Countertrade Research Paper

Submitted By Airman123
Words: 308
Pages: 2

Countertrade is a business agreement in which firms exchange goods or services with other firms instead of currency for goods or services. Countertrade can help a firm enter closed markets and may be a good tool to achieve competitive advantage. One form of countertrade is the barter system in which there is direct exchange of goods or services between two parties. Moretz (n.d.) indicates the clearing agreements were established between China and the SSR in ’88 for textile and light industrial products. Another form of countertrade is compensation. This is known as buy-back deals which involves the sale of goods such as plant equipment and technology by one firm to another. The purchase is then paid for through the output related to the original export. Compensation is one form of counter trade that can be used by telecom firms to enter markets. Moretz (n.d.) explains that China Hewlett-Packard Ltd. was established under a compensation agreement and gave H-P access to China through the Joint-venture acting as the sole local distributor. Offset is another form of countertrade often used by governments for high dollar deals such as defense equipment and other coveted technology. Moretz (n.d.) explains AT&T used offsets to transfer circuit technology to China and plans to sell the output to its subsidiaries and other multinational firms both domestically and in China. Also IBM agreed to cooperate with the on projects involving the development, application and