Counter-trade consists of transactions that have as a basic characteristic a linkage, legal or otherwise, between exports and imports of goods or services in addition to, or in place of, financial settlements. Counter-trade can be used as an effective international business tool.

Forms of counter-trade range from simple barter, which is a direct exchange of goods or services of approximately equal value, to buy-backs, where the exporter takes back output from the equipment he exported.

Counter-trade is for example widely used in the East-West trade, as Russia and neighboring country have insufficient hard currency to pay for imports of essential raw materials and plant and equipment from Western countries. 

Why Counter-trade?  

Reasons for the increasing use of counter-trade include: 

The World debt crisis has made ordinary trade financing very risky.

Many countries cannot obtain the trade credit or financial assistance to pay for desired imports.  

Countries are increasingly returning to the notion of bilateralism as a way to reduce trade imbalances.  

Counter-trade is often viewed as an excellent mechanism to gain entry into new markets. The party receiving the goods may become a new distributor, opening up new international marketing channels and ultimately expanding the market.