Lesson 10
Counter Trade

Counter trade is a peculiar form of transaction allegedly' popular in less developed countries and in centrally planned economies2. It attracted much interest in the past decade. As the landscape3 of economic systems drastically changed recently, one wonders what the fate of countertrade will become.

During the last 15 years the phenomenon of counter trade has received the attention of both those involved in international business transactions and those who analyze the practices in this field. In the process the awareness and the understanding of the various operational aspects of different types of counter trade, as well as the motivations behind them, have increased dramatically. Counter trade has become the generic term to describe a set of cross-border contracts4 that link a seller's exports to imports from the buyer.

As counter trade often takes place in less developed economies and in centrally planned economies, it is then often associated with policy objectives5 in these economies like dealing with foreign exchange" shortages and promotion of exports.

The terminology counter trade employed today can be traced to the pre-World War K years when normal trade relations were breaking down. Following German hyperinfiation, competitive; devaluations" and protectionism9 meant a global collapse in trade and in international financial and banking markets .Unwilling to see Germa ny cut off from its traditional raw materials supplies in the Balkans ; the Reichshank agreed to the establishment of a clearing system that settled only net positions''-—— and only once a year -- -a rneasure that permitted traditional trade flows between Germany and the Balkans to continue. These arrangements were called compensation trade13. Another term used in the context of such bilateral clearing operations was ''counter trade". During and after World War II . when financial markets were in disarray, British used similar bilateral arrangements, as did Western Europe when setting up the European Payment Union.Subsequently the countries of centrally planned economies copied such clearing systems and used them among themselves and also in trade with neigh-boring countries like Finland. Conceptually,all these arrangements are trade redit accounts between familiar trading partiiers exchanging unrelated goods.

In the 1370s and 1980s counter trade was different from the old practice although some similarties remained. Current counter trade partners are not necessarily familiar partners and goods exchanged are sometimes vertically related''. Current counter trade can be categorized as follows;

Barter : The direct exchange of goods and services which is complered in a short period of time, e. g. , an exchange of frozen lamb from New Zealand for Iran crude oil.

Counter purchase15: The assumption by an exporter of A transferable obligation through separate but linked contract to accept as full or partial payment goods and services from the importer or irnporting country. The contract is usually stipulated to he fulfilled within a given period of time, e. g, 5 years, and the goods or serviced in return are usually pre-specified in a list and are subject to availability and changes made by the original importing country. In essence-, then, country purchase is an intertemporal direct exchange of goods and services. For example, in l977 VolkSwagen sold 10 000 cars to the former East Germany and agreed to purchase goods from a list set up by the former East Germans over the next 2 years, up to the value of the cars sold to the former East Germany.

Buyback''^: An agreement by an exporter of plant and equipment to take back in the future part of the output produced by these goods as full or partial payment. The important difference between counter purchase and buyback is that in buyback the goods and services taken back are tied to The original goods exported whereas that is not the case in counter purchase. Another important difference is that a buyback deal usually stretches over a longer period of time (as long as 15 to 20 year:;) than a counterpurchase deal. For instance, the Xerox Corporation sold to China the plant and technology for the production of low volume photocopying machines, and contractually committed24 to repurchase a very large potion of the photocopy machines produced in the Chinese plain.

The intriguing features common to barter, counter purchase, and buyback is ''bundling": the exchanges of goods and services are bundled together (the exchanges are implemented either concurrently or intertemporally). In normal market transactions buying and selling of goods and services is unbundled , an arrangement made possible by the use of money and the ''market" as an institution. Thus, an individual can sell goods and services to obtain monetary income and can then use the income for other desired goods and services. Such unbundling greatly facilitates transactions and allows more efficient economic exchanges.

While counter trade does not represent an extreme form of bundling, and money as a unit of account is not totally bypassed—- -in many counter trade deals, only a fraction of the initial purchase is paid for in goods and services-——the question remains why a significant part of the buying and selling of goods and ser vices should be bundled together.

The impression one gets is that bundled trade, i. e. , countertrade, takes place where the market institution is imperfect. It can be said to generally take place between mature market economies and economies with a less sophisticated26 market system.. Under such circumstance there are several presumed advantages in counter trade:

1. Counter trade is implemented because it helps a country to deal with foreign exchange shortages.
2. Counter trade car; be used to promote exports.
3. Counter trade can be used to reduce uncertainty regarding export receipts.
4. Counter trade is used to bypass an international price agreement like, for example, that of OPEC".
5. Counter trade may help those nations, with serious debt problems to continue to import goods while, in effect, concealing export earnings from creditors.

However, counter trade can be very risky business. By concealing the real prices and costs of transactions it may conceal and help perpetuate economic inefficiencies in the market place. Companies may suffer losses because they could not get rid of products of poor quality. Finally, counter trade may he considered as a form of protectionism.

Words and Expressions
counter trade反向贸易
allegedly ad. 被说成地;据说
landscape n.风景;地貌; 情况
drastically ad.大幅度地; 猛烈地
phenomenon n. 现象
notivanon n.动力
generic a.总称的
adduce v.引证
empirical a. 以经验为根据的
hyperinflation n.极度通货膨胀
literally a. 互惠的;相互的
Reichsbank n.德国国家银行
Disarray n.混乱
Conceptually n.概念上地
Vertically adv.竖式地;涉及生产销售全过程地
Stipulate v. 规定
Pre-specify v. 预先说明
In essence 实质上
Intertemporal a. 不同时的
Be tied to 固定于
Photocopying machine 复印机
Intriguing a. 引起兴趣的;有迷惑力的
Concurrently 同时发生地
Facilitate 使便利
A fraction of 一点儿;一部分
Verify v. 证实;核实
Sophisticated a. 经验丰富的;复杂的;高级的
Bypass v. 避开;置…于不顾
Expertise n. 专业知识
Leverage n. 杠杆作用
Tap v. 开发;开辟;着手利用
Conceal v. 掩盖;隐藏
Pepetuate v.使永久存在