Counter Trade Between USA And Israel

Running head: INTERNATIONAL TRADE 1

INTERNATIONAL TRADE

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Running head: INTERNATIONAL TRADE 2

Counter trade between USA and Israel

One of the major economic activities that have seen many countries grow more superior

to the rest is trade. Having the right goods and or services to trade is an added advantage all

together. The United Arabs Emirates for example has highly developed due to the major export

trade of its oil to other countries. Having the goods and services that are in high demand or

necessary makes trade even much easier. Counter trade refers to trade of goods and or services

with other goods and services between nations or different countries. This means that currency is

not in the picture for a transaction to take place. Counter trade is usually common in countries

with control policies on foreign exchange or those that have a short supply of foreign currency.

For the developing countries, counter trade is one of the techniques used to catalyze

development. It is also used as a tool to control trade.

Since 1975, the value of the world trade share for counter trade has been gradually

increasing with the various types of counter trade including; barter trade, counter purchase,

switch trade, buyback and offset. Switch trade involves changing or as the term suggests,

switching of the countries the goods and services are meant to be traded in. Barter trade refers to

the direct exchange of goods and services for goods and services that are of equivalent value and

no cash transaction is involved. Offset counter trade is an arrangement between the producing or

selling country and the buying country whereby the country selling is expected to assist in

marketing of the goods and or services produced by the buying country. In other words, allowing

producers to assemble or manufacture part of their products in the buying country is an act of

offset counter trade. Another form of counter trade is the counter purchase which involves two

transactions that are simultaneous between two different parties, usually with or without any cash

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involved. Compensation or buyback on the other hand, is repayment in form of products or

goods, produced by or directly derived from the equipment, technology or plant of the seller.

Various countries have been trading with each other for a long time now for different

reason. Counter trade however is usually preferred when a country is facing hard currency

shortage, when the export income is low, no experience on the internal trade, inadequate credit

and capacity surplus as well as undeveloped private sectors to carry on the international trade

activities. Other challenges that face countries that need to participate in the counter trade

include geographical disparity and even demographic size. Israel and the Unites States are two

countries that are faced with this kind of challenge. But the real reason that they are best fit for

counter trade is the fact that they share various values that are equivalently helpful to both

countries. For instance, values based on Judeo-Christian in both countries are of the same level.

The USA and Israel both believe in the human rights and the principles of equality, pluralism

and freedom and this forms a basis upon which counter trade can effectively take place. It is on

this democracy values that in 1951, after Holocaust, the United States gave Israel a loan of up to

$65 million to accommodate the Displaced Persons of the Jewish origin. In the early 1990s,

guarantees for commercial loans were provided by the United States to absorb Jewish

immigrants from what was then called the Soviet Union. Israel, on its part has been able to

compensate all these humanitarian loans unlike other nations that owe the United States. Many

nations have received support and other benefits from the United States but are still in constant

conflicts and fights with the USA.

It has also been noted, on more personal grounds, that the residents residing in both Israel

and USA keep close contact with each other. Most of the Israelis that have families, relatives

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and friends in the United States maintain a high communicate rate to an extent that phone calls

between the two nations once ranked as the highest in per capita worldwide. Tourism between

USA and Israel has maintained its course even when the course is expected to change due to

Israel’s demographic location of the Middle East where there is constant conflict between the

nations there with the United States. Israel has been able to seclude itself and maintain the good

relationship with the United States.

The Unites States and Israel are technology trade partners in the development of

technologies that are advanced and scientific research. Both nations believe in encouraging

independent thoughts that lead to innovations of the highest order and talent development. There

have been alliances formed between these two nations and one of them includes the joint

research of development frameworks both in industrial and agricultural sectors of technology.

The alliance is backed up by matching fund contributions from either one of the two nations.

In 1994, a high-tech agreement was established between the United States and Israel

which encourages all states in the USA to form direct relations with Israel. North Carolina in

particular encouraged technology exchanges in telecommunications, autism and textile

technology among other unprecedented forms related to international cooperation. High-tech

high ranking corporations in the United States among them including; HP, Intel, CISCO,

Microsoft, IBM among others have since opened facilities in Israel to boost counter trade

between the two nations.

The bond between Israel and the United States goes way back during the cold war and

when the then known as Soviet Union had a great impact over the Middle East nations as well as

Arab nationalism. Since then, the world has gone through many changes but Israel has

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maintained its strategic position and support for retaining peace especially in the Middle East.

Fighting radical forces including violent extremism and political Islam, Israel has taken further

action to prolife the weapons of mass destruction in the Middle East including destroying nuclear

programs carried on by Syria and Iraq. Israel and the United States often share intelligence

information on nuclear prolife and Middle East politics and terrorism. Israel’s experience in

military defense has given the United State a different effective way to deal with counter

terrorism attacks. The David’s sling defense system of arrow missile and counter-rocket which is

ready for export to the allies of the United States is a clear indication of progressive counter trade

between the two nations in various ways. There is exchange of information, products or weapons

for attacking terrorism and trade involving technology.

The United States and Israel’s counter trade has been in existence as early as 1984 when

Israel received trade offsets agreements from the United States. It was agreed that, up to 15% of

the offsets go to Israel for procurement of American military sales which amounted to $225

million during that time and $200 million in the year 1985. This therefore confirms that indeed

the Unites States and Israel engaged in counter trade and more so based on a common mutual

ground with the same interests of eradicating terrorism and fighting for peace and freedom

especially in the Middle East region.

Counter trade has ever since existed among nations, besides the tangible goods or

products and the services that we all know of for trade to take place, other valuable commodities

like peace always been part of the tools of trade. The mutual and long lived relationship between

the Unites States and Israel has so far bore fruitful fruits of peace, major technological

innovations even as Bill Gates recognizes the great potential in Israel’s zeal of thinking

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independently. Further achievements include stability in the far Middle East, improvements of

terror attack techniques with the help of Israel and this is important especially in today’s world

were terrorism attacks are being experiences all round the world. Other nations may also benefit

from these techniques in the process of the United States learning and adopting from Israel.

Counter trade, as the definition has it, does not need any form of cash or currency for a crucial

transaction to take place especially one that could promote peace, innovations and general

technological improvements. Commodities can take any form given the circumstances and

agreement of both parties engaging in the trade. It is clear though, that the counter trade between

the United States of America and Israel has so far been more fruitful and necessary for both

nations.

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References

Assessment of the Effects of Barter and Countertrade Transactions on U.S. Industries; Report on

Investigation No. 332-185 Under Section 332 of the Tariff Act of 1930, United States

International Trade Commission

Michael Eisenstaedt and David Pollock, Asset Test: How the United States Benefits from Its

Alliance with Israel

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