Countertrade's Impact on the Supply Function

During the 1970s and 1980s, many second‐ and third‐world countries accumulated enormous external debt. For countries facing convertible currency shortages or borrowing constraints, countertrade provided a means of circumventing structural trade imbalances. Due to intense global competition and the secrecy surrounding countertrade, little data is available regarding the scale and scope of this trading practice. This article updates the findings of a government survey performed in the mid-1980s and compares several parallel statistics from the earlier and later surveys. The combined information traces a pattern of American involvement in countertrade during the past decade. This study also examines countertrade's impact on the supply function by considering the placement of reciprocally purchased goods - a task most frequently assigned to purchasing. The influence that countertraders' experiences may have on their choice of disposal options is explored through analysis of the more recent survey's data. The findings indicate that a majority of U.S. firms use reciprocal goods in their own operations. A number of future research directions are suggested as a follow-on to this study to provide additional detail regarding how countertrade affects the supply function and the supply base.