Worsening Terms of Trade Terms of trade determine division of gains from trade. Prices of primary products have fallen relative to other prices. Arguments by developing nations. Primary markets competitive. Markets for manufactured goods and services not competitive.
Advanced nations gain relative to developing nations.
Economic growth and higher incomes increase demand for manufactured goods and services relative to primary goods. Empirical evidence is ambiguous. Organized in response to demands by developing nations for changes in trade system. International Commodity Agreements to stabilize commodity prices. Increases in aid to developing nations.