73 exports of processed products for which required production and trade data were available. Considerable variation is evident as the transport ERPs range from about 7 percent for electrical machinery to over 90 percent for animal feeds. This degree of variation suggests that freight costs will play an important role in determining the specific types of products Africa might export successfully. Another noteworthy point is that some relatively modest nominal freight rates conceal very high effective rates of protection -- for 6 of the 30 product groups the effective rates are more than double the nominal rate of protection. An extreme situation occurs for animal and vegetable oils where the transport ERP (56 percent) is more than 5 times higher than the corresponding nominal rate.' While Africa is an important producer of several types of oilseeds, like groundnuts and copra, that might be further processed for export, this activity almost certainly is constrained by the amount that local value added would have to be reduced to offset the effects of transport costs.

As previously noted, many developing countries have a strong interest in pursuing resource based industrialization strategies to facilitate their industrialization and growth and it is often held that tariff escalation in their major markets is an important obstacle to expansion of commodity processing. In this context, the results in Table 16 assume special importance since effective transport rates exceed nominal freight rates for 28 of the 30 processed products. The properties of the ERP index are such that this will occur only when the average rates of (transport) protection for production inputs are lower than that for the final product (i.e., the rates increase or escalate with additional fabrication). As such, the statistics in Table 16 shows international freight costs generally are structured in a way that works against the local processing of domestically produced African commodities.<sup>3</sup> 6 'Since the ERP measures the percentage difference between value added in the presence of protection, and without trade barriers, relatively low nominal freight costs can produce quite high effective rates of protection for low value added products. That is, as equation (3) shows, the value added coefficient is the base for the ERP calculation and when this term takes relatively small values (say 10 to 15 percent as is the case with some vegetable oil products) quite high effective rate indices can result. Empirical studies show that production coefficients are generally quite similar across countries. However, if they are significantly different for some African products the results would be affected.

> 3' Tariff or transport cost escalation is held to exist when these charges increase, for a specific exporting country or group of countries, as the goods shipped experience further processing. Since the ERP calculations shown in Table 5 are based on: (i) nominal freight rates for African exports of processed products; and (ii) average nominal rates for the production inputs from **all foreign sources,** it describes a different situation. The latter is employed since it shown the margin by which domestic United States producers of the inputs may raise local prices and not be displaced by competing foreign suppliers.