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Countertrade Agreement Definition

Today, more than 80 countries regularly use or require counter-trade exchanges. Officials from the General Agreement on Tariffs and Trade (GATT) said that counter-trade accounted for about 5% of world trade. The UK Department for Trade and Industry has proposed 15%, while some scientists believe it is closer to 30%, with east-west trade reaching 50% in some trade sectors in Eastern Europe and World War III in recent years. A consensus of experts (Okaroafo, 1989) put the percentage of world trade volume in trade at between 20 and 25%. Barter is the oldest counter-trade arrangement. It is the direct exchange of goods and services of equivalent value, but without cash compensation. The exchange transaction is called "trade." For example, a bag of nuts can be exchanged for coffee beans or meat. A major drawback of counter-trade is that the promise of value may be uncertain, especially in cases where traded products have significant price volatility. Other drawbacks of counter-trade are complex negotiations, potentially higher costs and logistical problems. The famous American economist Paul Samuelson was skeptical of the viability of counter-commerce as a marketing tool and stated: "Unless a hungry tailor accidentally finds an inflamed farmer who has both food and pants and cannot trade." (This is called the "double coincidence of will.") But it may be too easy if you interpret how markets work in the real world. In any real economy, bartering takes place all the time, even if it is not the most important means of acquiring goods and services. The volume of counter-trade is increasing. In 1972, it was estimated that counter-commerce was used by businesses and governments in 15 countries; 1979 27 countries; In the early 1990s, about 100 countries (Verzariu, 1992).

Much of the art of counter-commerce included the sale of military equipment (weapons, vehicles and facilities). One of the great advantages of counter-trade is that it facilitates the maintenance of foreign currency, which is a priority consideration for creditworthy countries and is an alternative to traditional financing, which may not be available in developing countries. Other benefits include lower unemployment, increased sales, improved capacity utilization and easy access to demanding markets. However, if we measure world trade only in terms of monetary transactions, we neglect a part of the market known as counter-trade. Counter-trade is a trading system in which goods and services are used as a means of payment and not as currency.