Countertrade has grown into a phenomenon too important to be ignored by business practitioners, researchers, and governments. Yet there is a dearth of empirical research on this form of trade. The present study reports the results of a survey of firms engaged in such transactions. Specifically, it examines the benefits and pitfalls of countertrade with Latin America and compares them with those of similar arrangements with other parts of the world. Some explanations as well as implications and limited generalizations are developed.
Countertrade is any one of several trade arrangements by which goods and services are traded for each other. Since a large number of countries desire goods and services for which they do not have the currency to pay, countertrade usually involves a non-cash contract between a developed and a developing country. The literature on countertrade as an important global strategic tool has grown rapidly in recent years. Although no reliable figures of the actual magnitude of these arrangements are available, trade financed by this method has grown considerably. Estimates of its share in total world trade range anywhere from eight percent to a high of forty percent (see, e.g., Daniels and Radenbaugh, 2001; Ball and McCulloch, 1999; Ruggerio, 1997).
Historically, United States businesses have seldom been obliged to think about nonmoney trade, primarily because America's trading partners have tended to rely on the traditional forms of trade financing. They include the use of cash, letters of credit, and borrowing from private and official sources. However, in recent years, a large number of U.S. corporations have found it increasingly difficult to conduct business with many countries without relying on countertrade. They include IBM, Heinz, General Motors, PepsiCo, Xerox, Boeing, Monsanto, and Procter and Gamble. In response to this growing interest, some U.S. banks such as Citibank and Chase have decided to set up their own countertrade departments (Dizard, 1983). Furthermore, Bragg (1988) reported that two-thirds of foreign purchases of American-made commercial and military jets are paid for with local products instead of cash. Conversely, for American executives who face, more than ever before, worldwide economic and competitive pressures, countertrade offers previously untapped opportunities particularly since it is "more attractive than having no sales in a given market" (Dizard, 1983: 89). Indeed, it has been described as "a rational response...to environmental constraints and market imperfections" (Mirus & Yeung, 1986: 38) particularly for those nations lacking either hard currency or the ability to borrow. Thus countertrade operations add another dimension of particular benefit to developing countries seeking to circumvent structural trade imbalances.
Yet the wide variety of forms of countertrade poses a challenge to the rules, conventions, and structures of international trade. Consequently, a growing number of business firms and governments have found it necessary to reexamine their strategic responses to countertrade as it offers both new threats and opportunities. Not surprisingly, according to one business writer, "knowing the tricks of countertrade can be a competitive advantage when advantages are hard to come by" (Bragg, 1988). Clearly, this form of trading can no longer be treated by American business as a marginal or archaic form of international business. Having flourished in today's global economy and its uncertain environment, countertrade has grown into a phenomenon too important to ignore by business practitioners, researchers, and policy makers. It is likely to be a significant marketing tool well into the next century as global businesses face problems of closed or saturated markets, trade barriers, surplus capacity, inconvertible currencies, and financial constraints. In sum, many firms now realize that, in order to be effective global competitors, countertrade considerations must be part of their overall strategic plans. …