Military Sales:

Concerns Over Offsets Generated Using U.S. Foreign Military Financing Program Funds

T-NSIAD-94-215: Published: Jun 22, 1994. Publicly Released: Jun 22, 1994.

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GAO discussed offset arrangements associated with foreign military sales financed through the Foreign Military Financing Program (FMF). GAO noted that: (1) current laws, policies, and regulations do not preclude offsets when recipients are making purchases with FMF funding; (2) the four largest FMF recipients have benefitted by purchasing their weapons systems with U.S. funding while developing their industrial bases and economies through offset requirements; (3) FMF grants and loans or military procurement funds pay for some offsets and their costs; (4) offsets reduce U.S. employment, the defense industrial base, and other economic benefits from U.S. weapons exports and create new competitors for U.S. companies in the world market; (5) offsets are not needed to ensure the sale of a U.S. weapon system, particularly when FMF funding is involved; and (6) no other arms supplier provides a combination of grant aid and offsets, and it would be extremely difficult to enforce prohibitions against using FMF funds for offsets.

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