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Trade Balance

Volume 958: debated on Monday 20 November 1978

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asked the Secretary of State for Trade what the change of 1 per cent. either way in the terms of trade for the United Kingdom means in value at current prices for the overall trade balance.

The effect of a change in the terms of trade on the current balance will depend on a number of factors, such as the period over which the effect is considered, the cause of the change—for example whether it arises principally on exports or imports, and for which products—and the impact on trade volumes. In the very short term, assuming unchanged volumes, a rise of 1 per cent. might be expected to improve the visible balance by around £30 million a month, with a fall of 1 per cent. reducing it by a similar amount. The long term impact would generally be considerably less than this and will depend on the factors referred to above and on the prevailing economic circumstances.