Countertrade, the GATT, and the Theory of the Second Best

Authors

William D. Zeller

Abstract

Countertrade, which refers to international barter and barterlike transactions, has grown rapidly in recent years, becoming a permanent part of the world economy. This growth has occurred despite criticisms that countertrade is inefficient and creates distortions that could undermine the multilateral trade system. This Article defends countertrade against such arguments and asserts that countertrade actually enhances international trade. After initially reviewing the different types of countertrade, the author argues that countertrade is an appropriate response to the disequilibrium of a "second-best" world, because its trade-creating effects outweigh its trade-diverting effects. The author also asserts that countertrade is not inconsistent with the General Agreement on Tariffs and Trade (GATT) because countertrade permits trade where none might exist otherwise, permits foreign products to compete in domestic markets, and often helps to alleviate problems caused by balance of payments deficits. The author concludes that GATT should not be revised to deal with countertrade because countertrade helps to further the goals of GATT and because countertrade rarely, if ever, violates the provisions of GATT.

Recommended Citation

William D. Zeller, Countertrade, the GATT, and the Theory of the Second Best, 11 Hastings Int'l & Comp. L. Rev. 247 (1988).
Available at: https://repository.uclawsf.edu/hastings_international_comparative_law_review/vol11/iss2/2