This topic is very critical in the business of trade. It plays a significant role in 20%-25% of world trade. Countertrade is essentially transactions which have a basic characteristic of linkage. This linkage refers to imports and exports of goods and/or services. Countertrade offers unique quality that brings buyers and sellers together that otherwise wouldn’t be doing so. Some reasons that they might not have usually be brought together is because of risk and fear. Many investors fear risky business transactions, especially in hostile regions or environments. Countertrade has been the answer to many risk-averse businesses and markets. “Countertrade is inherently an ad hoc activity – practice varies according to local regulations and requirements, the nature of the goods to be exported and the current priorities of thee parties involved.” (witiger)

There are some key reasons why countertrade is in such demand. Not only does it take the burden off risk-averse investors. It also does many more things. It allows many countries to trade when they normally couldn’t due to a lack of financial assistance and trade credit. It is also as a mechanism to enter new markets. It expands business opportunities by opening up new channels and getting more people involved. Countertrade also helps sellers differentiate its products from other competitors. This allows more opportunity for a seller to distinguish its own product without it blending in with the others. Lastly it provides a great amount of flexibility. This essentially means that buyers and sellers can provide many different options and not have to stick ridgid rules or standard ways of conducting trade. That is the way that causes a lack of trade and ruin potential interest.

There are many different kinds of countertrade. For example, there is offset, counterpurchase, tolling, bartering, buyback, and switch trading. The most commonly known would be barter, which is exchanging goods between markets with no cash transaction involved. It is very straight and to the point. Counterpurchase is also commonly known. “A foreign supplier undertakes to purchase goods from a purchasing country as a condition of securing the order.” (witiger) These are just a few of the techniques that are used to countertrade. Countertrade is a very positive thing. It builds business relationships with foreign nations, stimulates economies, and relieves debt just to name a few.

References:

· http://www.witiger.com/internationalbusiness/countertrade.htm

http://www.inv http://mgtclass.mgt.unm.edu/DeGouvea/328/countertrade.htmlestopedia.com/terms/c/countertrade.asp