Legal Implications of Countertrade in an Economic Context
SOAS Law Department Occasional Paper No. 2
28 Pages Posted: 26 Jul 2009
Date Written: March 1, 1996
There are those who approve of countertrade. There are those who give it limited support. There are those who condemn it outright. There are even those who would say that countertrade is a relatively insignificant form of trade, which "will never attain the position that conventional trade enjoys" (Erma 1989, 407). In 1984, the IMF reported that there was "an absence of statistical confirmation of any significant increase in countertrade" and that research showed that "countertrade is not really as serious a problem as it seems to be" (Sciortino 1984, 178). But depending upon the definitions given to it, countertrade has been said to represent anywhere from 5 to 40 percent of world trade (Kostecki 1987, 8).
Whether countertrade is to be rightly viewed as a mountain or a molehill in international trade is of less importance when it is considered that it has become "an integral part of international trading systems." It has been resorted to by the developed world in times of trouble, such as World War Two and the trading crisis of the 1930's (Proceedings of the Commonwealth Symposium on Countertrade 1986, 352), and remains attractive to both the developed and the developing worlds. The fact is that countertrade may be here to stay, and the world market must come to terms with it. It is for this reason that the questions of why countertrade provokes the opposing reactions of attraction and repulsion, and which of those is the correct response, become important.
Countertrade has stimulated a significant amount of debate, particularly in the last decade. However, most discussions have approached the subject from the perspective of either the individual trader, or of the governments that advocate countertrade, or of the effects of countertrade on international trade patterns. The task of this paper is to examine countertrade from each of the above perspectives, in order to discover where the balance of convenience lies between the two extremes of promoting countertrade and rejecting it. Since the majority of the conflict surrounding countertrade seems to be over its use between developed and less-developed countries (LDCs), and its use amongst less-developed countries, these transactions will be the focus of the paper.
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