Question

International Business

Identify 3 disadvantages of countertrade? Explain how counterpurchasing works.

Answer 1

1) A major drawback of countertrade is that the value proposition may be uncertain, particularly in cases where the goods being exchanged have significant price volatility.

2) Other disadvantages of countertrade include complex negotiations, potentially higher costs and logistical issues.

3) Additionally, how the activities interact with various trade policies can also be a point of concern for open-market operations. Opportunities for trade advancement, and shifting terms and conditions instituted by developing nations could lead to discrimination in the marketplace.

Counterpurchase

Under a counterpurchase arrangement, the exporter sells goods or services to an importer and agrees to also purchase other goods from the importer within a specified period. Unlike bartering, exporters entering into a counterpurchase arrangement must use a trading firm to sell the goods they purchase and will not use the goods themselves.