This paper examines a model of export rivalry between a developed and a newly industrializing country by highlighting two important trade problems: competition in product quality and the NIC's dependence on imported intermediate inputs. Assuming that a DC producer is the leader in setting prices, the paper analyzes the optimal strategies of the NIC producers and the two countries' optimal trade policies. It is shown that the optimal policy of the DC is non-interference and that of the NIC is to impose a tariff on imported intermediate inputs and/or a tax on its exports to counter the foreign monopoly power. The optimal rates are shown to depend on the cost and quality parameters.