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Date Submitted: 05/20/2014 08:25 AM
15-17
Countertrade
Trade carried out wholly or partially in goods rather than money.
McGraw-Hill/Irwin
© 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
15-18
Countertrade as a Share of World Trade Value
50 % 40 30 20 10 0 1975 1985 1990 1992 2000
McGraw-Hill/Irwin
© 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Types of Countertrade
Barter- direct exchange of goods or services having equivalent values without a cash transaction Counterpurchase: involves 2 simultaneous separate transactions between 2 parties with or without cash Buyback or compensation: involves repayment in the form of goods derived from directly from, or produced by, the technology, plant, or equipment provided by the seller
1
Types of Countertrade
Offsets: involves an arrangement whereby the seller is required to assist in or to arrange for the marketing of products produced by the buying country or to allow some portion of the exported product to be assembled or manufactured by producers located in the buying country. Switch-trading: refers to a switch in the country of destination goods
15-19
Countertrade Practice
100
Percent of companies engaged in each countertrade practice
80 60 40 20
73 60
Offset Switch Trading Barter Buyback Counterpurchase
19 3
22
Figure 15-5
0
O ffse t
S w itc h T ra d in g
B a rte r
B u yb a c k
C o u n te rp u rc h a se
McGraw-Hill/Irwin
© 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Why countertrade?
shortage of hard currency lack of credit BOP problems low commodity prices - low export income surplus capacity arms trade lack of a well developed private sector lack of international trading experience LDCs - low share of manufactured goods I intl trade
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Benefits of Countertrade
Allows entry into difficult markets Increases company sales Overcomes currency controls & exchange problems Increases sales volume Overcomes credit difficulties Allows fuller use of capacity Allows disposal of declining...