Table of contents

  1. About Countertrade
  2. About Bartering process
  3. Counter purchase
  4. Other examples of Countertrades
  5. Countertrade arrangement
  6. Disadvantages of countertrade
  7. Conclusion 
  1. About Countertrade

Countertrade may be a reciprocal variety of international exchange that merchandise or services square measure changed for alternative merchandise or services instead of for cash. This sort of international trade is a lot common in developing countries with restricted interchange or credit facilities. Countertrade will be classified into 3 broad categories: barter, counter purchase, and offset.

In any type, countertrade provides a mechanism for countries with restricted access to liquid funds to exchange merchandise and services with alternative nations. Countertrade is an element of an overall import and export strategy that ensures a rustic with restricted domestic resources has access to required things and raw materials. In addition, it provides the exportation nation with a chance to supply merchandise and services during a larger international market, promoting growth inside its industries.

  1. About Bartering process 

Bartering is the oldest countertrade arrangement. it’s the direct exchange of products and services at the same price however with no monetary settlement. The bartering group action is said as a trade. For instance, a bag of kooky could be changed for low beans or meat.

  1. Counter purchase

Under a counter purchase arrangement, the bourgeois sells merchandise or services to a businessperson and agrees to conjointly purchase alternative merchandise from the businessperson inside such an amount. Unlike bartering, exporters going in a counter purchase arrangement should use a commerce firm to sell the products they purchase and can not use the products themselves.

In offset arrangement, the vendor assists in selling merchandise factory-made by the shopping for the country or permits a part of the exported product’s assembly to be meted out by makers within the shopping for the country. This observation is common in the defence and infrastructure industries. counteractive is additionally a lot more common for larger, dearer things. The offset arrangement might also be said as industrial participation or industrial cooperation.

  1. Other examples of Countertrades

A counter purchase refers to the sale of products and services to a corporation in a foreign country by a corporation that guarantees to create a future purchase of a particular product from an equivalent company in this country.

A repurchase may be a countertrade that happens once a firm builds a producing facility in a country—or provides technology, equipment, training, or alternative services to the country and agrees to require an explicit share of the plant’s output as partial payment for the contract.

An offset may be a countertrade agreement during which a corporation offsets a tough currency purchase of any old product from that nation within the future.

Compensation trade may be a variety of barter during which one in every one of the flows is part in merchandise and part in cash.

  1. Countertrade arrangement

Countertrade provides a mechanism for countries with restricted access to liquid funds to exchange merchandise and services with alternative nations.

Bartering is the oldest countertrade arrangement.

A major advantage of countertrade is that it facilitates the conservation of foreign currency.

Common disadvantages of countertrade measures are complicated negotiations, higher prices, and supply problems.

Benefits and downsides

A major advantage of countertrade is that it facilitates the conservation of foreign currency, which may be a prime thought for cash-strapped nations and provides an alternative name to ancient funding which will not be obtainable in developing nations. alternative edges embody lower state, higher sales, higher capability utilization, and simple entry into difficult markets.

  1. Disadvantages of countertrade

A major downside of countertrade is that the worth proposition could also be unsure, notably in cases wherever the products being changed have vital value volatility. Alternative disadvantages of countertrade embody complicated negotiations, doubtless higher prices and supply problems.

Additionally, however, the activities act with numerous trade policies can even be a degree of concern for open-market operations. Opportunities for trade advancement, shifting terms, and conditions instituted by developing nations may lead to discrimination within the marketplace.

  1. Conclusion

Thus countertrade policies are policies that have both advantages and disadvantages.

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Banking Professional with 16 Years of Experience. The idea to start this Blogging Site is to Create Awareness about the Banking and Financial Services.

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