Page 17 - Countertrade

Switch Trade

Switch trading refers to the use of a third-party trading house and
therefore is a countertrade transaction which requires at least three

parties to make it work.

When counterpurchase or offset countertrade arrangements are used
these give rise to trade credits with the partner country. However, if the
original exporter has no use for any of the commodities which the credits
will purchase then he may call on a third-party trading house who will

buy these credits and then resell them to another firm.

Practice in which a company sells to another its obligation to make a
purchase in a given country.

Switch Trading :

• It involves at least three parties. This means a country may barter

goods from another country which may be of no use to itself so it
sells the goods to the other country for hard cash
• Expands Exports
• Enables each party to achieve a satisfactory outcome

• There may be difficulties in brokering.

Export imported goods from country 2 by
country 1 to country 3

Exports
Country 1 Country 2 Country 3
Imports