Use of Contertrade in International Trade

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, byp

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he Austrian bank paid the German seller in cash, (2) sold to Soviet natural gas to a third party, and (3) collected from the Soviet Union the difference between the values of the two contracts involved in the counterpurchase arrangement. Since 1970, the Kingdom of Saudi Arabia has developed and implemented formal plans for the country's economic development. Major objectives in the fiveyear plans which have been implemented are the development of (1) the nonoil sectors of the economy, and (2) the oil refining segment of the country's oil sector. Saudi Arabia has also had as economic objectives the (1) development of domestic production to replace imports, and (2) preserving its international monetary reserves to an optimal extent. The major economic development objectives of the Saudi government led to the formulation of an offset rule for Saudi countertrade arrangements. The Saudis adopted a 30 percent proportion for their offset arrangements. The 30 percent provision meant that, for the major purchases covered by the offset rule, sellers were required to invest in Saudi production facilities at the level of 30 percent of the value of the initial contract. Investment in Saudi production facilities was required, as oppose
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Approximate Pages = 20 (250 words per page)