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

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.