The misrepresentation of international transport costs.
Ola, Ayoola Oluwaremilekun.
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International transportation costs and the use of a country’s imports cif/fob ratios as a measure for ad valorem shipping and direct international transportation costs measures has been at the forefront of international transport costing debates. Many researchers and analysts use the imports cif/fob ratios as a proxy for direct transportation costs in the absence of direct measures. The study was motivated to examine the authenticity and use of the imports cif/fob ratios as a measure for international transport costs. The study highlights the impact of the use of the ratios in presenting and interpreting international transportation costs. The study examined, investigated and analysed data on the United States, Germany, South Africa and Malawi and provided empirical evidence that the imports cif/fob ratios as a measure for ad valorem shipping and international transport costs are distorted and misused and are therefore misrepresentative and uninformative of the actual direct shipping and international transport costs of countries. Evidence from the study shows severe limitations in using the imports cif/fob ratios, as the trade data used for devising them are largely unreliable and inaccurate. Users of the imports cif/fob ratios generally assume when using the ratios that, the composition of imports are constant. By means of correlation analysis, the evidence from the countries analysed in this study shows otherwise and prove that where the quality of trade data applied are reliable and accurate, a country’s composition of imports has a considerable and significant effect on the level and trend of the country’s imports cif/fob ratios. On the other hand, where the data is unreliable, the resulting imports cif/fob ratios from the computation are inaccurate and insignificant as an informative indicator of the country’s actual international transportation costs.