TOPIC:

TERM OF TRADE ISSUES

ISSUES IN PAK ECONOMY

Submitted To:
Mam Maryam
Submitted By:
• Zain Jaleel 40918
• Zain Saeed 40842
• Shoaib Yasir 40838
• Abdullah 40933
WHAT IS TRADE?

The activity of buying and selling or exchanging goods or

services between people or countries.

There are two types of trade
1: Internal Trade
2: International Trade
 3

• INTERNAL TRADE • INTERNATIONAL TRADE

Internal trade refers to the International trade refers to the
buying or selling of goods buying or selling of goods beyond
within the geographical the geographical limits of a country.
limits of a country.
 4

TERMS OF TRADE

• The ratio between the index of export prices and

the index of import prices is called terms of
trade.
• In other words, it is a measure of how much of a
country's imports can be purchased with a unit
of its exports.

TOT= index of export prices

100
index of import prices
 5

EFFECT
• When a country's terms of trade improve, it means that
the prices of its exports have increased relative to the
prices of its imports, and therefore the country can
purchase more imports with the same amount of
exports.
• and if a country's terms of trade deteriorate, it means
that the prices of its exports have decreased relative to
the prices of its imports, and therefore the country can
purchase fewer imports with the same amount of
exports.
 6

FACTORS
• The terms of trade can be affected by a variety of factors

• Including changes in global demand for a country's exports

• changes in the prices of commodities
• Changes in exchange rates
• And changes in trade policies
• Size of population
• Size of demand
 7

SIZE OF POPULATION
• Intensity of demand for import goods is relatively
more for our country having large population and as
such terms of trade will turn against such a country on
the other hand terms of trade will b favorable for a
country having small population.
 8

SIZE OF DEMAND
Terms of trade are also influence by the changing in the size
of demand for the imports and exports ,other things
remaining the same with increase in demand for the export
of country prices of exports will increase as against the prices
of import and hence terms of trade will become favorable on
the other hand if the demand for imports increase there
prices will increase as against the prices of exports and so the
terms of trade becomes unfavorable.
 9

EFFECTS OF TARIFF
Other things being constant
with increase in custom duties
import falls consequently terms
of trade become favorable and
vice-versa.
TERMS OF TRADE ISSUES OF PAKISTAN

Pakistan is a developing country and has

been facing several terms of trade issues
over the years. Here are some of the key
terms of trade issues that Pakistan has
faced:
 11

DEPENDENCE ON A FEW EXPORT ITEMS

Pakistan's exports are heavily dependent on a few
items, such as textiles and clothing, which make
up around 60% of total exports. This means that
any changes in the prices of these items can have
a significant impact on Pakistan's terms of trade.
 12

FLUCTUATIONS IN COMMODITY PRICES

Pakistan is a net importer of oil, which means that
any fluctuations in global oil prices can have a
significant impact on its terms of trade. In addition,
fluctuations in the prices of other commodities such
as metals, grains, and sugar can also affect Pakistan's
terms of trade.
 13

EXCHANGE RATE FLUCTUATIONS

Pakistan's currency, the Pakistani rupee, has

been volatile in recent years. When the rupee
depreciates, it can make exports cheaper and
boost the terms of trade, but it can also make
imports more expensive and hurt the
economy.
 14

TRADE IMBALANCES
Pakistan has historically run a trade deficit,
meaning that its imports exceed its exports.
This puts pressure on the country's foreign
exchange reserves and can make it more
difficult to finance imports.
NON-TARIFF BARRIERS
Pakistan has faced challenges in
accessing foreign markets due to non-
tariff barriers such as technical
standards, regulations, and certification
requirements. These barriers can make
it difficult for Pakistani exporters to
compete in foreign markets and can
hurt the country's terms of trade.