Terms of trade are the ratio for a given product between the export price index and the import price index, with these indices expressed in relation to the same base year. A 1% improvement in the terms of trade means that the growth in export prices is 1% higher than that of import prices. It also signifies a deterioration in French price-competitiveness.
Conversely, a drop in the terms of trade indicates an improvement in price-competitiveness. This ratio can be calculated by product, for a set of products, or globally.