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Tuesday, 11 September 2018

Merits and Demerits of Counter Trading Merits

Both countries and companies derive the following advantages form participating in a counter trading;

Preservation of hard currency.
Improvement of balance of trade.
 Easy access to new markets and opportunities.
Maintenance of export product price.
Building of capacity in manufacturing facilities.
Indebtedness which worsens balance of payment position of countries is avoided.
Critical raw materials required for production in terms of scarcity of foreign exchange is accessible through counter trading.

Some of the demerits of counter trading now listed below.

      A country company with weak bargaining power or weak economic situation will lose out as the deal is done to be counterproductive.

Could lead to  perpetuating a country's dependence on foreign technology instead of developing indigenous technology.

Determination of quality merchandise received in exchange is usually difficult.

Simulation of the economy from the price side is absent in counter trading.

  The bureaucratic bottlenecks associated with counter trading increase the cost of international trade.

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