Do Third World Countries Benefit From Countertrade?

Abstract

In recent years there has been a rapid expansion of unorthodox methods of arranging and financing trade, especially in trade with or between Third World countries. The phenomenon is known as countertrade and includes all exchanges of goods and services between nations, which do not consist of a straightforward sale of goods for internationally convertible money, but involve an exchange of goods for goods, or goods for a combination of goods and money, or other unorthodox methods of payment. Traditionally, of course, the socialist countries have accounted for a major share of bilateral deals in world trade. The new phenomenon is the extension of countertrade to the rest of the world. During the late 1970s and early 1980s, for example, it became pervasive in the oil market, as well as in arms deals. In recent years, a number of developing countries — including Nigeria, Malaysia, Pakistan and Indonesia — have explicitly adopted countertrade as an important element in their trading strategies.

This essay was first published in Dell (ed.) (1988). Harsha V. Singh is a member of the GATT secretariat. This chapter contains our personal views and does not necessarily represent those of the GATT or of Richard Blackhurst, to whom we are grateful for comments on an earlier draft.