Countertrade Definition

Cite this article as:"Countertrade Definition," in The Business Professor, updated March 13, 2019, last accessed October 1, 2020,


Countertrade Definition

Countertrade is a system of trade where buyers import machinery, equipment, technology, and raw materials from foreign manufacturers on a credit basis and agree to pay back the debt with other products or labor in a given time frame.

Countertrade is an international trading system in which governments decrease the trade deficits between two or more countries.

References for Countertrade

Academic Research for Countertrade

  • A note on countertrade: contractual uncertainty and transaction governance in emerging economies, Choi, C. J., Lee, S. H., & Kim, J. B. (1999). Journal of International Business Studies, 30(1), 189-201. The paper establishes a conceptual framework for evaluating organisational impacts on contractual risks in regards to developing economies. Regardless of the ancient explanation by inadequacies of foreign exchange, Arguments of continued international countertrade demonstrates organisational cures to institutional governance transactions deficit
  • The economics and politics of countertrade, Banks, G. (1983). World Economy, 6(2), 159-182. The paper concludes that countertrade is of minimal benefits in world trade. Systematic forces in Eastern bloc countries increase the probability of continuous in the countertrade to increase significantly to external trade. In countertrade, powerful domestic interests are significant only in the non-market economies where it is of inflexible source
  • Economic incentives for countertrade, Mirus, R., & Yeung, B. (1986). Journal of International Business Studies, 17(3), 27-39. The paper undertakes an examination of countertrade using standard economic theory. The theory demonstrates circumstances under which countertrade is a reasonable response transactional cost, information disproportionateness, ethical hazard-agency challenges and other market defectiveness. The paper also develops an introduction proposition that is capable of experiential examination after improvement.
  • Countertrade: Forms, motives, pitfalls, and negotiation requisites, Khoury, S. J. (1984). Journal of Business Research, 12(2), 257-270. This paper observes countertrade from the viewpoint of policy makers and businesses and outlines the definition of countertrade and the types that include barter, counter-purchase, buy-back arrangements and switch trades. Reasons backing the countertrade are discussed from the perception of East Europeans, developing countries and Western organizations. The conclusion states that countertrade is a developing strategy of trade and the need of American businesses adjusting to it to sustain and develop their attractiveness in the global markets.
  • Tying trade flows a theory of countertrade with evidence, Marin, D., & Schnitzer, M. (1995). The American Economic Review, 1047-1064. A countertrade contract bonds export to an import. In most cases, countertrade is condemned to be a form of bilateralism and mutuality hence an ineffective form of international trade. In this paper, the authors discuss the situations in which combining of two technologically dissimilar trade movements is probable for efficiency improvements. The authors illustrate that there is a possibility of countertrade being efficient in international trade that provides the solution to moral-hazard problems and reinstates solvency of very obligated countries.
  • The transaction-cost rationale for countertrade, Hennart, J. F. (1989). Journal of Law, Economics, & Organization, 5(1), 127-153. The paper defines countertrade as an agreement between the buyer and a seller in which the major transaction is accompanied by extra terms. The major counter trade forms are barter trade, switch trade and clearing arrangements. Most literature is concentrated on the macro-economic and legal factors while no attention is devoted to managerial functions which may not be significant in some types of countertrade like barter is more necessary for complex agreements.
  • Countertrade, offsets and barter in international political economy, Hammond, G. T. (1990). The paper refers to countertrade as a set of commercial arrangements between a buyer and a seller in which the main transaction is complemented by numerous conditions. The paper aims at the development of initial grouping of compensatory requests applied in offset deliberations which form part of the highly significant, multifaceted and least documented countertrade forms. The paper is also aimed at the identification of some unexplained challenges to be examined in the coming studies.
  • Achieving an advantage with countertrade, Reisman, A., Fuh, D. C., & Li, G. (1988). Industrial Marketing Management, 17(1), 55-63. The paper examines the numerous layouts of countertrade which is the current development of traditional goods exchange trade. The format provides the nomenclature of grouping the ways of the conduct of countertrade which includes; allocates the benefits for the trading partners based on the respective degree of economic development in their home countries, and argues on the process of countertrade generally sufficient to set into every format. The paper also describes product bundling and principles of setting countertrade regulations. Even though the above discussed being universal, some specific example illustrating countertrade is with the People’s Republic of China.
  • Some empirical dimensions of countertrade, Hennart, J. F. (1990). Journal of International Business Studies, 21(2), 243-270. The paper studies some of the current theories of reasons for the implementing countertrade barriers and undertakes the comparison of the impacts of these theories with the information from an all-inclusive database of countertrade activities.
  • The management of countertrade: Factors influencing success, Lecraw, D. J. (1989). Journal of International Business Studies, 20(1), 41-59. Countertrade victory was found to be higher for firms that had experience in exporting and in countertrade activities, large, were able to withstand countertrade take-backs and valued upright incorporation, high visibility, complex products, had the low reputation for quality and high volumes. Attainments were also higher provided the importer treated quality with utmost considerations, with low technical proficiency inexperienced ion exporting, encountered obligations in export markets, highly expensive forward contracts foreign exchange limitation and challenged low exchange rate.

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