COUNTERTRADE TRANSACTIONS - THEORY AND EVIDENCE

Countertrade consists of bilateral agreements (usually) between Western industrial enterprises and government agencies or state-owned enterprises in developing countries (LDCs) and centrally planned economies (CPEs), whereby sales of goods by the western exporter are linked contractually to the exporter's purchases of other goods or services from the countertrade partner. This paper reports findings from a sample of 230 countertrade agreements. We develop an analytical framework that both explains the mutual attraction of countertrade deals to the parties and predicts the terms of trade in individual transactions. Various statistical tests serve to assess assumptions underlying the model, evaluate various predictions and corollaries, and distinguish between certain competing hypotheses about the motives or effects of countertrade transactions. -from Authors