WASHINGTON — Offsets in Defense Trade: 1999 Report to Congress, released today by the U.S. Department of Commerce, shows offset demands in defense trade continued to rise between 1993 to 1997 with an average worldwide offset-to-sales ratio of 54 percent.
European governments remain at the forefront among U.S. defense trading partners in demanding concessions -- known as offsets -- when they purchase defense items from U.S. contractors. The average for Europeans was 88 percent compared to the rest of the world, where the average was 29 percent. Data in the report was obtained from U.S. prime contractors involved in offset trade agreements with foreign countries and examines 1997 new offset agreements plus transactions carried out that year to fulfill previous offset agreements.
The report outlines how offset requirements are becoming increasingly complex, leaving less flexibility for prime contractors to fulfill them. The goods and services used to meet these offset obligations include mandatory co-production, licensed production, subcontractor agreements, technology transfer, countertrade and foreign investment. Each country has a unique offset policy, making it difficult and costly for U.S. companies to implement and administer them on a global basis.
Offsets may be directly related to the particular U.S. defense item being purchased such as co-production or sub-contracting of parts and/or technology used in that system. Some arrangements are indirect, meaning that they are not tied to a particular product but instead may require such things as investment in that nation, agreements to accept increased imports from the purchaser (countertrade), or technology transfers.
This year’s report examines the defense trade offset policies and practices in five different countries. The five countries selected, Canada, Finland, South Korea, Switzerland, and the United Kingdom, currently have in place some of the most stringent offset requirements in the world.
According to the report, in the last year notable progress was made in the area of international defense trade offset consultations. Negotiations were pursued on both a multilateral and bilateral basis. The Department of Commerce is part of a Department of Defense-led interagency team, which has held consultations with Dutch and Canadian representatives and is planning consultations with other European countries, as well. The U.S. Trade Representative formally requested a working group on offsets with European Union counterparts through the Transatlantic Economic Partnership Initiative.
The executive summary of the report is available by fax. Please call 202/482-3796 or fax your request to 202/482-5650. The executive summary is also available on the web. Bound copies of the report will be available for purchase through the Government Printing Office by calling 202-512-1800 and requesting publication 003-009-00677-5.
In April of 2002 the Bureau of Export Administration (BXA) changed its name to the Bureau of Industry and Security(BIS). For historical purposes we have not changed the references to BXA in the legacy documents found in the Archived Press and Public Information.