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Use of Contertrade in International Trade

This research examined the use of countertrade in the conduct of international trade, with an emphasis on the buyback form of countertrade transaction. Since the mid1970s, the increasing use of the various forms of countertrade has constituted a major development in the arena of international trade. The buyback form is one of the least used forms of countertrade, accounting for only approximately sixpercent of all countertrade transactions. The buyback form is highly significant, however, when a transfer of technology from a selling country to a buying country is involved in a countertrade transaction.

Buyback arrangements are most often used in when producing facilities are sold to a country. The typical buyback arrangement requires that either the selling entity or the selling country agree to purchase specified volumes of the output from the production facility being sold. Selling prices for the products to be purchased by the seller or selling country are typically specified in buyback contracts.

Advantages associated with the use of countertrade exist for both multinational firms, and for the countries insisting on the use of the procedures and arrangements. The disadvantages, however, more often than not, are much more applicable to multinational firms than to the countries insisting on the use of the procedures and arrangements.

Within the context of such factors as bypassing price controls, bypassing exchange controls, bypassing credit monitoring, and so forth, some forms of countertrade are more effective than are others. Barter is the form of countertrade which holds great advantages for the bypassing of price controls, exchange controls, and credit monitoring. Buyback, counterpurchase, offset, switch, and compensation are relative ineffective in the context of bypassing these factors. Buyback and counterpurchase transactions, however, are effective as means of reducing transacti...

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Use of Contertrade in International Trade. (1969, December 31). In LotsofEssays.com. Retrieved 08:24, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1684759.html