Barter Trade

Definition

Hans Schuhmacher:

Concise definition : Complementary currency systems for swapping that circumvent problems generated by the financial markets

Characteristics

Hans Schuhmacher:

• Application for technology cooperation: Barter trade is employed by companies in order to

spare financial liquidity. Barter trade minimises risks arising from the financial markets. Additionally, barter systems bring together transaction partners and interlink them. This facilitates the use of barter platforms for matchmaking. This can be particularly beneficial for SMEs.

• Achievement potential: Supra-regional complementary systems can provide profitability in

scenarios where this may not be possible otherwise. The larger the barter system is, the higher the probability that goods and services are offered that are useful for all participants. The existence of widespread barter systems and organisations (for example the International Reciprocal Trade Association, IRTA) is an advantage for employing barter trade in technology cooperation.

• Prerequisite for effectiveness : Removal of legal and institutional restrictions for

participating SMEs in the global South.

• Practical experiences : Although barter trade is prevalent, there are no practical

experiences regarding technology cooperation.

• Possible correlations : There is possible synergy with all instruments for matchmaking and

interlinking."

Discussion

Hans Schuhmacher:

"Small regional barter systems (LETS) are generally not interesting for technology cooperation. An exception are LETS which use accounting units connected to climate protection, for example those that represent units of energy (Typically 1 KWh). A partner company in a developing country that implements mini- or micro hydro power technology could pay for services and labour by using coupons that represent energy generated by the hydro power plants. These coupons might serve as means of payment for other transactions in the region and so (like a local currency) remedy lack of financial means. In contrast to the national currency, these coupons will not leave the region. The company may spare its financial liquidity and lower its costs.

In the context of technology cooperation within weak economies, a proposal by the founder of the Japanese barter system WAT/I-WAT may be of interest. It describes the employment of an energy-based barter system for economic reconstruction after a natural disaster.16 An institution on site discharges three tasks: It hands over amounts in national currency to residents for the same amounts in the barter system's accounting unit, employs a workforce which is paid in the complementary currency and swaps those amounts of accounting unit it receives for national currency. Local fishermen, for example, would get equipment from the organisation and pay for it in complementary currency. Local traders could safely accept payments in complementary currency because the organisation would stand ready to swap it for national currency.

Besides of this more theoretical proposals, Barter systems which are driven by retail brokers can be directly employed for technology cooperation, particularly surpraregional systems. Supranational barter platforms can bring together companies from the global North and from the global South. SMEs may, thus, access international contacts. As the company that maintains the platform will be eager to gather as many transaction partners as possible, these platform may be beneficial for technology cooperation. There are, however, legal restrictions in some threshold and developing countries aimed at the support of the national currency that cause implicit access restrictions regarding barter trade. These restrictions should be modified.

New barter platforms, oriented specifically towards international transfer of carbon-efficient technologies and linked to existing barter systems may accelerate technology cooperation. A network of internationally recognised rating agencies in developing countries could significantly increase the proportion of participating SMEs in developing countries. Furthermore, models specifically designed to meet the requirements of SMEs like the Swiss WIR-Bank (since 1934) would be auspicious."

Source

• Climate Justice as Business Case: Innovative Business Models for the Transfers of Climate-Friendly Technologies. By Hans Schuhmacher, with support from Julio Lambing et al. European Business Council for Sustainable Energy. Preliminary English version. 06 December 2009 [1]