International Trade, Part III: Countertrade

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.

Questions? Comments?

And as always… make sure you make an informed decision in all cases,

All the Best,

The Capital Corp Team

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s