Countertrade – is the term used to specify commercial agreement in which people who seel or export something are required to receive in part of in entire the delivery of products from supplier or the importing country. In fact nations’s or comapny’s use of its purchasing power as a influence to power a privat company to purchase to market its unwanted goods, to receive new concesions for finance this imports or in orde to aquire hard currency or technology (Seyoum 2009, p. 271). Nowadays countertrade is assesed to account for 15/20 percent of word trade, it is used to achieve business goals, for example: capital scheme financing manufactures sharing or renewal earnings from countries which has hard currency absence (Seyoum 2009, p. 272). This agreement i salso use to market goods and services which has environmental embarrassment and market deficiency ( Bertrand 2011, p. 336). Though countertrade is a worldide occurrence, countries interpret this agreement differently and use alternative terms to represent the same experiences (Martin 2014, p. 15).
Methods of countertrade
Countertrade commercial exchanges could be carried out in three different methods: barter, counter purchase and buyback (Abdullah, Safari 2018, pp. 159-172):
- Barter - in this form of trade products or services are exchange of another products or services of sustainable value without payment of money between buyer and seler (Abdullah, Safari, 2018 pp. 159-172).The principle of pure barter is exchange of one good for another good and most ofen they are implemented by govemment to govemment transactions throughout a series of barter exchanges by clearing arrangement. Both parties to this deal accept to purchase a particular value of goods or services from each other over the specified period and then they create an account, which is debited when one of country imports from another and at the end of this period imbalances purged through the transfer of products or hard currency payments (Martin 2014, pp. 15-16).
- Counter purchase - in this scheme seller agree to purchase products from the asset customer or from a partnership nominated by the buyer or accept to arrange for their purchase by other party. The value of goods is specified in advance in percentage by buyer and seller of the price of the goods exported by merchant (Abdullah, Safari, 2018 pp. 159-172).
- Buyback - in this program an exporter provide implement or solution accept to buy the goods preapared implement or solution by the government throught a scheme which was contained during the negotations of agreement (Abdullah, Safari, 2018 pp. 159-172).
Types of offset
In countrtrade scheme is used to term: offset program but it specify activites connected with technology transfer and industry capability development. It is divided into two division that are: direct offset and indirect offset (Abdullah, Safari, 2018 pp. 159-172):
- Direct offset are operations connect to the good being procured such as licensed production, co-production, sub-contracting and Maintenance, Repair and Overhaul (MRO).
- Indirect offset are operations unrelated with at all to the good being procured, it is realize for the purpose of offset obligations relief such as technology transfer, partnership or any other programs agreed by the procuring party.
Countertrade - benefits
Countertrade is the specify agreement so it has many benefits for the parties, according to literature benefits are divided into two categories that are: benefits for buyer and benefits for exporter (Seyoum 2009, p. 287):
- Benefits for buyer:
- transfer of technology,
- composition of payments difficulties,
- market access and a stable price.
- Benefits for exporter:
- increased sales capabilities,
- acces to source of sales
- flexible prices at the market.
- Abdullah A., Safari Z. (2018)., Industry Collaboration Program (ICP): Empowering Technology Development for National Economic Growth, "Journal of Advanced Manufacturing Technology", 1 (2), pp. 159-172.
- Banks G. (1982). The Economics and Politics of Countertrade "The World Economy", p.159-182, Issue 2.
- Bertrand O. (2011). What goes around, comes around: Effects of offshore outsourcing on the export performance of firms. "Journal of International Business Studies", 42, 334–344.
- Hennart J-F. (1989). The Transaction-Cost Rationale for Countertrade. "Journal of Law", Economics, & Organization", No. 1, pp. 127-153.
- Martin S. (2014)., The Economics of Offsets: Defence Procurement and Coutertrade, Routledge.
- Mirus R., Yeung B.,(1986). Economic Incentives for countertrade. "Journal of International Business Studies", p. 27-39, Issue 235, ISSN: 0047-2506.
- Seyoum B. (2009)., Export-import Theory, Practices, and Procedures, Routledge.
Author: Marta Bartula