Barter and Today’s Economic World
Author: Neha Gupta, Writer for Ormita Australia Limited
Date Issued: March 2010
Barter is the process of exchanging products, goods or services, for other products, goods or services. It is a simple method of transaction where little to no money is used. In today’s world, it exists parallel to the monetary system.
Today with barter exchanges being set up, barter has become a much more systematic and structured system of commerce. Modern barter and trade has advanced considerably to become an effective method of escalating sales, saving cash and making use of excess or perishable production capacity for businesses around the world. A trade or barter exchange provides a trading platform and bookkeeping system for its members or clients to provide barter opportunities.
The member companies buy and sell products and services to each other using an internal currency known as barter or trade dollars (or trade credits of the local currency). Businesses in barter earn trade credits (instead of cash) that are deposited into their account. They then have the ability to purchase goods and services from other members using their trade credits. As this is multilateral trade, they are not obligated to purchase from who they sold to, and vice-versa.
Here are some facts and figures which help explain the increasing importance of barter in today’s commercial world:
The International Reciprocal Trade Association (IRTA) estimates that 30 percent of the world’s business is done on a barter basis.
Offset and non-cash trade grows at a rate of 8% per annum regardless of economic difficulties according to a World Bank report in 2007.
According to the 2004 Annual Report of the National Association of Trade Exchanges, approximately 65% of all New York Stock Exchange-listed companies engage in some form of excess capacity exchange.
20% - 25% of world trade is done in some form of counter-trade.
The National Association of Trade Exchanges, The International Journal of Hospitality Management and the Michigan State University together claim that approximately 70% of all Fortune 500 companies engage in some form of barter.
In Switzerland, one in every five businesses uses a barter network called WIR Bank to increase commerce and profits. WIR is one of the oldest barter organizations of the world, and has been in operation for over 75 years.
Virtually all media companies, including newspapers, radio stations, magazines, TV stations, billboard companies, etc. engage in barter at some time or another.
According to the International Reciprocal Trade Association, approximately 400,000 businesses engage in formalized barter in the United States.
Given how prevalent barter is in the world’s economy, it really becomes clear that it makes sense to use what you have to get what you need, rather than simply relying on cash for everything.
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The Ormita Commerce Network spans 5 continents, with direct representation in more than 17 countries plus additional partnerships in a further 59 countries. The business allows companies to exchange goods and services on a reciprocal trade arrangement in order to expand their reach, access new customers, improve their buying power, monetise excess or unsold capacity and improve profitability.
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