Defense Trade: Issues Concerning the Use of Offsets in International Defense Sales

GAO-04-954T Published: Jul 08, 2004. Publicly Released: Jul 08, 2004.
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Views on defense offsets range from beliefs that they are both positive and an unavoidable part of doing business overseas to beliefs that they negatively affect the U.S. industrial base. Defense offsets are often viewed as the key to foreign sales and thus increased business on the prime contractor level. They can also result in reduced unit costs to the U.S. military because of the increased size of production runs. However, the use of a foreign supplier by a U.S. prime contractor as a result of an offset may lead to decreased business opportunities for U.S. suppliers. Additionally, U.S. prime contractors may develop long-term relationships with foreign suppliers, which may lead to the transfer of capability from the U.S. defense industrial base. As a result of congressional concerns about emerging trends in defense offsets, GAO conducted a number of reviews and issued multiple reports. Because of GAO's work in this area, Congress asked us to provide our observations on offset issues. Specifically, GAO is providing observations on (1) what constitutes offsets and how they are used in defense trade, (2) how that use has changed over time, and (3) the quality and extent of information concerning offsets that is currently available.

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