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the quota-constrained category. As shown by Aw and Roberts (19..), the quality upgrading will lead to a rise in the unit value index for the quota category.

Aw and Roberts have drawn on the index number literature to evaluate the effect of the "product-quality' factor on foreign trade price formation. Following the work of Diewert (1976), they applied the Tornquist indices to separate the effect of quality differences from foreign trade prices. While this is a highly effective method to assess the quality upgrading among different products within a given quota category, the method does not allow to separate the effect of quality differences from prices for given products. Technical progress is another factor, which affects product quality. It will be reflected in the production of commodities, which embody more advanced technology resulting from technical progress. However, the relationship between technology and export prices is not straightforward. On the one hand, superior technology may rr-ult in the production of technologically more advanced ccmmodities that are m,..e attractive to consumers and, consequently, in higher prices. On the other hand, supertor technology is likely to be inversely related to production costs, providing a scope for price reductions. Moreover, final export price may depend on the price elasticity of demand. To assume, therefore, that higher export prices reflect superior technology, as it is sometimes done in the literature, ignores the cost or the demand effect of technical progress.

Our approach will be, therefore, as follows. We shall divide commodities into two groups. (A) Products which we believe are not subject to qualitative differeiices, or for which the qualitative differences tend to be relatively small. This reflects mainly the nature of the commodities but also relatively stricter quality controls, which are applied to these products in international trade. These products include moot raw materials, agricultural products, semiprocessed industrial goods such as chemicals or,steel products. (B) All other commodities, which are subject to great variations in product quality due to changes in fashion, technical progress, differences in craftsmanship, etc. These products typically include most manufactured goods. We shall expect greater variations in export prices of products of category "B" in comparison to prices of products of category "A" if quality of products indeed differs. More specifically, export prices will have to be lowered for exports of lower quality.

We shall further analyze the price perfoi. .ace of CPEs in markets which are subject to NTBs. We have identified NTBs for individual product categories of CPEs' exports to the EEC market using the EEC tariff nomenclature which was then matched with export categories. Following Falvey, we shall expect higher export prices for products which are subject to NTBs.

We shall also explore the hypothesis that the CPEs were trying to (re)capture greater shares in world markets tby lowering their export prices. More specifically, we shall consider the prica performance in the case of markets in which the CPEs' share was small relative to those markets in which