Company Name:
Lishui Huanqiu Bearing Trading Co., Ltd.
Company Address:
No.11 Shiting Road, Shuige Industrial Zone,Lishui, Zhejiang,China
Contact Person: William
Email: admin@tradebearings.com
Homepage: www.asiabearings.com
Bearing B2B: www.tradebearings.com
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.
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.
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.
( liyy )11 Oct,2010
