The economic background

 

The developing countries of Africa, Asia and Latin America, the East European Stales, the oil exporting countries and other countries demand in a growing measure Countertrade arrangements when accepting the supply of goods or services from exporters in the industrialized countries. Some developing countries lack hard currency and credit facilities to pay for their imports in money and also wish to expand their own export markets. The foreign trade organizations of East European countries seek lo balance their exports and imports in compliance with the requirements of their national economies. Oil exporting countries use the oil which they produce as consideration in kind for industrial and other products which the) require.

Countertrade is not the most desirable form of international trade. It is not in harmony with the concept of an open, cash-based trading system, which the GATI and the OUCD aim to maintain and promote They have expressed concern at the growth of countertrade in recent years, and the United Kingdom Government shares those concerns because countertrade replaces the pressures of competition and market forces with reciprocity, protection and price selling.

In spite of this general objection, in practice countertrade is an international business method or growing importance According to an American business stud. In 1983 countertrade arrangements were required by 8K countries, as compared with 28 countries three years earlier. Countertrade transactions are frequently used in the oil business.

BARTER

Barter. This term is employed loosely in commercial circles. It is sometimes used -incorrectly for all types of countertrade, irrespective of the legal nature of the arrangements made by the parties.

In law a barter is an exchanged of goods for goods or services, e.g. sugar from Cuba is exchanged for screws produced in Britain.

Here again, two types can be distinguished. In the true barter, there is a simple exchange and no value is placed on the goods exchanged. In the second type, some value is put on the exchanged goods. It is obvious that in commercial trans-actions only the valued barter is used.

A valued barter is not I he same as a reciprocal sales contract. The essential difference is that a valued barter, like an unvalued one. is a one-contract transaction in which the obligations of (he parties are made dependent on each other, whereas the reciprocal sales agreement is always a Two-contract arrangement, even if the contracts arc linked together in the manner indicated earlier.

In the valued barter two problems arise. The first is the disposal of the goods received by the exporter from the overseas customer. Secondly, arrangements have to be made for the payment of the settlement balance which at the end will arise in favor of one of the parties to the barter.

A settlement account or evidence account will have to be constituted, preferably in a hard currency country which does not operate an exchange control system. The value of the bartered goods is set off in the settlement account and on termination the transaction (the credit balance is paid in cash to the party entitled thereto.

THE FRAMEWORK AGREEMENT

 

Normally it is advisable to conclude a framework agreement, within which the individual countertrade transactions shall operate. But sometimes in a long-term or major construction contract it is usual to build the countertrade provisions, e.g. the buy-back clauses, into the main contract without concluding a framework agreement.

The framework agreement should contain a clear definition of the mutual obligations of the parties. The countertraded goods should be specified and it should be provided whether their value should be ascertained on a fob or cif basis. Further, the restrictions as to the markets in which (hey may be sold should be specified. Arrangements should be made for a settlement account or evidence account and for the payment of the credit balance on termination of the agreement in cash. If the exporter intends to realize the countertrade proceeds at once by an open factoring arrangement, the factor should he a parlay to the framework agreement. The framework agreement often contains provisions for nonperformance of the countertrade obligations y the exporter. A choice of law clause and an arbitration clause should be provided. It simplifies mailers if all contracts, viz. the framework agreement, the export sale and the counter sale, are submitted to the same legal system.

Sometimes the framework agreement takes the form of a letter of intent, but this is unsatisfactory because a letter of intent is not enforceable in law.

enforceable in law – имеющий законную исковую силу

The History of Money

The use of money is as old as the human civilization. Money is basically a method of exchange, and coins and notes are just items of exchange. But money was not always the same form as the money today, and is still developing.

The basis of all early commerce was barter, in other words the direct exchange of one product for another, with the relative values a matter for negotiation. Subsequently both livestock, particularly cattle, and plant products such as grain, come to be used as money in many different societies at different periods. The earliest evidence of banking is found in Mesopotamia between 3000 and 2000 B.C. when temples were used to store grain and other valuables used in trade.

Various items have been used by different societies at different times. Aztecs used cacao beans. Norwegians once used butter. The early U.S. colonists used tobacco leaves and animal hides. The people of Paraguay used snails. Roman soldiers were paid a "salarium" of salt. On the island of Nauru, the islanders used rats. Human slaves have also been used as currency around the world. In the 16th century, the average exchange value of a slave was 8000 pounds of sugar.

Gradually, however, people began exchanging items that had no intrinsic value, but which had only agreed-upon or symbolic value. An example is the cowrie shell. Metal tool money, such as knife and spade monies, was also first used in China. These early metal monies developed into primitive versions of round coins at the end of the Stone Age. Chinese coins were made out of copper, often containing holes so they could be put together like a chain. The Chinese invented also paper money during the T'ang Dynasty.

Outside of China, the first coins developed out of lumps of silver. They soon took the familiar round form of today, and were stamped with various gods and emperors to mark their authenticity. These early coins first appeared in the Kingdom of Lydia (now in Turkey) in the 7th century B.C.. Paper money was adopted in Europe much later than in Asia and the Arab world -- primarily because Europe didn't have paper.

The Bank of Sweden issued the first paper money in Europe in 1661, though this was also a temporary measure. In 1694 the Bank of England was founded and began to issue promisory notes, originally handwritten but later printed. To make travelling with gold less dangerous, goldsmiths, or people who made jewelry and other items out of gold, came up with an idea. The goldsmiths started writing out notes on pieces of paper that said the person who had the note could trade the note in for gold. These promissory notes were the beginning of paper money in Europe. If you look at a British bank note today, you'll see it still says: I promise to pay the bearer on demand the sum of twenty pounds.

Unit 3

TOPICS