on costs.
This research examines the use of countertrade in the conduct of international trade, with an emphasis on the buy back form of countertrade transaction. Countertrade is "a generic term which refers to trade involving an element of reciprocity" (Economic Intelligence Unit, 1985, p. 7). Since the mid 1970s, the increasing use of the various forms of countertrade has constituted a major development in the arena of international trade (Hennart, 1990). The buy back form is one of the least used forms of countertrade, accounting for only approximately six percent of all countertrade transactions (United Nations Commission on Trade and Development, 1990). The buy back form is highly significant, however, when a transfer of technology from a selling country to a buying country is involved in a countertrade transaction (Wulka Mirbach, 1990).
The findings of the research performed are presented in three major discussions. These discussions address (1) the theories and operational mechanisms of the various forms of countertrade, (2) the financial risks and benefits associated with the use of countertrade, and (3) recent trends in the use of the various forms of countertrade.
THEORIES AND OPERATIONAL MECHANISMS OF THE
The theories and operational mechanisms of the various forms of countertrade are considered through both a theoretical discussion, and a case analysis. The theoretical discussion is presented first, and is followed by the case analysis, in which the buy back form is emphasized, but in which illustrations of the use of the other forms of countertrade are also provided.
Theoretical and Operational Aspects of
Barter is the oldest and most elementary form of countertrade. The net effect of multinational countertrade transactions is that a sale by an external entity to an entity located within a country imposing countertrade rules is contingent on some sort of offset by the selling entit...