Countertrade: literature review and directions for research · This paper is aimed at profiling the...
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Countertrade: literature review and directions for research
Guido Nassimbeni, University of Udine, via delle Scienze, Udine, Italy [email protected],
+393204366017
Marco Sartor, University of Udine, via delle Scienze, Udine, Italy, [email protected],
+393282198896
POMS 20th Annual Conference
Orlando, Florida U.S.A.
May 1 to May 4, 2009
Abstract
The term “countertrade” refers to a set of (commercial) agreements between a buyer and a seller in
which the primary transaction is accompanied by a variety of additional conditions (Hennart, 1989).
The relevance of this solution can hardly be assessed since these agreements are often surrounded
by secrecy (Lecraw, 1989; Erridge, Zhabykenov, 1998). The estimates provided by the literature,
although heterogeneous (ranging from 5% to 30% of the total value of international transactions),
however demonstrate its importance.
Motivated by the relevance of the phenomenon in the last three decades many authors have
developed studies on this topic. This paper is aimed at profiling the literature on countertrade from
44 (supply chain management, international marketing, international business, and international
trade low) journals over the years 1977-2006.
This article reflects on the mass of literature on this field, synthesizing, organizing and structuring
knowledge (coming from different perspectives) and offering suggestions for future researches.
Keywords: countertrade, offset, barter, buyback, literature review
1. Introduction
One of the first definition of countertrade found in literature states that it is a variety of trade
arrangements in which “a seller provides a buyer with deliveries, and contractually agrees to
purchase goods from the buyer equal to an agreed percentage of the original sales contract value”
(United States Department of Commerce, 1978). Since this definition was proposed at the
beginning of the 80s, it is primarily addressed to the “first generation” forms of countertrade (such
as barter, counterpurchase e buyback). Considering that over time other forms of agreements
developed (such as the offset), today we could more generally describe the countertrade as a set of
agreements in which the seller is engaged in a variety of compensatory activities necessary to settle
the sale (Hennart, 1989). The nature of these activities depends on the type of agreement considered
and can vary from the (imposed) sourcing of goods and services to the obligation of making
investments in the importer’s territory1.
The first form of countertrade documented in literature is barter – the oldest method of trade,
already practiced by primitive tribes – consisting in the exchange of goods for goods without the
medium of cash payments. This solution was based on personal ties and mutual trust, benefit and
balance (Al Suwaidi, 1993). Barter was frequently used until the 18th century (many applications
documents for example its use in the inter-colonial trading) when the monetary system was
introduced in most countries of the world. It was often applied after the World War I (for example
in Germany to obtain needed imports such as bauxite, oil, copper with Balkan states) and after the
World War II (when it becomes functional for intra-East bloc trade as well as for trade between
East and West)
The other forms of countertrade arose in the 40s at the beginning as a feature of the East-West
trade. These practices become soon important in particular for developing nations, solving problems
as balance of payment difficulties, scarce foreign exchange resources, finding markets for surplus
1 Despite the US Department of Commerce’s definition (1978) refers generically to “buyer” and “seller” independently
from their nationality, the literature addresses mostly international countertrade transactions. So “buyer” and “seller”
often are used as synonymous respectively of “importer” and “exporter”.
goods, securing a reliable source of raw materials. Countertrade represented an extension of the
bilateral-balancing principle many Communist countries pursued (Banks, 1983).
While countertrade was initially used in developing countries, subsequently countertrade has
become a popular policy measure in industrialised countries as well (Belderbos, Slauwaegen, 1995).
Today, it is considered a relevant solution for international trade (US Department of Commerce,
2007), affecting an high percentage (some estimates say until 30%) of the total value of
international transactions. In the last three decades many authors have developed studies on this
topic. The objective of this paper is to structure knowledge coming from different branches
(international trade low, international business, international marketing, supply chain management)
to develop the first comprehensive literature review on this field.
The paper is articulated as follows. Chapter 2 provides a description of the methodology adopted in
the study; chapter 3 describes the main research fields in the literature. Chapter 4 looks at the open
questions (and the subsequent new research directions) coming from the literature analysis and
systematization. The paper closes with a synthesis of the findings.
2. Methodology
Through a literature analysis in the most known databases (JStore, Science Direct, Emeral, Sabra,
Cilea) using the words “countertrade”, “barter”, “counterpurchase”, and “offset”, we have identified
44 journals that have hosted articles on countertrade issues. These mainly belong to four areas:
supply chain management, international marketing management, international business, and
international trade low. The heterogeneity of international journals demonstrates that in
countertrade a number of variables and disciplines intersects: legal aspects (e.g. concerning the
choice of the investment to be carried out in the foreign country, solutions available for technology
transfer and protection of property rights, etc.) linked to the political and economic geography of
the involved countries; cultural and organizational aspects and those regarding logistics and ICT
solutions for the management of these activities.
Seventy-six articles were identified in these 44 journals, all published in the 1977-2006 period (see
Table 1).
Table 1: Journals hosting countertrade articles (by number of contributions)
JOURNAL
COUNTERTRADE
ARTICLES
1 Industrial Marketing Management 7
2 Journal of International Business Studies 6
3 International Journal of Purchasing and Material Management 5
4 International Marketing Review 4
5 Journal of World Trade Law 5
6 American Economic Review 3
7 Harvard Business Review 2
8 Journal of International Economics 2
9 Journal of Law, Economics and Organization 2
10 The Economic Journal 2
11 The World Economy 2
12 Scandinavian Journal of Management 2
13 Applied Economics 1
14 Arab Law Quarterly 1
15 Canadian Journal of Administrative Sciences 1
16 California Management Review 1
17 Computer Ops Res. 1
18 Economic Inquiry 1
19 Economic Outlook 1
20 Economics and Organization 1
21 Economics of Transition 1
22 Electronic Commerce Research and Applications 1
23 European Economic Review 1
24 European Journal of Development Economics 1
25 European Journal of Marketing 1
26 European Journal of Political Economy 1
27 European Journal of Purchasing and Supply 1
28 Futures 1
29 Global Finance Journal 1
30 International Business Review 1
31 International Journal of Industrial Organization 1
32 International Trade Journal 1
33 Journal of Business Research 1
34 Journal of Development Economics 1
35 Journal of Industrial Economics 1
36 Journal of International Marketing 1
37 Journal of Management Studies 1
38 Journal of Marketing Management 1
39 Journal of Policy Modelling 1
40 Man, New Series 1
41 Proceedings of the Academy of Political Science 1
42 Review of International Economics 1
43 The International and Comparative Law Quarterly 1
44 Third World Quarterly 1
Total 76
The frequency of the publications over years is depicted in Figure 1.
0
1
2
3
4
5
6
7
8
9
1983 1988 1993 1998 2003 2008
Number of articles
Figure 1: Number of countertrade artciles over years
3. Results
The literature review points out the following main research fields: countertrade forms, motivations,
problems, legal aspects. There are also some studies focused on particular characteristics of the
phenomenon: estimates of the transaction values and of the characteristics of the companies
involved, evaluations about the countertrade forms adopted and the geographical areas of their
presence, analyses of products traded. This chapter will describe each of these fields. A more
detailed systematization of the literature is reported in Appendix 1.
3.1 Countertrade forms: general characteristics and examples
The main countertrade forms described in literature are: barter (while “single barter”, “switch
trading” and “clearing arrangements” are sub-typologies of these agreements), buyback,
counterpurchase and offset. The core features of these forms – according to the literature analysis –
are depicted in Table 2.
Table 2:Major countertrade forms
CURRENCY COMPENSATORY
ACTIVITY
TYPICAL
AGREEMENT
DURATION
NUMBER OF
INVOLVED
SUBJECTS
SUB-TYPOLOGIES
BARTER Typically not
used
Purchase of products
(not related with the
primary transaction)
Short term
(few
weeks/months)
Typically two subjects
Simple barter
Switch Trading
Clearing Arrangement
BUYBACK
(Industrial
compensation)
Used
Purchase of products
(related with the
primary transaction)
Long term
(several years)
Typically two
subjects -
COUNTERPUR.
(Commercial
compensation)
Used
Purchase of products
(not related with the
primary transaction)
Short term (few months/years)
Typically two subjects
Advance purchase
OFFSET Used
Activities that
doesn’t concern only
the purchase of
products
Long term
(several years)
From few units
to several dozens
of subjects
-
Modern barter is a type of countertrade that typically involves short-term exchange of products
without the use of money (Plank et al. 1994; Marin, Schnitzer, 2002). This is the only countertrade
form that (not requiring the use of money) could solve problems related to the unavailability of
foreign currency (Amman, Marin, 1994). Mutual needs of products and services for both the parties,
a short time period in which the agreement has to run out, the same value of exchanged goods
(Birch, Liesch, 1998) are some of the characteristics that have limited the use of this solution in the
last decades.
Viceversa countertrade agreements that have experienced an expansion over time are buyback,
counterpurchase and offset (US Department of Commerce, 2007).
In buyback agreements (that often concern turnkey contracts) the seller accepts the condition of
buying the costumer’s products resulting from the plant, equipment or technology he has supplied
(Mirus, Yeung, 1986; Camino, Cardone, 1998). The link between the primary transaction (i.e. the
plant) and the secondary one (i.e. the plant production) represents an important guarantee provided
to the purchaser (Lecraw, 1989; Hennart, Anderson, 1993) that could decrease (as we will see in the
“motivations” paragraph of this chapter) the transaction costs (Hennart, 1990).
The counterpurchase differs from the previous form because the products purchased in the
secondary transaction are not related to those of the primary one, but regards other productions
(Hennart, Anderson, 1993).
Finally in the offset agreements the impositions for the seller consist not only in purchasing
obligations, but in a varied set of compensatory activities (Hennart, 1989, 1990). This solution,
originally applied almost exclusively to defence supplies, is nowadays widespread also in non-
military supplies and in agreements between private organizations2 (US Department of Commerce,
2007). Other reasons for distinguishing offset arrangements from other forms of countertrade are
that they are governmental proposed arrangements (although not necessarily implemented by the
government) covering wide policy objectives (sometimes social or environmental) (Al-Suwaidi,
1993).
The literature offers some examples for each countertrade form. As far as barter is concerned,
examples are the milk-for bauxite deal negotiated between the United States and Jamaica, and the
lamb-for-oil deal negotiated between the New Zealand Meat Board and the Iranian Government
(Banks, 1983). Mirus and Yeung (1986) cited a buyback agreement between Volkswagen and East
Germany by which Volkswagen agreed to deliver a production line (in operation in West Germany)
capable to producing 286,000 engines per year agreeing to buy in return 100,000 motors per year.
An example of buyback is also provided by Occidental Petroleum: they had a 20 million transaction
with the Soviet Union. The company supported the soviets in the construction and financing of
ammonia plants and agreed to purchase ammonia manufactured in these plants over a period of 20
years (Al-Suwaidi, 1993). An example of counterpurchase is again offered by Volkswagen: in the
‘70s they sold 10,000 automobiles from West Germany to East Germany in 1977, undertaking to
buy in return selected East German goods (including coal, oil and machinery) to an equivalent value
within the next 2 years (Banks, 1983). As far as an offset example is concerned, Saudi Arabia
imposes on an exporter an offset obligation to reinvest 35 percent of the cost of the acquired
2 Especially when the purchasing organization, although private, is subjected to an offset regulation planned by the local
government.
technology and services in an industrial joint venture created specifically for the purpose (Al-
Suwaidi, 1993).
In general there are few examples of countertrade and however they are often only short citations,
sometimes not even enough to make the reader aware of the form they are mentioning. Furthermore
most of these exemplifications relate some countertrade forms (mainly barter), while neglecting
others (e.g. offset).
3.2 Countertrade motivations
The widest research area (Bates, 1986; Kogut, 1986; Mirus, Yeung, 1986, 1993; Hennart, 1989,
1990; Lecraw, 1989; Camino, Cardone, 1998; Marin, Scnitezer, 1995; Forker, 1996, 1997; Erridge,
Zhabykenov, 1998; Fletcher, 1998; Choi et al., 1999) regards the motivations for countertrading
They can be classified into the three following categories:
� Seller’s reasons. The seller seems to choose compensatory agreements first of all in order to
achieve specific market goals increasing the attractiveness of his offer (Forker, 1991;
Fletcher, 1998; Paun, 1997). In countries where local regulations don’t allow direct foreign
investments, countertrade agreements can be an effective entry mode3 (Hennart, 1989, 1990;
Hennart, Anderson, 1993; Camino Cardone, 1998).. Finally, buyback (in particular) is a
possible solution when strong guarantees on the quality and effectiveness of the product
supplied are requested (Murrel, 1982; Lecraw, 1989; Hennart, Anderson, 1993; Camino
Cardone, 1998). Countertrade can bring also what some authors call “unexpexted bonuses”,
such as the discovery of low-cost sources of production and raw materials (Yoffie, 1984)
� Buyer’s reasons. The buyer’s motivations for countertrading can be several: to improve
foreign distribution channels, to smoothen sales trend by opening foreign markets, to
3 Empirical evidences have shown the major presence of these agreements in country where there are such restrictions
(Hennart, 1989, 1990; Hennart, Anderson, 1993; Camino Cardone, 1998).
overcame periods of falling demand, to sell out obsolete and perishable products (Mirus,
Yeung, 1986; Lecraw, 1989; Hennart, 1990; Hennart, Anderson, 1993; Fletcher, 1998). In
some cases (in particular in the offset and buyback), the buyer may ask for compensatory
agreements as a guarantee for an easier credit access (sometimes it happens that primary
transactions are financed by a bank of the exporting country) (Banks, 1983; Forker, 1991), an
effect which is anyway questioned by some authors (Hennart, 1989, 1990; Hennart,
Anderson, 1993). Countertrade (barter in particular) is also attributed with the effect of
facilitating dumping (Banks, 1983).
There are also two depicted rationales to countertrade in a situation of a over-valued currency:
it seems to allow local firms to continue trading when their availability of foreign currency is
insufficient; moreover it enables the terms of exchange to be shifted to a more realistic rate
for particular transaction (that is what some authors name “selective devaluation”) (Banks,
1983).
Some studies explain that the buyer can use countertrade (in particular buyback) to reduce the
risk associated to the purchase of high technological goods: the link between primary and
secondary transaction provides important guarantees for the purchase. The authors (Hennart,
1989; Hennart, Anderson, 1993; Lecraw, 1989; Mirus, Yeung, 1986; Marin, Schnitzer, 1995)
that sustain this thesis, assert that not rarely face ex-ante information asymmetries. In these
cases countertrade seems able to provide an efficiency way of dealing with moral hazard,
since the tying together of primary and secondary transactions creates an “hostage”
(Williamson, 1983) able to reduce transaction costs (Camino, Cardone, 1998).
Looking at the literature it is possible to identify two types of enforcements in international
business: contract (widely used in mature business environments where organizations can rely
on structured legal systems) and trust (common in emerging and changing environments).
There are societies (e.g. Japan) where trust and reputation are crucial to economic relations in
facilitating transactions (Dunning, 1996). At the other extreme some societies
overemphasized the role of laws and regulations (Ellickson, 1991). Countertrade (and its
“hostage effect”) seems to be effective as a third way. Some analyses (e.g. Choi et al., 1999)
showed that in particular in the context of emerging economies, countertrade arrangements
could be more effective than trust or traditional contract based-exchanges in enforcing
collaboration. They assert that opportunism can be reduced by countertrade better than
contract low, obligations of an ethical or trusting nature or reputation. Although some form of
countertrade (e.g. counterpurchase) are often seen as having no hostage element, some authors
(e.g. Choi et al., 1999) assert that they also involve some degree of mutual hosting, in the
sense that both parties have something to lose from breaking off the agreement. Trust,
contracts and countertrade hostages so become optional choices.
� Governmental reasons. Governments can force the use of countertrade agreements
differently: they can require them for domestic companies belonging to strategic sectors or
force the choices of public companies. Governments can select a countertrade agreement
(typically an offset solution) when they themselves are the clients (for example for military
orders) (Nassimbeni, Sartor, 2008).
There are different reasons that lead to the imposition of countertrade agreements by
governments. The long-termed and close relationship between domestic companies and the
(often foreign) supplier that frequently characterises countertrade agreements, can determine
tangible benefits for the industrial sectors involved, stimulating their technological,
managerial and commercial growth (Lecraw, 1989; Fletcher, 1996). Offset can be used by
governments to offer not officially grantable support to strategic sectors (Hennart, 1990).
Some impositions of countertrade may allow to employ or train the local labour force (Forker,
1997). A government can impose the countertrade also to sell the surplus of domestic goods
or to limit the use of foreign currency. Countertrade could also offer some political
advantages strengthening bilateral ties between nations. Countertrade seems to be also useful
to evade embargoes, even if this aspects is just sometimes cited but never documented in
literature.
Empirical results (Hennart, 1990; Caves and Marin, 1992; Hennart and Anderson, 1993) suggests
that countertrade often occurs in situations where the superiority of market-mediated transaction is
not well established, either because of asymmetric information or imperfect competition. In these
cases, for both parties to countertrade are required some economic incentives to forego ordinary
market alternatives (Camino, Cardone, 1998).
In some nations, market imperfections are particularly evident; foreign exporters face many
restrictions and a lack of information on the partners and their business environment. Under these
circumstances countertrade may lead to transactions that would otherwise not occur (Camino,
Cardone, 1998).
Other studies based on Williamson’s transaction cost thery (1975) (Hennart, 1989; Hennart,
Anderson, 1993) show that countertrade is a an alternative to FDIs. It surely represents one of the
options (licensing, plant delivery, co-production, subcontracting, joint venture, etc.) available to the
exporter for market entry (or the maintenance of the market shares) (Buckley, Casson, 1988;
Hennart, 1988, Camino, Cardone, 1998). Data show how this solution is more frequently used in
countries where FDIs are restricted (Hennart, 1989; Hennart, Anderson, 1993). China represents an
example of this: (official) buy back agreements declined while joint venture regulations were
approved (Camino, Cardone, 1998). Under certain circumstances – such as asymmetric information,
host country restrictions on foreign investment, a rapidly changing environment - countertrade can
represent a form that minimize transaction costs.
3.3 Countertrade problems
Looking at the literature focused on the countertrade problems (Neale and Shipley, 1989; Forker,
1992; Person, 1992; Person and Forker, 1995; Fletcher, 1996; Erridge, Zhabykenov, 1998) the risks
these agreements present can be linked to:
• product problems. As stated in the studies of Person (1992) and Pearson and Forker (1995)
many companies verify the receipt of goods and services in return that exhibits inferior
quality to the Western partner’s requirements. Availability problems have also been
documented;
• negotiating problems. Countertrade seems to ask for more complex and time spending
negotiations (Fletcher, 1996; Erridge, Zhabykenov, 1998);
• uncertainty concerning the outcome of the whole (long-term) operation. This uncertainty
often brings to additional expenses in the form of brokerage fees and facilities, and higher
procurement costs (Forker, 1992)
Some studies describe in detail how countertrade complicates the international trade procedures and
makes transactions more costly and risky. Reported risks are: changes in the price of the
countertraded goods (being these agreements effective for long periods), lacks in management and
technical capabilities of the buyer, IP protection (Banks, 1983; Al-Suwaidi, 1993). Some authors
emphasize the fact that countertrade may also undermine the multilateral trading system replacing it
with bilateralism with possible disruptive effects (e.g. trade contraction).
Other risks discussed in some studies (Egan, Shipley, 1996; Angelides, 1993) are the sequestrations
of assets or profits by host governments (particularly when high vale offset deals are involved),
restricted sourcing flexibility and increased operating costs (Pearson and Forker, 1995). Since
countertrade transaction often involve a number of subjects in a number of countries, the issue of
what law has to be applied in the event of a dispute represents another problems. Finally involving
governments, countertrade legal action against a sovereign government are difficult to be pursued.
3.4 Countertrade legal aspects
Another central topic in countertrade studies concerns legal aspects. Some works (Rajsky, 1986;
Bonnell, 1993; Kerkovic, 2004; UNCITRAL, 2007) offer information and observations about the
structure and the characteristics the agreements should present.
Counterpurchase transactions (for example) are usually structured in four separated agreements:
primary (which regards the selling to the importer), counterpurchase (it is unconventional contract
in a standard sale transaction; it merely constitutes an undertaking to buy goods at some time in the
future), fulfilment (regarding the purchase of goods from the importer), protocol or framework
agreement (tying together the previous ones) (Walsh, 1983; Al-Suwaidi, 1993).
Studies on legal issues also highlight legal problems and criticalities and compare contractual
aspects in the different countertrade forms.
Finally some studies (e.g. Al-Suwaidi, 1993) reflects on the country specificities between the lows
regulating dealings in countertrade. They show how there are states (e.g. USA, Qatar, etc.) where
there is an official trade policy on countertrade while, on the contrary, in other nations (e.g.
Kuwait, Saudi Arabia, etc.) there is no declared policy on it.
3.5 Other features of countertrade arrangements
Some authors (among them Neale, Shipley, 1986; Hennart, 1989, 1990; Palia, Liesch, 1991; Llanes
and Miller, 1993; Palia, 1993; Fletcher, 1996, 1998; Forker, 1996; Paun, 1997) have focused their
analyses on a number of features of countertrade agreements, such as: estimates of the transaction
values and of the characteristics of the companies involved, evaluations about the countertrade
forms adopted and the geographical areas of their presence, analyses of products traded.
These studies underline the rapid growth that countertrade agreements have had over the years
(Erridge, Zhabykenov, 1998; US Department of Commerce, 2007) both in the relations between
Western countries and emerging economies and in the relations between developed economies.
Despite the variety of situations, barter seems to be the most popular countertrade form, followed
by counterpurchase, buyback and offset. Interesting are the estimates concerning the diffusion of
countertrade forms in different geographical areas. For example the low level of barter agreements
between OPEC countries (compared to those between other countries) seems to support the thesis
that this solution is used to bypass the planned tariff agreements between member states (Hennart,
1990). From the examined studies the compensations seem to differ deeply according to country-
specific factors, i.e. productions and specific needs of the countries involved (Fletcher, 1998).
The countertrade dimensions is also widely debated. Ammond suggest that 20-30% of world trade
is accounted by countertrade; Hennart and Anderson asserts it is 10-20%; Forker estimates the 9%.
The disparity of the estimations is itself an important finding. As Cohen and Zihsman (1990) have
effectively noted: “when variance is in the hundreds of billions of dollars, we know two things.
First, that something big is going on; and the second is that we have not control over it”.
Some reasons explain why companies and governments keep their involvement in countertrade
secret. WTO and the International Monetary Fund consider the countertrade "a distorting free
trade”. It can be seen as a way to bypass specific cartel agreements (such as the one among the
countries member of OPEC) or to disguise dumping in violation of international agreements.
Countertrade relations are also surrounded by an atmosphere of "clandestinity" that could affect the
image of reputable companies. Finally, for companies that use countertrade agreements, this is a
solution able to determine a competitive advantage that they don’t want to reveal to their
competitors (Lecraw, 1989; Hammond, 1990). It is also very difficult to identify the totality of
companies engaged in countertrade thus the extent of the field is unknown (Erridge, Zhabykenov,
1998).
4. Some open questions and new research directions
Looking at the literature analyzed in this exploratory study, at recent reports of public institutions
(e.g. US Department of Commerce, WTO), at the presentation illustrated by some Defense
Department in their meetings with their foreign suppliers, several open questions emerge that can
orientate future deepenings.
The first open issue regard which are the today’s concrete benefits offered by countertrade since
many of the historical advantages are now questioned and others are strongly hindered by problems
and costs this choice can determine.
Looking at the actual situation several advantages don’t seem to still work. As far as the credit
access (one of the historical advantages attributed to countertrade), recent data demonstrate as
nowadays western banks are less motivated to lend money to finance these transactions. For
instance the Export Credit Guarantee Department of United Kingdom don’t cover contracts which
contain elements of countertrade because the long period of these agreements could strongly change
their expected income profile (as the historical (1979) experience of Occidental Petroleum with the
Soviet Union demonstrated).
Also the possibility of overcoming hard-currency shortages seems to be put into a new perspective
since it is offered only by the barter form and in any case for a short period.
Countertrade has been also usually credited with allowing the sell poor quality goods that would
diversely not sold in the export markets. Anyway countertrade seems to be a rather inefficient
means of marketing hard-to-sell items. Goods and services that did not fit exporter’s marketing
channels or productive requirements are typically sold through a trading company. The services of
these trading companies could be managed directly by the importer without any (costly)
intermediation of the exporter.
Another question is strictly linked to this aspect. Almost every compensatory activity determine a
cost for the exporter. In counterpurchase, buy back and offset relations, for example, the price paid
by the exporter to a trading company can rise the 30% of the managed goods. The question is: who
pay this service? There is a lot of sense in thinking that that exporter will charge these costs for the
compensatory activities on the price of the job order paid by the importer. This way, could be the
(total) effect of several countertrade activities just an increase of inefficiency, time, costs and
managerial complexity? If this is true, could countertrade represent a solution reducing the amount
of trade possible in a given period?
Other open issues regard countertrade and bilateralism. Which could be the effects of trying to
balance trading with every trading partner? Could countertrade restore bilateralism and which could
be the effects on the global trade? Bilateralism for sure requires more management than
conventional trade, more administrative and legal inputs, is more time consuming, it determines
more transaction costs. The effects could be a contraction of trade and production caused by an
increase of transaction costs. Multilateral trade is normally associated with trade imbalances
between trading partners (thanks to international specialization). A general action to reduce
disparities in bilateral trade flows could imply a switching of import expenditure to higher cost
sources. This could affect both the volume of import and export.
Another open question regards the political future of countertrade. One of the main weaknesses of
the countertrade is that it is opposed by the WTO since it introduces bias against SMEs (which may
be less able to handle the additional costs and staff efforts entailed by these agreements) and above
all since it contravenes the intents of GATT principles. These favor non discrimination (on the
contrary countertrade is a relationship in which each party discriminates for another),
multilateralism (countertrade is bilateral), non distortion of the natural flow of trade, transparency
(many aspects of countertrade agreements (sometimes the whole contract) are often surrounded by
secrecy). When will WTO start acting effectively to stop this form of trade? And when it will
happen, will governments and private institutions be able to manage these activities in an unofficial
manner as it already now happens in some countries in the world?
Appendix 1: countertrade literature review (by author)
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1 Al-Suwaidi Arab Law Quarterly 1993 x x x x Arab States
2 Amman, Marin Journal Of Industrial Economics 1994 x
3 Banks The World Economy 1983 x x x x x
4 Bates International Marketing Review 1986 x x
5 Belderbos, Sleuwaegen European Journal of Political Economy 1997 x Japan, Europe
6 Birch, Liesch Industrial Marketing Management 1998 x x x Australia Barter
7 Camino, Cardone Scandinavian J. Of Management 1998 x x
8 Carey, McLean J. Of World Trade Law 1986 x x
9 Caves, Marin The Economic Journal 1992 x x
10 Chan, Hoy J. Of International Economics 1991 x
11 Choi, Lee, Kim J. Of International Business Studies 1999 x x x
12 Cohen, Zysman California Management Review 1986 x x x
13 Commander Economic Outlook 1999 x Russia Barter
14 Commander et al. Journal of Development Economics 2002 x Russia Barter
15 Cresti Applied Economics 2005 x x USA Barter
16 Egan, Shipley International Marketing Review 1996 x x
17 Ellingsen, Stole J. Of International Economics 1996 x
18 Erridge, Zhabykenov European J. Of Purchasing and Supply 1998 x x x x
19 Fletcher International Business Review 1996 x
20 Fletcher Industrial Marketing Management 1998 x x Australia, Japan, Malaysia
21 Forker I. J. Of Purchasing and Material Manag. 1992 x x
22 Forker I. J. Of Purchasing and Material Manag. 1996 x x
23 Forker I. J. Of Purchasing and Material Manag. 1997 x x x x
24 Griffin, Rouse Third World Quarterly 1986
25 Guriev, Kvassov I.J. Of Industrial Organization 2004 Barter
26 Haddawy et al. Electronic Commerce Research and Applications 2005 Barter
27 Hennart J. Of Law, Economics and Organization 1989 x x x x
28 Hennart J. Of International Business Studies 1990 x x x
29 Hennart, Anderson J. Of Law, Economics and Organization 1993 x x
30 Humphrey Man. New Series 1985 x Barter
31 Khoury Journal Of Business Research 1984 x x x
32 Kogut J. Of International Business Studies 1986 x
33 Kostecki J. Of World Trade Law 1987 x
34 Lange, Elliott J. of International Business Studies 1977 x x USA
35 Lecraw J. Of International Business Studies 1989 x x x
36 Liesch, Palia Industrial Marketing Management 1997 x Australia
37 Liesch, Palia European J. Of Marketing 1999 x x Australia
38 MacPherson, Pritchard Futures 2003 x x x USA Offset
39 Magenheim, Murrel Economic Inquiry 1988 x x Barter
40 Marin The World Economy 1990 x
41 Marin, Schnitzer American Economic Review 1995 x
42 Marin, Schnitzer European Economic Review 1998 x
43 Marin, Schnitzer The Economic Journal 2002 x x Barter
44 Marin, Schnitzer Review of International Economics 2003 x Barter
45 Marshall, Wynne Global Finance Journal 1996 x x Barter
46 Martin Third World Quarterly 1986
47 Milenkovic-Kerkovic Economics and Organization 2004 x x x x Buy-back
48 Menzler Scandinavian J. Of Management 1989 x x
49 Mirus, Yeung J. Of International Business Studies 1986 x x
50 Mirus, Yeung International Trade Journal 1993 x x
MAIN ISSUES
N. JOURNAL YEARAUTHOR(S)
MO
TIV
AT
ION
S
PR
OB
LE
MS
LIE
GA
L A
SP
EC
TS
GE
NE
RA
L F
EA
TU
RE
S
EX
AM
PL
ES
CO
UN
TR
Y S
PE
CIF
IC F
OC
US
CO
UN
TE
RT
RA
DE
FO
RM
FO
CU
S
50 Murrel Economic Inquiry 1982 x x
51 Neale et al. International Marketing Review 1997 x x UK, Turkey
52 Neale, Shipley Journal of Management Studies 1988 x x x UK
53 Neale et al. Journal of Marketing Management 1992 x x UK, Canada
54 Noguera, Linz Economics of Transition 2006 x x Russia Barter
55 Okoroafo International Marketing Review 1988 x
56 Palia Industrial Marketing Management 1990 x x
57 Palia Industrial Marketing Management 1993 x x Japan
58 Palia, Liesch Industrial Marketing Management 1997 x x Australia
59 Paun Industrial Marketing Management 1997 x x x
60 Paun, Shoham J. Of International Marketing 1996 x
61 Pearson, Forker I. J. Of Purchasing and Materials Manag. 1995 x
62 Plank et al. I. J. Of Purchasing and Materials Manag. 1994 x x Barter
63 Qiu, Tao European J. of Development Economics 2001 x x
64 Radasch, Kwak Computer Ops Res. 1998 x x Offset
65 Rajski The I. and Comparative Law Quarterly 1986 x x x
66 Ritter American Economic Review 1995 x
67 Roessler J. Of World Trade Law 1985 x x
68 Shapiro, Posner Harvard Business Review 2006 x
69 Strizzi, Kindra Canadian Journal of Administrative Sciences 1997 x x Canada
70 Taylor J. Of Policy Modelling 2003 x x x Offset
71 Walsh J. Of World Trade Law 1983 x x
72 Walsh J. Of World Trade Law 1985 x x
73 Wang Proceedings of the Academy of Political Science 1986 x x
74 Williamson, Wright American Economic Review 1994 x x Barter
75 Yoffie Harvard Business Review 1984 x x x
MAIN ISSUES
N. JOURNAL YEARAUTHOR(S)
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