FAO in action

THE TEMPTATIONS AND TROUBLES OF BARTER

In 1984 barter is back in style. It has some new variations and a new name counter-trade but it has not hanged very much since the 1930s, when it was known as" compensation racing". It is what Nazi Germany's economic minister imposed on Balkan trading partners. Eastern Europe has been using counter-trade for 40 years to help offset hard-currency shortages. Today developing countries are using it more and more willingly. It is tempting to think that they have finally found a new solution to the problems that threaten their economies.

Even when they consider past experience, students of the subject today have difficulty agreeing about the current phenomenon. The very nature of the exchanges. the discretion that surrounds the negotiations, the often long duration of contracts, the fragmentation of the operations, agreements that remain concealed in the balance sheets of companies or governments these make it hazardous to ensure any sort of definition. Economists and statisticians often restrict themselves to the resurgence of counter-trade, but point out that the economic organization of developing countries. when a good part of imports is under the control of companies or state agencies. is conducive to it. Gary Banks. an economist, in an article in The World Economy, I estimates that counter-trade today accounts for five per cent of international trade. According to some OECD studies, the figure is nearer 20 per cent.