Exports and imports of goods exchange ratio. Also known as the Import and Export parity, usually expressed as an index, that parity index of import and export commodities. The formula is: the terms of trade index = export price index / import price index × 100. For example, the above as the base year, import and export commodity price index was 100, the import and export commodity prices have increased, but the increase rate is different, export prices increased by 10%, import prices increased by 5%, the terms of trade index increased.
Trade index higher than the base period, which means that export prices relative to import prices increase, but also the country that is less able to export more in exchange for imported goods, which is to say the country is advantageous, foreign trade conditions improve. Conversely, if the import price index increased faster than exports, and even export prices unchanged or decreased, the terms of trade index lower than the base period, which means that a country should export more goods in order to buy the same as the original imported goods, obviously, this is detrimental to the country, is the deterioration of terms of trade. This change is usually used as an indicator between developed and developing countries of unequal exchange.
Trade refers to the ratio of a country's export commodity price index and import price index. A certain period as the base period, the terms of trade for the 100, if the comparison of the terms of trade is greater than 100, indicating that the country can be less exports in exchange for the same number of original imported goods, the terms of trade improved, the country is advantageous ; if less than 100, indicating that a country should export more goods in order to buy the same number of the original imports, worsening terms of trade, the country adversely.