Counter Trade Concept

Counter Trade Concept

In simplest term counter trade is reciprocal trade arrangement between two countries to control exchange rate or to promote the economy of the country. Goods are transferred against goods. There are more than one types of counter trade, which has been explained in other article (Types of Counter trade)

Reasons of Counter Trade

1.    Grow Economy

The first reason of counter trade is to grow the local economy. This concept is often used by the developing countries. Counter Trade compel advance countries to buy something from developing countries.

2.    Balance of payment

Second reason of counter trade is to control the balance of payment of the country and to keep exchange rate within control. Without counter trade developing country would not be able to arrange foreign exchange for imports.

Example of Counter Trade

When country a country (country A) buys something from other Country (Country B), then other country (country B) is supposed to buy something from Country A.