Australian Countertrade Association Ltd

The Australian Countertrade Association Ltd was founded in Sydney in 1986 by a number of business men and others interested in promoting the practice of countertrade in the Australian business and commercial community. It is a non-profit organisation and the major benefit received by its members is the monthly newsletter Countertrade Review. (To go to extracts from recent editions of Countertrade Review, click here )

What is countertrade?

Countertrade is a form of international trade in which payment is made in goods and/or services, instead of cash. While it has always existed, it came into force after World War II in the trading practices utilised by Russia and its COMECON partners. It soon spread into the East-West trade, as Russia and its COMECON partners had insufficient hard currency to pay for imports of essential raw materials and plant and equipment from Western countries. The usual practice was to conduct trade through clearing accounts, and at the end of a specific period balances would be settled in a convertible currency.

Kinds of Countertrade

Barter occurs when cash does not enter into the transaction, but even so, calculations of values in an accepted common currency have to be made. Actually, barter is only a small part of all countertrade.

Counterpurchase is the classic form of countertrade. The importer pays for the imported goods through supplying other goods, of the total or part of the value of the import. Counterpurchase was very common in the post-war years, but is less apparent today.

Buy-back occurs when an importing country pays for plant and equipment, often in the form of a turnkey factory, with products produced from the plant. The supplier of the plant usually disposes of the countertrade goods along with those produced in his own plant.

Offsets is the form of countertrade that is taking centre stage today. Suppliers of capital equipment such as aircraft and telecommunications equipment, and more especially defence materiel, are obliged to offer offsets in the form of licensing, co-production, joint ventures, technology transfer, training, research and development and so forth, as part of the sales package.

Incidence of Countertrade

The proportion of countertrade in all international trade has remained fairly constant over the years at about 20%. This figure is only an approximation, as no country collects accurate statistics, but it is an estimate agreed on by most experts in the field.

So, countertrade is an important component in international trade, is practised world-wide, and exporters who neglect it are depriving themselves of entry into new markets and expanding their exports to existing markets.

The Australian Countertrade Association Ltd exists to assist Australian exporters to learn about countertrade, its procedures, and how they can engage in it effectively.