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Counter Trade

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7 views

Counter Trade

Uploaded by

victor kiprono
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Countertrade

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Countertrade

Counter trade is a form of international business transaction in which goods and services

are exchanged with other goods of equal value without using currency (Wild and Wild, 2019,

p.320). It is the common form of international trade used in developing countries that have a

limited amount of foreign exchange or whose currency is weak in comparison to the country and

credit ability. For example, a country rich in agricultural products like coffee but lacking in oil

may opt to trade with a country that has plenty oi of but without coffee. Therefore, through the

exchange, the two countries are able to sustain themselves without using hard cash.

From the article, Negotiating Techniques in Diplomacy and Business Contracts (2021),

the concept of countertrade is classified into different categories. One of the categories is barter

trade. Barter trade is the oldest arrangement in which goods and services are directly exchanged

with other goods that matches in value. For instance, a bag of maize corn may be exchanged with

an equal value of beans. Another classification of countertrade is counter purchase. In this

arrangement, an exporter sells goods and services to an importer and agrees to purchase different

goods from the importer within an agreed time. It differs from barter trade because the exporters

must sell the goods through a trading firm (Wild and Wild, 2019). The third classification of

counter trade the article highlights that offset. The exporter in this type of business allows part of

their products to be manufactured or assembled by the importing country. It is mostly common

on larger or expensive products like the aerospace or defense industries. Moreover, there are

other forms of counter trade like compensation trade in the exchange is partly goods and partly

currency.

I selected the topic of counter trade as it highlights an alternative trading method

especially for countries who have a trade imbalance. In addition, the topic emphasizes more
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understanding of a company’s advantage policy in maintaining market shares concerned with

international relations. Moreover, countertrade for example reduces the overdependence on hard

currency. The topic is relevant because it helps understand more detailed aspects of international

relations such as stock market and barter trade in the global markets. Hence, countertrade allows

countries with low value currency to participate in trade without having hard currency.

Therefore, the topic has helped me understand that some of the old forms trade like barter trade

are still in existence today. Prior to reading both sources, I was unaware of the concept of

buyback. In this arrangement, a business firm build a manufacturing plant in another country,

and agrees to take a certain part of the plant’s overall output as payment of the contract. The

question I would like to pose to my classmates is, is it possible for countertrade to completely

replace hard cash in the world today ?


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References

Wild, J. J., & Wild, K. L. (2019). International business: The challenges of globalization. 9th

Edition

Chatterjee, C. (2021). Negotiating Techniques in Import-Export Trade. In Negotiating

Techniques in Diplomacy and Business Contracts (pp. 57-67). Palgrave Macmillan,

Cham. https://link.springer.com/chapter/10.1007/978-3-030-81732-9_5

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