Countertrade
Countertrade
Another type of compensatory trade, called offset trade or countertrade,
are js becoming increasingly important. Countertrade exists "when reciprocal and contingent exchanges of goods and services are specified by contract and each flow of deliveries is valued and settled in monetary units.'"1 A good example of how a firm might have to deal with offset involves McDonnell Douglas and the sale of F-18A fighter aircraft to the government of Canada. The sale of aircraft to Canada in 1980 was to net McDonnell Douglas nearly $3 billion, a significant amount of money for one sale. Over the eight-year period involved in the delivery dates, this would result in average imports for Canada of several hundred million dollars per year. Given the weakness of the Canadian dollar in relation to the U.S. dollar at the time of the sale, this was bound to concern the Canadian government. As a result, the negotiations for the sale of the aircraft involved not only the technical capabilities of the F-18s and the attendant costs, but also the industrial benefits that McDonnell Douglas could promise the Canadian government.
The Canadian offset program covers a period of 15 years with a three-year grace period. The total program commitment of $2.9 billion must be covered from the following three areas: aerospace and electronics (minimum 60 percent), advanced technology (minimum 6 percent), and diversified activities (maximum 40 percent). The aerospace and electronics area is the most important of the three, and it involves designated production, co-production, technology transfer, and joint R&D. The diversified activities portion of the offset commitment involves investment/technology development, export development, and tourism development.
Another type of compensatory trade, called offset trade or countertrade,
are js becoming increasingly important. Countertrade exists "when reciprocal and contingent exchanges of goods and services are specified by contract and each flow of deliveries is valued and settled in monetary units.'"1 A good example of how a firm might have to deal with offset involves McDonnell Douglas and the sale of F-18A fighter aircraft to the government of Canada. The sale of aircraft to Canada in 1980 was to net McDonnell Douglas nearly $3 billion, a significant amount of money for one sale. Over the eight-year period involved in the delivery dates, this would result in average imports for Canada of several hundred million dollars per year. Given the weakness of the Canadian dollar in relation to the U.S. dollar at the time of the sale, this was bound to concern the Canadian government. As a result, the negotiations for the sale of the aircraft involved not only the technical capabilities of the F-18s and the attendant costs, but also the industrial benefits that McDonnell Douglas could promise the Canadian government.
The Canadian offset program covers a period of 15 years with a three-year grace period. The total program commitment of $2.9 billion must be covered from the following three areas: aerospace and electronics (minimum 60 percent), advanced technology (minimum 6 percent), and diversified activities (maximum 40 percent). The aerospace and electronics area is the most important of the three, and it involves designated production, co-production, technology transfer, and joint R&D. The diversified activities portion of the offset commitment involves investment/technology development, export development, and tourism development.
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