In this 3rd part of our series on finance in international trade, we’re touching briefly on countertrade, or the trade arrangement in which groups circumvent strict foreign exchange controls and/or low creditworthiness by the practice of countertrade.
In brief definition, countertrade is the arrangement in which services and/or goods are exported by a manufacturer with the understanding that manufacturer would accept imports of other goods and/or services as compensation. Examples of countertrade include bartering of goods, switch trading and buyback compensation agreement.
There are benefits to countertrade as they help to control the foreign exchange receipt balance as goods are exchanged not based on currency. It also offers less quality products to be traded internationally as well as overcome domestic price controls which inhibit trade to other countries.
And as always… make sure you make an informed decision in all cases,
All the Best,