Achieving an advantage with countertrade

This article discusses the various formats of countertrade, a modern outgrowth of ancient barter. It presents a taxonomy for classifying the ways countertrade is conducted; delineates the advantages to the trading partners depending on the respective levels of economic development in their home countries; and discusses the process of countertrade generally enough to embed each of the countertrade formats. This article also addresses issues of product bundling including quantity ranges within which a trade will be profitable to both sides assuming that comparative advantage is enjoyed by the trading partners in their respective product lines. Lastly, the article discusses some principles of setting a corporate countertrade policy. All of the above issues are clearly generic, however, the paper shows some specific examples to illustrate countertrade with the People's Republic of China. (Reprinted by permission of the publisher.)