Why Purchasers lmpose Countertrade .
To preserve hard currency Countries with non convertible currencies look to countertrade as a way of guaranteeing that hard currency expenditures(for foreign imports are offset by hard currency(generated by the foreign party's obligation to purchase domestic goods) To improve balance of trade. Nations whose exports have not kept pace with imports increasingly rely on countertrade as a means to balance bilateral trade ledgers. To gain access to new markets. As a non market or developing country increases its production of exportable goods, it often lacks a sophisticated marketing channel to sell the goods to the West for hard currency. By imposing countertrade demands, foreign trade organizations utilize the marketing organizations and expertise of Western companies to market their goods for them. To upgrade manufacturing capabilities. By entering compensation arrangements under which foreign(usually Western) firms provide plant and equipment and buy back resultant products, the trade organizations of less-developed countries can enlist Western technical cooperation in upgrading industrial facilities. To maintain prices of export goods. Countertrade can be used as a means to dispose of goods at prices that the market would not bear under cash-for-goods terms. Although the Western seller absorbs the added cost by inflating the price of the original sale, the nominal price of the counter purchased goods is maintained, and the seller need not concede what the value of the goods would be the world supply-and-demand market. Conversely, if in the world price for a commodity is artificially high, such as the price for crude oil, a country can barter its oil for Western goods(e.g., weapons) so that the real"price" the Western partner pays is below the world price. To force reinvestment of proceeds from weapons deals. Many Arab countries require that a portion of proceeds from weapons purchases reinvested in facilities designated by the buyer everything from pipelines to hotels and sugar mills.