The Impact of Eastern Liberalisation on East-West Countertrade

This paper considers the implications for countertrade (CT) of recent liberalisation of politico/economic structures in the former Eastern Bloc. Because CT is a response to market imperfections, more relaxed institutional restrictions with greater availability of information may remove the need for CT. However, orthodox trade requires mutual currency convertibility or reliable access to trade finance. Until these are established, CT is likely to feature strongly in trade with former CMEA countries. Meanwhile, lower institutional barriers will drive Western and Eastern partners toward more formal strategic alliances. The experiences of a small group of UK exporters illustrates these tendencies.