European Initiatives and Reciprocal Procurement MOUs

T-NSIAD-91-30: Published: Apr 30, 1991. Publicly Released: Apr 30, 1991.

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GAO discussed reciprocal defense procurement memorandums of understanding (MOU) and U.S. government and industry perceptions of European defense procurements and contract awards. GAO noted that: (1) when the United States first entered into reciprocal MOU with European countries in the 1970s, it had a significant defense trade advantage, which has shrunk along with U.S. and European defense budgets; (2) several initiatives were underway to consolidate the European defense industry and make it more competitive with the U.S. defense industry; (3) the Department of Defense (DOD) generally waived Buy American Act restrictions and applicable customs duties for its procurements of products from MOU signatory countries; (4) European MOU signatories varied in their practices for waiving tariffs for U.S. products; (5) some European signatories considered such tariffs when evaluating U.S. contractors' bids; (6) the DOD Office of Foreign Contracting maintained that MOU provided U.S. contractors better access to the European market, but other DOD components believed that MOU worked mostly to the advantage of European defense companies; (7) renewed MOU with France, Italy, and the Netherlands incorporated some new provisions but did not address the need for reciprocal treatment in waivers of buy-national laws and tariffs; and (8) it was difficult to conclusively prove the general perception that European allies preferred to buy nationally first, then buy European, and buy U.S. products as a last resort.

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