Note on Countertrade

by: John Branch

Publication Date: December 10, 2018
Length: 9 pages
Product ID#: 1-837-516

Core Disciplines: Accounting/Finance, Base of the Pyramid, Economics, International Business, Negotiations

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Teaching Note

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Barter and other transactions that are executed in whole or in part with other goods and services—collectively known as countertrade—account for 20-30% of international trade which can be hindered by monetary challenges. More than 500,000 global members of the corporate trade exchange and 65% of Fortune 500 companies report they are engaged in some type of countertrade.

This conceptual note defines the six types of countertrade and reviews the motivations for these complicated transactions which include: currency problems, government policy, currency risk and foreign direct investment. The note also provides three examples of countertrade in practice.

Teaching Objectives

After reading and discussing the material, students should:

  • Describe the four primary motivations for countertrade.
  • Explain the six types of countertrade and how they differ from one another.
  • Identify what type of countertrade is utilized for arms trade and explain why it has a dubious reputation.