Trade Offsets in Foreign Military Sales

Trade offsets involve shared manufacturing by a foreign government or other arrangements aimed at offsetting part of the cost of a weapon system purchased from the United States. Various government and private industry officials have expressed concern about the increased use and possible consequences of offsets in foreign military sales. GAO was asked to review the policies, responsibilities, and data bases of federal agencies regarding these offset arrangements. This report contains information on each of these areas. It also suggests that the Congress may wish to direct the administration to institute a policy to resist offset demands by foreign governments purchasing military goods from the United States when U.S. assistance is provided. GAO believes that foreign military sales credits or grants should not be used directly or indirectly to expand the industrial base of a foreign country at the expense of the U.S. industrial base and U.S. jobs. Exceptions to this general rule might be made for foreign policy reasons.