136 
INTERNATIONAL TRADE 
country, not by the exporting. But in general price levels and 
income levels, and thereby in the barter terms of trade, there may 
ensue conditions different from what would have been in the ab- 
sence of such a charge. In consequence the net gain from the 
exchange of commodities may be quite as great to one of the trading 
countries, or nearly as great, as if they had been contiguous; nay, 
it is conceivable, even greater than if they had been contiguous. 
These, however, are recondite possibilities, quite beyond the 
ken of the individual buyers and sellers, and of interest only to the 
speculative economist. Even for him they constitute an intellec- 
tual plaything rather than a matter of substantive importance. 
They are no more than ramifications of the abstract theory, and 
belong among the phases of the theory which it is impossible to 
verify or illustrate from the actual course of events.! 
Of some substantive importance, on the other hand, is a com- 
plication which the item of freight charges entails in the interpreta- 
tion of import and export statistics. 
The common practice in the compilation of official statistics on 
the movement of merchandise is not the same for exports as for 
imports. To put the difference in commercial terms, exports are 
usually figured f.o.b. (free on board), imports usually c.i.f. (cost 
plus insurance and freight). The exports, that is, are recorded in 
terms of the value of the goods as put on board at the place of 
departure; the imports are recorded in terms of the value of the 
goods as received at the place of arrival. When valuing exports, 
cost of transportation is ignored; when valuing imports, it is 
included. The consequence is that recorded imports tend to be 
over-stated to the extent of that item, while recorded exports 
tend to be understated. 
The statistical puzzles to which the practice leads can be best 
illustrated by analyzing some possible cases. Simplifying the 
analysis, as has been done for other problems, we may take 
1 See the well known passage on the subject in Mill, Book 3, Ch. 18, Sec. 3. 
2 The passages which follow have no necessary relation to the preceding parts of 
this chapter. They are inserted here as the most convenient place for dealing with 
a somewhat intricate problem of statistical interpretation; and they may be skipped 
by those who wish to follow without digression the main course of the exposition.