Question

Nipennie and Mirasa, two developing countries, bartered cotton for jute rather than for currency. In this scenario, the two countries engaged in _____.A. foreign franchisingB. fair tradeC. arbitrageD. countertrade

Answer 1

Nipennie and Mirasa, two developing countries, bartered cotton for jute rather than for currency. In this scenario, the two countries engaged in counter-trade.

Explanation:

Counter-trade is an internal mode of trade through which products and services are traded instead of hard currency for any other products or services. For developing nations with restricted exchange or credit services, this form of global trade is more prevalent.

Counter-trade can be divided into 3 main categories: trade, counter purchase and reimbursement.

The earliest counter-trade practice is bartering. An important advantage of counter trade is that it makes foreign exchange savings simpler. Complex agreements, increased costs and logistic problems are rising drawbacks of counter trade.