Page 10 - Countertrade

this fleet of 20 naval vessels was sold for scrap steel, thereby paying for
Pepsi products being moved to the Soviet Union.

Michael R Czinkota commented that “Concern is also growing about
structural trade deficits. Governments and companies make
countertrade a condition for importers. For example, Zaire and Italy
exchanged scrap iron for 12 locomotives. China traded Russia 212

railway trucks full of mango juice in exchange for a passenger jet”. (3)

General Electric’s first barter deal was with the Malaysian government who
bought 20 diesel electric locomotive from it. “Officials of the government said
that GE will be paid with palm oil supplied by a plantation company. The
company will supply about 200,000 metric tons of palm oil over a period of 30
months”. (4)

However, in the typology of countertrade arrangements barter is the
simplest arrangement but, it is not all that common representing only a
small part of all countertrade (see Table 1).

Moreover, barter suffers from a number of problems not the least of
which is that in any exchange where goods are not swopped

simultaneously results in one party ending up financing the other for a
period of time. Furthermore, calculations of the goods’ values have to be
made in an accepted common currency. Finally, firms run the risk of
having to accept goods which they do not want because they have no
use for them or may have problems reselling them at a reasonable price.