumer goods and low-cost imports were embedded into the calculations of the regime to survive and ensure domestic stability as well as the continued acquiescence of middle and working classes.
The country’s trade restrictions, whether based on tariff or nontariff barriers, were not simply procedural barriers. For the Ben Ali regime, Tunisia’s arbitrary trade constraints served a vital political function: giving brokerage power to families connected to the president. A large group of cronies benefited from this position by gaining access to Tunisia’s lucrative (and captive) import market.
These trade restrictions separated the crony-supported firms and family-backed entrepreneurs from ordinary traders or companies who were unable to compete on these unequal terms.
Companies who wanted access to the circle of well-entrenched insiders had to pay those powerful connected families to protect themselves against the predations of Tunisian law enforcement bodies, which had become accustomed to the system of bribes and kickbacks that accompanied cross-border trade.
This brokerage system created a division between insiders and outsiders and acted as an incentive to entrepreneurs to rely on brokerage services to pay less taxes, avoid tighter controls, and underreport goods.
These arrangements tolerating tax evasion, massive underinvoicing of imports, and corruption reflect the extent to which, under authoritarian rule, national interests often are sacrificed on the altar of regime interest.
For Tunisia, they led not only to serious fiscal losses for the state but also to distorted domestic markets, as they provided a cost advantage to comparatively inefficient but politically connected firms. New segments of economic elites sprang up in the import business through their associations with the president and his extended family.
The World Bank study found evidence that entry regulation of many sectors was captured and to some extent dictated by the Ben Ali clan’s private business interests. The Ben Ali family’s entrepreneurship was both extremely lucrative and significant from a macroeconomic perspective.
Enterprises with direct ownership links to the Ben Ali family confiscated in the aftermath of the 2011 revolution accounted for 3 percent of all private sector output and appropriated approximately a fifth of all private sector profits.
More strategically, land and maritime corridors, border and port economies, and entrepreneurs and traders straddled formality and informality. The various networks, embedded into supply and distribution chains across Tunisia, competed to supply Tunisian shops and marketplaces.
Over time, informal networks became part of Tunisia’s economy. Bribes and protection fees collected by the security services provided an incentive to remain loyal to the regime.
The regime and its allied families played a central role as protectors and arbiters of the distribution of market shares and opportunities between trade networks by shaping a political economy of foreign trade where illegality was an integral part of the system.
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Hamza Meddeb is a nonresident scholar at the Malcolm H. Kerr Carnegie Middle East Center, where his research focuses on economic reform, political economy of conflicts, and border insecurity across the Middle East and North Africa.
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