Compensatory Trade – Definition

Cite this article as:"Compensatory Trade – Definition," in The Business Professor, updated May 16, 2019, last accessed October 28, 2020,


Compensatory Trade Definition

Compensation Trade, or countertrade, refers to the exchange of goods (commodities) and services between two countries which is not paid for in cash but in other goods or services. A compensation trade does not involve exchange of goods or service for money, rather, it is an exchange for other goods or services that the country needs.

A compensation trade arrangement can also be called a counter trade in which a country consents to import specific goods or services to another country where it exports goods and services. For examples, a country can export crude oil to another country in exchange for ships, boats or electrical machinery.

References for Compensatory Trade

Academic Research on Compensatory Trade

Compensatory Financing for Shocks: What Changes are Needed?, Griffith-Jones, S., & Ocampo, J. A. (2008). United Nations Committee on Development Policy, April.

What are trade agreements for?–two conflicting stories told by economists, with a lesson for lawyers, Regan, D. H. (2006). Journal of International Economic Law, 9(4), 951-988.

Trade liberalisation and ‘fair trade‘demands: addressing the environmental and labour standards issues, Bhagwati, J. (1995). World Economy, 18(6), 745-759.

Coping with trade-offs: Psychological constraints and political implications, Tetlock, P. E. (2000). Elements of reason: Cognition, choice, and the bounds of rationality, 239-263.

What is Free Trade–The Real Issue Lurking behind the Trade and Environment Debate, Driesen, D. M. (2000). Va. J. Int’l L., 41, 279.

Has globalization gone too far?, Rodrik, D. (1998). Challenge, 41(2), 81-94.

I like what I know: Is recognition a non-compensatory determiner of consumer choice?, Oeusoonthornwattana, O., & Shanks, D. R. (2010). Judgment and Decision Making, 5(4), 310.

What do independent directors know? Evidence from their trading, Ravina, E., & Sapienza, P. (2009). The Review of Financial Studies, 23(3), 962-1003.

The economic structure of renegotiation and dispute resolution in the World Trade Organization, Schwartz, W. F., & Sykes, A. O. (2002). The Journal of Legal Studies, 31(S1), S179-S204.

Globalization and the Egalitarian Backlash: Protectionism Versus Compensatory Free Trade, Boix, C. (2002, May). In Workshop on “Globalization and Egalitarian Redistribution,” Santa Fe Institute. Available: http://www. wcfia. harvard. edu/seminars/pegroup/boix. pdf.

Toward an interactive-compensatory model of individual differences in the development of reading fluency, Stanovich, K. E. (1980). Reading research quarterly, 32-71.

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