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.

Typical examples of this are the borders between Ukraine and Russia, between Norway and Denmark/Sweden/Finland/Russia/Estonia and between Denmark/Switzerland and Germany. For instance, the excise tax on alcohol is lower in Estonia than in Finland and much lower than in Sweden, thus it is common to buy large volumes of alcohol when returning from Estonia: there are shops in the Tallinn harbour that cater specifically to tourists. In Finland, the best-selling Alko shops in proportion to local population is on the border to Norway, since even if the alcohol tax is high in Finland, it is lower than the one in Norway.

Border trading exists between Northern Ireland and the Republic of Ireland; during the Global Financial Crisis, when the Euro rose against the British pound, so many from the Republic visited Newry—with lines of traffic four miles long—that the phenomenon became known as the "Newry effect". One in four households in the Republic in counties as far as Galway, four hours away from the border, shopped for groceries in Northern Ireland. Petrol is cheaper in the Republic, and groceries, furniture and clothing are cheaper in Northern Ireland.

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Wikipedia