Countertrade

Countertrade involves paying for goods and services with consideration other than cash. There are three main types of countertrade. Barter is the direct exchange of goods or services for other goods or services. Buyback involves supplying capital equipment to a customer in return for a certain percentage of the output of the equipment as partial payment. Offset involves an agreement to purchase a specified amount of product from a particular country. For example, a government may award a contract to a contractor to make tanks with an offset obligation to place 20% of the contract’s value with contractors in that country. In theory, countertrade allows the buyer to create value in acquiring the countertrade ‘bargain’ and then create additional value on the resale of the countertrade ‘bargain’. In practice, many countertrade bargains are liquidated through countertrade intermediaries who specialise in countertrade, for example in Vienna. See also Barter, Buyback and Offset.