Abstract - 011- 0369

Countertrade: literature review and directions for research

Guido Nassimbeni, University of Udine, via delle Scienze, Udine, Italy nassimbeni@uniud.it,

+393204366017

Marco Sartor, University of Udine, via delle Scienze, Udine, Italy, sartor1@uniud.it,

+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

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ION

S

PR

OB

LE

MS

LIE

GA

L A

SP

EC

TS

GE

NE

RA

L F

EA

TU

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EX

AM

PL

ES

CO

UN

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Y S

PE

CIF

IC F

OC

US

CO

UN

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RT

RA

DE

FO

RM

FO

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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

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