Countertrade

Countertrade is a reciprocal trading agreement between or among trading partners. In essence, countertrade is international BARTER. It is often used when there are problems with hard-currency generation and in TECHNOLOGY TRANSFER agreements. It is also often involved in the sale of aerospace and defense equipment. Countertrade was the ancient basis for trade before MONEY was created and often became necessary during times of economic collapse. Between World War I and World War II, Germany was forced to barter for goods as its money became worthless. Countertrade became popular in the 1980s among companies wanting to trade with the Soviet Union and Eastern European countries. For example, PepsiCo traded billions of dollars worth of Pepsi PRODUCTs in exchange for Stolichnaya vodka and a few ships. Similarly, Coca Cola Company accepted Yugoslavian wine in exchange for their soft drinks. In addition to straightforward barter agreements, there are many other types of countertrade transactions.
• Counterpurchase. This obligates the foreign supplier to purchase from the buyer goods and SERVICES unrelated to the goods and services sold, usually within a one- to five-year period.
• Reverse countertrade. This requires the importer to export goods equivalent in value to a specified percentage of the value of the imported goods—an obligation that can be sold to an exporter in a third country.
• Buyback arrangements. These obligate the foreign supplier of plant, machinery, or technology to buy from the importer a portion of the resultant production during a future time period.
• Clearing agreements. Two countries agree to purchase specific amounts of each other’s products over a specified period of time, using a designated “clearing currency” in the transactions.
• Switch arrangement. Permission is granted to sell unpaid balances in a clearing account to a third party, usually at a discount; this may be used in producing goods in the country holding the balance.
• Swap arrangements. Products from different locations are traded to save transportation costs.
The American Countertrade Association includes over 100 U.S.-based companies. Countertrade specialists facilitate exchanges for companies wanting to sell products abroad but having no knowledge of products outside their industry.