8-1 Discussion: Global Countertrading
Hello class,
I found an example of countertrading in 1977 between the Soviet Union and Philip-Morris. At that time
the Soviet Union entered into agreements with Western manufacturing companies to upgrade factories
in Soviet Union with Western knowledge and technologies to in turn sell those products in Soviet Union
from Soviet Union plants. Philip-Morris had an agreement with Soviet Union to trade tobacco
manufacturing equipment in order to export the tobacco grown from it.
For Philip-Morris entering into the countertrade was an opportunity to save on the cost of their raw
material tobacco in order to increase profits. I believe it was more affordable for Phillip-Morris to be
able to purchase cheaper tobacco. I think countertrading is important, but it is also risky. Countertrading
allows access to new markets with the protection against currency fluctuations since there usually is not
an exchange of foreign currency. On the other there could be a lack of quality of goods manufactured in
other countries. Companies can also lie about the true value of the agreement in order evade taxes.
Reference
Marino, M. (1990). Penn State Law Elibrary. Site. https://elibrary.law.psu.edu/
