It is estimated that about a half a million business firms will use the services of commercial barter companies this year. That number is growing as commercial exchanges and corporate trade companies report increasing membership and increasing trading among members.

What explains this impressive growth? First, technology makes it possible to track countless barter transactions very easily. In not so modern times, transaction had to be done by hand. For instance, John Hancock’s uncle, a minister by profession, is one of those early bookkeepers who recorded commercial trades of rum and whale oil in exchange for the wheat and furs of the early frontier. If the computer had been available then, our monetary history would certainly have been different.

The growing appeal among business owners and professional firms to reciprocal trade is attributable to several factors, which include generation of new sales and higher volumes of business, conserving cash for essential expenditures, exchange of unproductive assets for valuable products or services, reduction of unit costs, and opening new outlets for excess inventory and unused capacity. Reciprocal trade finance enables a firm to buy using its incremental cost of production.

This applies to international trade as well. So long as incremental revenue exceeds incremental cost, it is worth it for a firm to trade using a barter exchange. If you’re not sure if this is for you, visit the News & Resources area of this site and take our short test on Is Barter For You?

One challenge with reciprocal trade in a barter exchange is the potential limitation on the range of products or services offered in trade which varies from exchange to exchange. It should be noted that more and more exchanges are members of international trading networks that provide them with opportunities to access larger, global marketplaces to buy and sell within using trade credits. The Universal Currency or "UC" is one such network.

The existence of surplus inventory, unproductive assets, and excess capacity throughout the world, and the ability to reach new customers both at home and abroad through reciprocal arrangements, makes exchanging through barter an attractive marketing tool that yields a competitive edge over firms that only use cash. Incremental sales from reciprocal trade transactions add to employment, production and purchasing power. Asset exchange enables a firm to capitalize its excess capacity by using it to finance its purchases. By exchanging surplus assets for needed products or services obtainable from a trade exchange, business firms are able to obtain a higher value for such assets than if they sold them for cash at a few cents on the dollar.

There are approximately 600 commercial and corporate barter companies serving all parts of the world. As they are linked electronically in a national and international barter marketplace, their economic significance is growing. Commercial exchanges make money by charging a commission on each transaction done. Corporate trade companies make money by negotiating favorable prices for media and other products and services, and exchanging these for the excess assets of their clients plus cash.

Reciprocal trade also helps check inflation by spreading overhead, lowering costs, and reduced borrowing. It makes good economic sense for businesses to purchase media, printing, and other needed items with their trade credits because financing such purchases through incremental sales of their own inventory or exchanging unwanted assets is cheaper than borrowing. Reciprocal trade helps conserve cash, and lowers interest rates by taking the pressure off money markets. The reciprocal trade industry helps firms stay competitive by turning surplus inventory, unproductive assets, and excess capacity into extra sales, income, and value.

Reciprocal trade enables international trade to flow among established exchanges in North America, Australasia, Western Europe and the Middle East. Reciprocal trade finance permits importing when conventional finance will not work, while providing overseas marketing and distribution channels that exporters need for their surplus inventories.

Corporate trade companies are increasingly obtaining media for multinational firms to implement global advertising plans. Reciprocal trade companies execute international transactions to enable exporters to be paid in hard currency through the liquidation of goods received in trade from soft currency countries. The dance of currencies in international finance, plus national needs that exceed the availability of hard currency through conventional trade and aid, makes reciprocal trading a growing field today.

Commercial barter is a young industry, roughly 25 years old, run by a strong group of entrepreneurs. The leading members of the industry are joined together in the International Reciprocal Trade Association, which has branches in Europe and Australasia. It was this group that worked with the U.S. Congress to pass the barter tax compliance provisions of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The same law recognized barter exchanges on a par with banks and credit card companies as “third party record-keepers” of the financial records of other taxpayers. All U.S. barter exchanges now submit to the tax authorities yearly total of the barter sales of their clients.