The Use and Limitations of Import Coverage Statistics

Excerpts from the report: To conclude, import coverage statistics, when used alone, are not an adequate indicator for assessing external economic position or for the more specific task of determining potential for the importation of U.S. agricultural products. They need to be supplemented by other, possible more pertinent, economic information. For example, information on historical balance-of-payments performance may give some indication as to whether a current change in the level of external economic activity is cyclical or secular; information as to total international liquidity available to the country will more nearly equate potential resources to potential needs; domestic economic data may indicate something about forces which underlie, and perhaps cause, balance-of-payments disequilibrium. Import coverage statistics may usefully contribute, however, to the making of temporal comparisons for a particular country. If import coverage improves over a certain period, it may indicate that a country has successfully reduced import levels and/or has earned enough additional foreign exchange to be able to maintain or increase present import levels. If we also know, for example, that import regulations have not been made more restrictive and/or discriminatory trade arrangements have not been extended, and that external liquidity other than reserves has not been impaired or reduced, then an increase in months of import coverage may indeed be indicative of increased import potential. Import coverage statistics can, with some improvement in computation (e.g., seasonal adjustment), be an extremely useful analytical tool when used in conjunction with other economic data.