Scribd
Upload
10 views

Chapter 12 PPT - Copy

Countertrade is a commercial agreement where exporters accept goods from importing countries as payment, accounting for 20-30% of global trade. It offers benefits such as technology transfer and increased sales opportunities, but raises concerns regarding free trade principles and higher transaction costs. The U.S. government prohibits federal promotion of countertrade while maintaining a hands-off stance on private transactions.

Uploaded by

Thơ Hoàng
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
10 views

Chapter 12 PPT - Copy

Countertrade is a commercial agreement where exporters accept goods from importing countries as payment, accounting for 20-30% of global trade. It offers benefits such as technology transfer and increased sales opportunities, but raises concerns regarding free trade principles and higher transaction costs. The U.S. government prohibits federal promotion of countertrade while maintaining a hands-off stance on private transactions.

Uploaded by

Thơ Hoàng
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 16

Countertrade

What is Countertrade?
A commercial agreement in which the
exporter is required to accept in part/total
settlement of its deliveries, a supply of
products from the importing country
It is estimated to account for 20 to 30

percent of world trade


Benefits of Countertrade
 Benefits for buyers:  Benefits for exporters:
- Transfer of technology - Increased sales
- Alleviation of balance opportunities
of payment difficulties - Access to sources of
- Market access and supply
maintenance of stable - Flexibility in prices
prices
Theories on Countertrade
 Countertrade is positively correlated with a
country’s level of exports
 Countertrade is partly motivated in order to
substitute for foreign direct investment
 The stricter the level of exchange controls,
the higher the level of countertrade activity
 Countertrade is positively correlated with a
country’s level of indebtedness.
Forms of Countertrade
Barter
Switch trading
Clearing arrangement
Switch Trading
Exporter country A Importer country B

Switch trader
Clearing Arrangement
 Bilateral clearing account

Country A Country B

Goods/services
Parallel Transactions
Buyback
Counterpurchase

Offsets
Buyback
Transfer of technology/ capital goods
Technology
Cash (hard currency) Technology
Exporter
Importer
Licensor Purchase of all or partial Licensee
Country A output over time
Country B

Cash ( hard currency )


Counterpurchase
Goods / Services
Importer
Cash (hard currency) Country B
Exporter

Goods / Services Importer of third


party
Country A supplier/
Cash (hard currency
Manufacturer
Country B
Offsets

Direct offsets:
- Coproduction
- Subcontractor production
- Investments and transfer of technology
Offsets (cont.)
 Export of military high-tech products

Cash as partial or total payment

Offsets (direct / indirect,


Exporter partial/total, A-D ) Importer
(Government
A. Co-production / licensed production Or
- Private Firm)
B. Subcontractor production in country B

Country A C. Investment in and technology transfer Country B


D. Countertrade
(barter, compensation)
Indirect Offsets
Offset arrangements in which goods and
services unrelated to the exports are
acquired from or produced in the
importing country
 Organizing a countertrade department
within the company has its own benefits
and disadvantages.
 Advantages: Direct contact with the

customer, Opportunity for learning and


flexibility, Confidentiality and control over
the operation.
 Disadvantages: Costly and mostly suitable

for Multinational firms with broad based


product lines, complex and involves
corporate planning, limited expertise and
problems with countertraded goods.
Countertrade Concerns
of the GATT/WTO
 Countertrade represents a significant
departure from the principles of free trade
based on comparative advantage
 Countertrade results in higher transaction
costs
 Countertrade is inconsistent with the national
treatment standard that is embodied in most
trade agreements
U.S. Government Policy
Toward Countertrade
 U.S. government prohibits federal
agencies from promoting countertrade
in their business.
 Adopts a hands-off approach in relation
to private transactions.

You might also like