Problem

Deterioration of international terms of trade

Other Names:
Unequal exchange in trade
Decline in trading position of countries
Nature:
The long-term increase in the price of manufactures which developing countries must import has been accompanied by static prices or price declines for many primary commodities, which are their main export. This deterioration in the terms of trade (a unit value index of exports divided by unit value index of imports) is most visible when the relationship is traced back to the early post-war period; this shows that developing countries are decreasingly able to import goods from funds generated by their exports.
Incidence:
Nine times the amount of export beef required to import one barrel of oil was needed by developing countries in 1981 than in 1971. Profits from one ton of bananas bought a steel bar in 1970; in 1980 it paid for half a bar of steel.
Related Problems:
Inadequacy of foreign aid
Problem Type:
D: Detailed problems
Date of last update
01.01.2000 – 00:00 CET