Brief notes on Gross Barter Terms of Trade (GBTT)

In order to overcome the deficiency in the net barter terms of trade, Prof. Tausig devised the concept of gross barter terms of trade. He pointed out that instead of relating import and export prices, quantity of imports and exports should be related.

Thus, the gross terms of trade are the ratio of the total quantities of imports to the total quantities of exports of a nation in physical terms. Symbolically,

Where,

GBTT = Gross barter terms of trade

Q_m = Total quantity of imports

Qx = Total quantity of exports

If Q_m > Q_x, terms of trade will be unfavourable; and if Q_m < Q_x, terms of trade will be favourable.

To measure the changes in terms of trade over a period of time, the index numbers of the quantities of imports and exports in the base year and the current year are related to each other. Then the formula becomes:

Where the subscripts 1 and 0 indicate the current year and base year respectively.

A rise the current year’s gross barter terms of trade means a favourable change. It indicates that more imports are obtained from a given volume of exports than in the base year.

Tausig’s concept of gross-barter terms of trade is also criticised on the following grounds:

(i) It incorporates various types of unilateral payments like tributes, immigrants’ remittances, etc. These payments remain unaffected whether there is any trade or not

(ii) It reflects less price movements than changes in the balance of payments and capital movements.