Forms of Countertrade

FORMS OF COUNTER-TRADE
Source: Oregon State University

1. BARTER:
- Direct exchange of goods and/or services
- A “shadow price” is determined for both prods/svces. to calculate the quantities
of these to be traded. Often short-term to guard against currency exchange
fluctuations.
- One contract for the whole transaction
- Most often directly between Governments.

2. COUNTER-PURCHASE:
- 2 contracts, 2 sales, 2 deliveries of roughly equal amount
- Paid in cash
- Also called “Parallel Trading” or “Parallel Barter”

3. OFFSET:
- Typically, Government purchases of expensive military equipment where the
importing country reduces its cost by locally manufacturing/assembling
part of the equipment.
- The local component (“offset”) is usually not much more than 20% to
30% of the deal value./

4. COMPENSATION TRADING (OR “BUY-BACK“):
- A country sells a manufacturing plant or power plant, but buys back all or part
of its production
- One contract for the whole deal.

5. COOPERATION AGREEMENTS:
- Triangular deal where -for example- a US firm sells to a cash-strapped Eastern
European country that delivers the bartered goods to a Western European one
which, in turn, pays the US company.
- Good for bulky, heavy goods -avoids transportation costs over large distances

6. HYBRID COUNTERTRADE:
- Approval by of foreign investment by a Government conditioned to the
commitment by the investing Co. to export all or most of its production

7. SWITCH TRADING:
- A form of triangular trading also called “Swap”
- Similar to Cooperation Agreementrs where the third party or intermediary is a
specialized trading organization that usually buys the bartered goods a discount
for resale at a profit.
- Sometimes they accept “soft” currencies as payment.

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