text: Developing economies194.2 73.7 1023.7 295.812.5 4.1 6.6 -1.212.8 10.4 6.4 6.7 Source: Calculated fromUnited Nations commodity tradedata. ~IStandard International Trad~_s ...s.Jl_i.c..a-.tJ...Q.D (SITC, revised), Statistical 34(U·tdNat~ons publication, SalesNo.E.61.XVII.6): Papers, Series M,No. n~e ~ SITC5+6+1+8+9-68. 1.Termsoftrade 64.Countries cannotexploit theircomparative advantage bilaterally. PolicY and distortions mayexacerbate bilateral tradeimbalances andthusleadtoeconomic political conflict, butintheabsence ofsuchdistortions, bilateral trade relations areoflittle concern. Thekeytothegrowth oCtradeand,hence. to increasing tradeopportunities forindividual countries isthemaintenance and expansion ofthemultilateral trading framework andthemonetary arrangements associated withit. 65.Mostoftheworld's trade(partiCUlarly itsmostrapidly gro",ing componp.nts) takesplaceonmarket terms, although partofthisisintra-firm trade. Various formsofplanned trade(alsoknownasbarter tradeorcounter trade), despite the veryconsiderable bureaucratic effort devoted tothem,haveCailed todeliver t~ benefits ofmarket tradeintermsbothofpriceandquality. Barter trade subsidizes inefficient producers and,thus,keepstheminbusiness. Itdoesnot. therefore, leadtothebetterallocation ofproductive resources. greater productive efficiency ortheotherbenefits oftradeconducted inamarket e~vi:onment. Ho",ever, formanycentrally planned economies. itisproving d~ff~cult tomovefromplanned tradeandassociated bilateral trading notions. If acountry sellsrawmaterials toanother country, itmaynevertheless buyconsUJ1ler goods fro~athirdcountry thatsellsthematalowerpricethantheimporter of rawmater~als. -18-66.Sincethemainobjective ofexporting istobuyimports, thetermsoftradea countryobtains areofsomeimportance. Intheshortrun,theconcern iswith bartertermsoftrade(thepricesofexports divided bythepricesofimports) whicharerelevant totheshort-run balance ofpayments, but,inthelongrun, ~~ntion mustbefocused onhowincome termsoftrade(export earnings divided by thepricesofimports) affectthelong-run balance ofpayments. 67.Bartertermsoftradediffer fromcountry tocountry. Theyareverydifficult todetermine forgroupsofcountries. Partlythisisbecause unitpricesof manufactured goodsareimpossible tocalculate andpartlybecause theweighting of "baskets" ofgoodsvaries. Barterterms-of-trade estimates arequitedifferent according tothesourceofestimation, notonlyinpercentage termsbutsometimes alsoindirection. Long-run barter-term calculations havelittlepolicyuseand areparticularly difficult tointerpret because ofthedifficulty ofvaluing the ~angesinquality inmanufactured goods. Income termsoftradearemoreuseful forpolicypurposes, although theyarealsoverydifficult tomeasure. Itisclear iliatmostcountries withreasonably rapidly growing exports haveimproved their incometermsoftradesince1965. Attimestheyhavehadtoworsentheirbarter ~rrnsoftrade-thatis,reducetheirexportprices, inordertowinalarger shareoftheworldmarket and,hence, toimprove theirincometermsoftrade. 68.Exportpessimism hashadanimportant roleindetermining tradepolicyinthe past.Initially, itwasarguedthatdeveloping andcentrally planned economies couldnotcompete withdeveloped market economies because thebarter termsoftrade werebiasedagainst themandbecause newcomers couldnotcompete withestablished producers. Thesearguments hadbeenprovederroneous bytheendofthe1960s. Japanhadusedtradetocatchuprapidly withtheindustrial economies. Bythe 19705itwasclearthattheEastAsiannewlyindustrializing economies hadalso successfully followed atrade-led growthpath,whilecountries thataccepted trade pessimism werelagging behind. However, export pessimism attained anewleaseon lifeasdeveloped market economies reintroduced non-tariff barriers inthe1970s. Exporters ofmanufactures wereundoubtedly affected bythesemeasures, butthe growthofmanufactures exports peakedduring 1975-1980. Another argument wasthen foundtosupport exportpessimism. Itwassaidthatthepenetration ofthemarkets
analysis: This text appears to be a academic or professional discussion on international trade, focusing on the concepts of terms of trade, barter trade, and the impact of these on economic development. The text also touches on the topic of export pessimism and its effects on trade policy. The language and tone suggest a technical or specialized audience.