terms of trade

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Terms of trade

The weighted average of a nation's export prices relative to its import prices.

Terms of Trade

1. The conditions the parties agree to follow in the trade of a security. Necessary terms of trade include the price and the number of shares or bonds traded. The terms of trade may also include special conditions.

2. In international trade, the difference between price indices on imports and exports.

3. See: Balance of trade.
Terms of tradeclick for a larger image
Fig. 183 Terms of trade. See entry. Source: Office for National Statistics, 2004.

terms of trade

a PRICE INDEX that shows a country's EXPORT prices relative to its IMPORT prices. It is constructed by taking an index of prices received for exports, on the one hand, and an index of prices paid for imports, on the other, and then dividing the first by the second (see Fig. 183 ). An improvement in a country's terms of trade occurs if its export prices rise at a faster rate than import prices over time and a worsening of the terms of trade if export prices rise more slowly than import prices; or, vice-versa, if export prices fall at a slower rate than import prices (as in Fig. 183), then the terms of trade are improved.

Superficially, an improvement in a country's terms of trade may be considered to be beneficial: in foreign-exchange terms, a given amount of exports will now finance the purchase of a greater amount of imports, or, put another way, a given amount of imports can now be purchased for a smaller amount of exports. A critical factor in this regard, however, is the PRICE- ELASTICITY OF DEMAND for exports and imports. If, for example, export demand is price-elastic, then price rises (which make the country's exports less competitive in world markets) will result in a more than proportionate fall in export volume, thus lowering foreign-exchange receipts and adversely affecting domestic output and employment. See also BALANCE OF PAYMENTS EQUILIBRIUM, DEVALUATION, REVALUATION.

References in periodicals archive ?
Dakuku Peterside who presented a paper titled, The Imperatives of Changing Nigeria's Crude Oil Affreightment Trade Terms From FOB to CIF pointed out that the Changing landscape of Nigeria's maritime sector viz-a-viz its security architecture, capacity, and other determinants has necessitated the Change now than ever before.
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I see no reason why the EU should want to negotiate anything other than the most favourable trade terms with the UK.
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As a free and independent nation we can negotiate our own trade terms which are acceptable to a British Parliament and people.
A cut in overall imports that outpaced a drop in exports further improved the country's trade terms.
This being said, all the members are trusted parties so trade terms can be negotiated confidently and let the company worry about the security of data.
TiSA promotes free trade terms in some service sectors, Bhala noted, that are favorable to Washington and other "like minded" partners in the US-led "coalition of the willing".
The analyst related weaknesses of the Customs Union entry with changes in trade terms and existing problems in the national economy.
If we were to leave the EU it would be much tougher for companies based here to compete with continental or global rivals operating under more favourable trade terms."
This new joint venture has the ability to handle procurement, logistics, and structuring appropriate trade terms with the foreign buyer.

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