Professional Documents
Culture Documents
COUNTERTRADE
COUNTERTRADE
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mmLCR explainsmm
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m "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 involvedr lso, the terms used to describe the main
modes of trading vary, often interchangeably causing confusionr "mm
- which is a fancy way of saying -
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mmfrom wwwrcobrohio-stateredu/citm/expa/countertraderhtmlmm
forms of countertrademm
http://wwwrcobrohio-stateredu/citm/expa/countertrade_listrhtmlm
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mm r The world debt crisis has made ordinary trade financing very riskyrmm
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- large banks and financial institutions are "risk adverse" in many of the hostile
m regions of the world opening to trademm
2r Many countries cannot obtain the trade credit or financial assistance to pay for
desired importsrmm
- the IMF and World Bank are increasingly restrictive in the way they allow
governments to operatemm
3r Countries are increasingly returning to the notion of bilateralism as a way to reduce
trade imbalancesrmm
- some multilateral blocks have developed - but politics is easier on a one2one basis -
so many nations find it easier to cur deals directly with another single countrymm
4r Countertrade is often viewed as an excellent mechanism to gain entry into new
marketsr The party receiving the goods may become a new distributor, opening up
new international marketing channels and ultimately expanding the marketrmm
- especially where 4X problems are challenging to solvemm
5r Providing countertrade services helps sellers differentiate its products from those of
competitorsrmm
- flexibility is key to winning business in a global market that is more and more
competitive to vendorsmm
from Fisher College of Business, Ohio State University - with notes added by witiger m
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mm |lderkin & Norquist, in their book "Creative Countertrade," say that companies
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countertrade in order to:mm
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ë |xpand or maintain foreign marketsm
ë Increase salesm
ë Sidestep liquidity problemsm
ë Repatriate blocked fundsm
ë Clean up bad debt situationsm
ë Build customer relationshipsm
ë Keep from losing markets to competitorsm
ë Gain foreign contracts for future salesm
ë Find lower-cost purchasing sourcesm
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mm ccording to the LCR, There are mm
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ë Money - some people cannot pay in the currency you wantm
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"to enable trade to take place in markets which are unable to pay for importsr
This can occur as a result of a non-convertible currency, a lack of commercial
credit or a shortage of foreign exchange"mm
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"to protect or stimulate the output of domestic industries (including agriculture
and mineral extraction) and to help find new export markets"mm
ë The Political |nvironment - rules and regulations to protect the host countrym
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"as a reflection of political and economic policies which seek to plan and
balance overseas trade"mm
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mmfrom http://wwwrbarternewsrcom/american_wayrhtmmm
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m By: CrGr lex and Barbara Bowersmm
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r "Companies with passive countertrade strategies regard countertrade as a
necessary evilr They participate in countertrade at minimal level, on an ad hoc basisr
Some companies operate this way because they have product leverage (irer, little or
no competition), while others follow the passive strategy because of disinterest in
countertrader"mm
,
r "This is the most common strategy among merican companiesr
Companies with reacting strategies will cooperate with the buyer country in
offset/countertrade requirements, they use countertrade strictly as a competitive tool,
on the theory that they cannot make the sale unless they agree to countertrader"mm
º
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- "Companies with proactive strategies have made a commitment to
countertrader They use countertrade aggressively as a marketing tool, and are
interested in making trading an active and profitable part of their businessr They
regard offset and counterpurchase as an opportunity to make money through trading,
rather than as an inconveniencer"m
rrmm
ccording to the LCR, There are mm
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"Offset has traditionally been used by governments around the world when they
have made major purchases of military goods but is becoming increasingly
common in other sectorsr There are two distinct types:mm
"The overall objective of offset either, direct or indirect, in the defence sector
generally to promote import substitution and to minimise the balance of
payments deficit for military purchases by developiing an indigenous industrial
defence capabilityr"m
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mm
+ " foreign supplier undertakes to purchase goods and services from the
mpurchasing country as a condition of securing the orderr Counterpurchase is
generally imposed for two reasons: first, to stimulate exports and second, to
alleviate the balance of payment deficit resulting from imported goodsr"m
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LCR advises that "rrrdeals seldom fit these categories preciselyr It is not unusual
for a large export deal to involve several countertrade arrangements - for
example, some long term buyback plus counterpurchase or barter to finance
initial down paymentsr"m
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"The London Countertrade Roundtable (LCR) was established in as a focal
point for all those involved in countertrade, offset and related activitiesr Its main
!-c--m objective is "to bring together companies and individuals engaged in the profession
of countertrade in its broadest sense", and to promote co-operation, exchange of
information, and opportunities for networkingr" m
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4%2
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mm The countertrade arrangement where the rights to sell Russian vodka in the US in
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m exchange for Pepsi (to be sold in Russia) was a huge story years agomm
Recently Pepsi has made another innovative step by taking submarines, a cruiser,
a frigate, and a destroyer in payment for Pepsi productsr In turn, this rag tag fleet of
20 naval vessels will be sold for scrap steel, thereby paying for Pepsi products being
moved to the Soviet Unionrmm
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