Page 21 - Countertrade

Offset

Offset is the form of countertrade that is increasing in usage, spurred by
the increase in use of joint ventures and licensing as market entry
strategies. Offset is mostly related to very high value of exports and/or
medium to high technology capital goods supplied by multinational
corporations or major manufacturers. Governments demand that
suppliers of this capital equipment such as aircraft and
telecommunications equipment, and more especially defence materiel,
are obliged to offer offsets in the form of licensing, joint ventures, co-
production, subcontractor production, technology transfer, research and
development, technical assistance and training, or patent agreements
etc., as part of the sales package. Essentially this is a transfer of
technology and know-how to the importing nation.

Offset

Capital Good

Payment in foreign currency minus

components produced in buyer’s country Buyer
Seller

Offset is similar to counterpurchase in that one party agrees to purchase
goods and services with a specific amount of the proceeds from the
original sale. Normally these purchases will be in the form of a portion of

local raw materials or components used in the production process.
However, unlike counterpurchase no specific firm is named so the
purchaser can buy goods from any firm in the country thereby giving the
purchaser a greater flexibility of choice.