The Research About The Applicability Of Terms Of Trade

Our economy has gone through the time of supply constraints but in demand constraints as the technology advances further,deepening international division of work,allocation of resources around the world and the continuously improving production capacity of human being.The terms of trade theory proposed by John Stuart Mill in the 19th century,which takes the implicit assumption of supply constraints,has been increasingly challenged in reality because of its explanatory power.Since the 50s of the 20th century,it has been a hot topic that the terms of trade are deteriorating.Recently many scholars pointed out that Chinese terms of trade continued to deteriorate and the trend would not change.Besides that these scholars analyzed the reason why the deterioration existed and they put forward a number of ways in improving the terms of trade.In this dissertation,we think that it is not appropriate to measure the success of today's trading by using the terms of trade evaluation mechanism.Starting from the logic analysis of the terms of trade theory, we find out it is the premise of supply constraints which is the real reason for the contradiction between the terms of trade theory and economic reality nowadays.With theoretical and empirical analysis of the terms of trade and the Paradox of Marshall-lerner condition,we reach the conclusions that the terms of trade apply to the supply constraint-based economy while Marshall-Lerner condition is suitable for demand constraint-based economy.Based on analysis of the causes of conflicts between the terms of trade theory and the reality of anti-dumping practice,we have revealed that anti-dumping is the product of demand constraint-based economy,the original supply curve has changed from vertical to tilt to the right upward,and the premise of supply constraints of the terms of trade theory doesn't exist anymore. Therefore the final conclusions of this dissertation include the following two points. The first is that the terms of trade evaluation mechanism applies to the supply constrained economy while it will only lead to misleading in the demand constrained economy.The second is that what we need is the improvement of the economic well-being but not the improved terms of trade.