Countertrade :: essays research papers

CounterTrade PaperCountertrade is a trade between two countries by which goods ar exchange for other goods rather than for hard currency. Countertrade is often the solution for exporters that whitethorn not be able to be paid in his or her home currency and according to the text few exporters would desire payment in a currency that is not convertible."Some propagation both parties are happy with the goods they receive, other times one country will liquidate the received asset, ultimately receiving hard cash in the deal. This is as well referred to as "using barter to complete a trade." (www.investopedia.com, 2004)An display case of countertrade is, the former Soviet Union would often countertrade, agreeing to trade, say, Soviet oil for another countrys vehicles.After researching this subject, I have learned that countertrade is an umbrella term covering a wide range of commercial mechanisms for reciprocal trade. Reciprocal trading (two-sided trading, trade in return ) occurs when the trade customers is also a supplier. The reciprocal trading arrangements may or may not be formally linked. In practice, reciprocal trade may strengthen an existing trading relationship, and may even create vulgar dependencies, which may create new trade relationship. Barter is probably the oldest and best known example of countertrading, however others, such as offset, buyback, tolling and switch trading, have also evolved to meet the requirements of a more sophisticated world economy. All of these generally involve the exchange of goods or services to finance purchases, rather than using cash alone. "The importance of countertrade as a trading tool has increased since early 1970s -especially in markets where there is a shortage of foreign exchange and countertrade may be the only effective marketing mechanism for doing business." (www.barternews.com, 2003)"One of the unique risks of countertrade transactions is that companies often find themselves han dling products with which they are not familiar. This is probably the superlative risk in a countertrade transaction." ((www.barternews.com, 2003)Approximately 130 out of 192 countries in the world require countertrade, one form or another, in their procurements. Many of them did so after having undertaken intensive and serious studies. Many global companies have dedicated in-house specialists dealing specifically with countertrade. Some 20% to 30% of world trade is countertrade. The one-year global market size for countertrade is estimated to be between US$200 to US$500 billion. No one really knows what are the correct percentages are and how large the true market size is.