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Countertrade: Commercial Practices, Legal Issues and Policy Dilemmas

Thomas B. McVey, Mine to Market: The Legal Issues (1985)

A curious practice known as countertrade1 is beginning to appear with increasing frequency in the world of international trade. Countertrade is an arrangement in which two parties agree to sell or otherwise convey products to each other in a reciprocal fashion. Most often, one party insists that it will agree to purchase goods from the second party only if the second party purchases goods from it. In other instances, the two parties merely exchange products in lieu of the use of foreign exchange. In all cases, however, there is a specific linkage of an export and import transaction.

Parties imposing countertrade requirements usually are sovereign nations purchasing products and technology in the international marketplace. Parties that submit to these requirements generally are private firms seeking to sell their products to these nations. In most cases, private firms prefer conventional forms of trade, but accept the risk and inconvenience of countertrade in order to complete the sales of their products to their overseas buyers. In view of the awkward and arguably coercive nature of these types of arrangements, countertrade has been referred to as “unnatural trade,” “bad business,”2 and “the greatest disease of our time.”3

According to some estimates, countertrade now accounts for between 20 and 30 percent of world trade and may account for up to 50 percent