Moneyless Business: Barter Transactions Increase Worldwide
Valentin KATASONOV | 21.02.2016 | OPINION

Moneyless Business: Barter Transactions Increase Worldwide

As part of human history, money will not last forever. True, with global supply on the rise, money is increasingly in demand today. The reason is simple: instead of real economy the printing press production goes to financial markets, where risky financial transactions are widely practiced. Even if one has the money in a bank, it’s becoming hard to use it as it turns into an instrument of speculation to benefit the owners of printing presses.

People respond by using money less often, or even making it without any currency at all. Today barter is the best way to carry out moneyless transactions exchanging one commodity for another.

Normally, barter is sharply on the rise any time economy goes through slumps with consumer demand falling.

Giant multinational corporations often practice transfer pricing – the setting of the price for goods and services sold between controlled (or related) legal entities within an enterprise. They can also resort to barter transactions to reduce tax payments. Besides, large corporations normally function as parts of international cartels that set uniform prices. In an attempt to gain a larger market share, they use different non-price related workaround methods, including bartering.

Nowadays, media outlets tell increasingly often about such cases. For instance, a political, economic and financial crisis hit Greece in the summer of 2015. The country’s economy lacked money. The things got worse as a result of restrictions introduced by the government on cash transactions and payments by transfer. The resulted money shortage provoked rapid growth of barter trade that involved giant corporations, small business and individuals.

Special data distribution networks are used to expand bartering by providing information on offer and demand related to different goods and services. As time goes by, some of them turn into special barter companies, clubs and trade exchanges to offer a wide range of services to clients, especially brokerage services like finding partners, creating goods distribution chains, preparing contracts and monitoring their terms. The most advanced bartering centers create barter money to buy goods by transferring it into accounts. Sellers can use it to buy other goods and services, or even get barter money loans.

In some countries the information on bartering is too fragmented. There are no statistics to present the whole picture. It’s easy to understand why. First, tax collecting agencies hinder the development of bartering, because they collect taxes only when money is paid. Many barter transactions are not controlled by governments. The attempts are on the way to change it. For instance, in the United States Tax Equity and Fiscal Responsibility Act came into force in 1982 in order to reduce the budget gap by generating revenue through closure of tax loopholes and introduction of tougher enforcement of tax rules, including barter exchange transactions. Besides, barter deals reduce the demand for the production of central banks’ printing presses. Naturally, barter trade evokes resentment of moneylenders. India and Spain are considered by experts as the countries with rooted barter traditions. The Indian city of Kochi boasts the oldest barter market created 200 years ago. Spain has large barter markets in Barcelona, Catalonia and Mieres.

Nowadays, barter is not something unheard of in North America. Barter companies have been operating in the United States for dozens of years promoting goods exchange and helping to find business partners. Some of them have turned into barter trade exchanges. The majority of US and Canadian cities, including big ones, have barter exchanges of their own. Today International Monetary Systems is the largest barter exchange group in the United States. Tradebank is the Canada's largest multi-directional barter exchange.

The National Association of Trade Exchanges (NATE) has been created in the United States to protect the interests of those, who are involved in barter trade. NATE has its own currency – the BANC.

According to some estimates, over 450 thousand US companies were involved in barter trading in 2010. No doubt, they normally make traditional trade transactions, but surpluses are sold through barter. US annual barter transactions account for over $10 billion. Probably, it’s just the tip of the iceberg.

It’s worth to mention Euro Barter Business International Limited, EBB.

EBB unites over 17 thousand of small and medium sized companies in Europe and even Turkey. The participants pay annual fees and get access to the barter trading data base that provides information collected from all parts of Europe.

Australia and New Zealand created Bartercard exchange in 1991. As time went by, branches were established in the United Kingdom, Cyprus, the United Arab Emirates and Thailand. Today Bartercard is the leading barter market place in the world with 75,000 cardholders.

There are about 400 barter companies worldwide providing for barter trade transactions to connect companies from all the corners of the globe. International Reciprocal Trade Association, IRTA coordinates their activities. It closely cooperates with Bartercard and recommends using Universal Currency (UC).

Barter deals are becoming more popular today, because the United States increasingly uses economic sanctions as an instrument of exerting pressure on other countries. The punitive measures include blocking transactions in US dollars and other reserve currencies. Barter trade is an effective method to counter the sanctions. Iran has been under the sanctions imposed by the United State and their allies for many years. It widely used barter exchange in its trade with other countries, for instance «oil for goods» barter deals. While under sanctions, barter trade with China, India and South Korea allowed Iran to import everything – from cell phones to railway equipment.

In 2014 the Russian Federation started talks on a large barter deal with Iran. In case of Tehran, oil was to become the staple article of export to be re-sold by Moscow to other countries. The Russian Federation was to sell a wide range of goods, as well as build energy infrastructure. The deal was envisaged to last for a number of years. According to the media, the total sum of the deal could be as high as $20 billion. When the West partially lifted the sanctions, the talks on the deal were suspended.

In 2016 Tehran said it won’t fully refuse barter trade. It is still mulling the idea to do business on the basis of traditional «oil for goods» formula. «Oil for assets» is also an option.

For instance, Iran has been in talks to buy oil refineries in Switzerland and France. The negotiation process has been suspended due to the pressure from Washington. Today, Iran is in talks to build refineries in Spain. It has expressed an interest in purchasing and constructing refineries in India and Brazil. 

Tags: European Union  Iran  Russia  US 

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