Apr 7, 1984
COUNTER TRADE IN PERSPECTIVE.
GENEVA, APRIL 5 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The proportion of counter-trade in world merchandise trade could represent a maximum of eight percents and its actual proportion could be actually smaller, according to a GATT study.-The study by the secretariat of the General Agreement on Tariffs and Trade is for its CG-18 (the Consultative Group of 18), the top policy-making body of GATT consisting of policy-making officials from capitals, now in session here.- The study is in response to a request from the U.S., which is seeking to curb or end this counter-trade to protect the interests of its Transnational Corporations (TNCs).- With world trade in 1982 of a value of 1.850 billion dollars, this puts the maximum value of counter-trade at about 148 billions.- Originally used to describe the east-west bilateral trade practices that became common in the 1970’s, the term is now used to cover a variety of practices.- It includes what GATT calls, classical barter arrangements, counter-purchase transactions and offset arrangements, and official buy-back arrangements.- In making out a case against the "inefficiency" of such counter-trade, and its possible violation of some GATT provisions in certain circumstances, the GATT study focuses on government actions promoting or requiring such counter-trades and its trade/finance linkages.- It ignores the role of TNCs and their intra-firm transactions, their monopolistic and monopsonic domination of world trade, and the trade/technology and trade/other services linkages.- Several of Third World responses as via counter--trade are essentially to provide a counter-vailing force to the power of the TNCs on the world markets and their management of world trade for the benefit of their home-countries.- Legally, GATT itself is intended to deal only with governmental restrictions or activities with an effect on trade.- The Havana charter, and its associated international trade organisation, was intended also to deal with the activities of business enterprises, like Restrictive Business Practices (RBPs), and other forms of privately managed trade.- But U.S. objections to the Havana charter killed it, and GATT came into being and remains for 36 years now as a provisional arrangement only.- It was in response to this and their dissatisfaction with the GATT, that the Third World initiated and brought into being the UN Conference on Trade and Development, which has also been focussing on issues like RBPs, and some of the "services" like shipping, technology, and insurance and other invisible.- The GATT study for the CG-18 notes that the GATT multilateral trading system's most important achievement was the dismantling of the pre-war "bilateral payments arrangements".- In recent years it notes, there has been evidence of a rise in commercial arrangements with a barter content, reminiscent of the inter-war bilateral agreements.- Beginning with east/west trade, these arrangements seem to be spreading to trade relations between market economies, including GATT members.- The terms "counter-trade" is used to distinguish it from "barter trade" where no money enters into the transactions.- In the east/west counter-trade, where originally the term was introduced, money is used as a means of pricing goods, to provide finance to one or both parties during the transaction period, and as an outright payment to cover differences in exchange values on imports and exports, and thus strictly not barter.- There is also an element of necessity in such counter-trade, in that without it the transaction would not have taken place.- The compelling force could be national laws or administrative decrees, or disorder in exchange markets.- The closest to the classical barter in such counter-trade involves one-time transactions - say oil for lamb, or oil and petroleum products for lamb, wool and butter.- The products exchanged are usually homogenous, such as agricultural or mineral commodities, with minimal bridging finance, and often involving, on one or both sides, state-trading agencies.- The second type of counter-trade involves "counter-purchase" transactions or "offset" arrangements.- In counter-purchase transactions, involving a time-span of five or more years, the initial exporter undertakes to buy some quantities of the purchasing country's goods during the period.- The agreements, often of a "standard" contract, specify merchandise quality, quantity and price, a general commitment to buy goods available, and the second transaction often as a percentage of the first.- Availability of trade finance is often a precondition for such transactions, with the two sides of the transactions financed separately as in conventional trade, and involving usually a government or state-trading organisation and a private firm.- Offset arrangements, are usually used in government purchases of military equipment and commercial aircraft.- The third category of counter-trade involves buy-back arrangements where repayment is in products derived from those in the initial sale of a industrial or mining plant, equipment or technology, with the exporter undertaking to acquire part of the resulting output.- Such arrangements involve longer time periods of 10 to 20 years, and the value of the buy-back often exceeds the original transaction.- Counter-trade, GATT study notes, is different from comprehensive bilateral trade and payments arrangements "which are a systematised form of barter binding all trade between two countries, and usually originating from the inconvertibility of at least one country's currency".- They commonly make use of clearing accounts that permit the trade to take place without need for foreign-exchange, and are intergovernmental arrangements where one partner's trade surplus is in effect held by the other, and can be spent only on purchase of that country's goods and services.-