§ Mr. Austin Mitchellasked the Secretary of State for Trade, pursuant to his answer of 3 March, Official Report, c. 137, concerning the terms of trade and the relative export prices of manufactures, what is the reason for the difference between the two series; and if he will make a statement.
§ Mr. Peter ReesThe terms of trade for manufactures is derived by dividing the United Kingdom export unit 443W value index by the United Kingdom import unit value index. The relative export price index is derived by dividing the United Kingdom export unit value index by the weighted average of the export unit value indices of the main manufacturing countries. The United Kingdom export unit value index is common to both the terms of trade and relative prices indices so that differences between them reflect differences between the United Kingdom import unit value index and the export unit value indices of our competitors. These latter, however, attempt to measure different prices of different products in different markets. The United Kingdom import unit value index is weighted, of course, by United Kingdom imports. The index of our competitors' export prices, however, is weighted using the value of their exports which are in competition with United Kingdom exports in the world market. A further contributory factor to the difference between the indices of the terms of trade and relative prices is that the former is compiled in terms of sterling but the latter in terms of US dollars.