Question

Statement:

Governments from time immemorial have undertaken business transactions with other countries through many ways, and this has depended to a lager extent on their bilateral relations and types of agreement. Some trade deals are politically motivated others are purely for economics reasons and such as would be determined on those basis by either party when they consider doing business.
Requirements
What risks are found in counter trade and how can these risks harm either party to the transaction?

Answer 1

Countertrade poses risks such as lack of payment certainty, inferior quality or suitability of goods or services, and challenges in pricing and valuation.

Step-by-step explanation:

The risks in countertrade can harm either party to the transaction. Countertrade refers to a form of international trade wherein goods or services are exchanged instead of using monetary currency. One risk in countertrade is the lack of payment certainty. Since counter-trade involves exchanging goods or services, there is no guarantee that both parties will receive equal or fair value in return. This can lead to imbalance or loss for one party.

Another risk in counter trade is the quality and suitability of the exchanged goods or services. In some cases, the goods or services offered in counter trade may be of lower quality or not suitable for the intended purpose. This can harm the party receiving the inferior goods or services, as it may affect their operations or reputation.

Additionally, counter-trade can also lead to complications in pricing and valuation. It can be challenging to determine the fair value of the goods or services being exchanged, especially if they are not easily comparable. This can result in disputes and disagreements between the parties involved.