9.9 Countertrade
Countertrade is quite simply the exchange of goods for goods, but it is also a barrier to free trade. The simplest form of countertrade - barter - dates from ancient times, but more recently various other forms of countertrade have been used in trade between rich and not so rich countries. Due to shortages of foreign exchange and a lack of markets for their products, many nations have engaged in countertrade. For example, Iraq obtained warships from Italy in exchange for oil; Spain obtained Colombian coffee in exchange for Spanish buses.
Countertrade is a barrier to free trade because the sellers are obliged to take goods they would not otherwise buy, and in doing so, they close off a market from free and open competition. It is estimated that countertrade presently accounts for about a quarter of all world trade.
There are five versions of countertrade:
- barter
- counter purchase
- offset trading
- switch trading
- buyback or compensation trading.
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