GAO Finds Foreign Competitors Use Arms Purchases to Promote Local Industry

Federation of American Scientists
Arms Sales Monitoring Project

Washington, D.C.- The General Accounting Office said in a report [NSIAD-96-65] submitted to Congress today that the demand for "offsets" is growing, with many top U.S. arms customers using high-tech military purchases to stimulate local industries. Offsets are industrial cooperation agreements that require suppliers to direct business back to buyers as a condition of the sale. Each of the ten countries studied in the report (Canada, Kuwait, Netherlands, Saudi Arabia, Singapore, South Korea, Spain, Taiwan, United Arab, Emirates, United Kingdom) has used offsets to promote the development of their military and civilian industries, at the expense of U.S. firms.

The report, entitled "Military Exports: Offset Demands Continue to Grow," also said that the Departments of State and Defense have not pursued formal discussions with U.S. arms customers "to limit the adverse impacts of offsets as called for in a 1990 presidential policy statement" and in the 1992 Defense Production Act Amendments. While the Pentagon has consulted sporadically with other nations in connection with specific weapons sales, Defense officials say that U.S. "buy American" laws, and U.S. reluctance to change those laws, put them in a weak negotiating position.

The GAO also found that a lack of data on the subject precludes a thorough examination of military offsets and the impact they may have on U.S. workers, industry and competitiveness.


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