Countertrade Is an Effective Tool
A March 23 Viewpoint column (“Is the World Bartering Itself Out of One Crisis and Into Another?”) referred to countertrade, in which the sale of goods or services is linked to the purchase of other goods or services, as “a challenge to economic stability.”
It suggested that major U.S. corporations are each “sitting on hundreds of millions of dollars of countertrade obligations of uncertain real value” while developing countries use countertrade to dump overvalued goods on the world market.
This alarmist position misses countertrade’s true significance and greatly underestimates the international trading savvy of U.S. corporations.
Most major U.S. businesses at first resisted countertrade; now they are honing their skills to compete with Japanese, Austrian and other countertraders.
In a recent survey, the U.S. Assn. of Countertrading Corporations reported that more than 100 major U.S. exporters now use countertrade for increasing export sales; locating lower-cost, long-term sources of supply; freeing blocked funds, and for providing aid to less-developed countries by enabling them to maintain imports and expand exports.
Its leading U.S. practitioners find countertrade perhaps not the best way to finance trade, but it may be the only way, in regions where commercial credit has dried up and the International Monetary Fund has imposed restraints on imports.
Far from destabilizing trade relations, countertrade may stem further declines in trade levels while contributing to stability by preserving jobs.
Most U.S. multinationals that market or procure products via countertrade believe that they can adequately assess the fair price of the goods purchased and the production capabilities of their clients.
While they concede that wildly fluctuating currencies complicate assessing the fair price of many commodities, they scoff at the suggestion that countertrade causes them to buy paper obligations of uncertain value.
Countertrade offers a significant opportunity both to expand U.S. exports and to strengthen U.S. foreign assistance programs.
In a very real sense, countertrade is a model for the “privatization” of development assistance that the Reagan Administration so enthusiastically touts.
Many developing countries are writing countertrade practices into their economic development plans; they want to acquire the equipment, the new technology and the managerial skills to develop natural resources in exchange for traditional products or products produced with the new technology.
For example, countertrading has allowed Uruguay to develop a motor vehicle industry and upgrade its rail and telephone systems.
Brazil purchased U.S., Japanese and European expertise to develop iron ore and bauxite mines in exchange for minerals extracted from those mines.
Mexico has pledged that it will rely on cooperative compensation agreements (a form of countertrade) to obtain advanced technology and begin major development projects in sulfur production, aluminum processing and other industries.
U.S. and foreign multinational participation in such projects via countertrade gives developing nations project financing, technical assistance during start-up and, in many cases, a guaranteed market.
In less than 25 years, countertrade has evolved from a simple, cashless method of exchanging goods and services to a range of sophisticated, multidimensional activities that serve genuine needs in developing countries.
With more fact gathering and clearer analysis, our government can surely evolve a comprehensive approach to a trade practice of growing importance.
The U.S. should establish a policy that would seek to bolster our own business community while strengthening Third World debtor nations.
SARAH CAREY
Washington
