Military Exports: Concerns Over Offsets Generated With U.S. Foreign
Military Financing Program Funds (Letter Report, 06/22/94,
GAO/NSIAD-94-127).

"Offsets" are industrial and commercial compensation practices provided
to foreign governments and firms as inducements or conditions for the
purchase of military goods and services. Israel, Egypt, Greece, and
Turkey are the largest recipients of the U.S. Foreign Military Financing
(FMF) Program, which provides offsets in conjunction with foreign
military sales. Since fiscal year 1975, the United States has provided
more than $60 billion in FMF grants and loans to these countries. The
FMF Program has been justified to Congress on the basis of its role in
(1) strengthening the security of friendly and allied countries and (2)
benefiting the U.S. economy because the funds are generally spent on
U.S. goods and services. U.S. laws and regulations, however, do not
preclude offsets when recipients are making purchases with FMF funding.
Using FMF funds, Israel, Egypt, Greece, and Turkey benefitted in two
ways--first with the U.S. government funding or underwriting their
weapons purchase with grants or loans, and then by developing their
industrial bases and other aspects of their economic through offset
requirements from the U.S. government or contractors. Offsets reduce the
employment, defense industrial base, and other economic benefits that
normally accrue to the United States from weapons exports. Some offsets
have caused U.S. contractors as well as companies in nondefense
businesses to lose work. Pentagon officials said that no other arms
supplier provides a combination of grant aid and offsets like the United
States does. GAO summarized this report in testimony before Congress;
see: Military Sales: Concerns Over Offsets Generated Using U.S. Foreign
Military Financing Program Funds, by Frank C. Conahan, Assistant
Comptroller General for National Security and Internal Affairs Programs,
before the Subcommittee on Commerce, Consumer Protection, and
Competitiveness, House Committee on Energy and Commerce.
GAO/T-NSIAD-94-215, June 22, 1994 (seven pages).

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-94-127
     TITLE:  Military Exports: Concerns Over Offsets Generated With U.S. 
             Foreign Military Financing Program Funds
      DATE:  06/22/94
   SUBJECT:  Military coproduction agreements
             Foreign military assistance
             Defense economic analysis
             Foreign military sales policies
             Offsetting receipts
             Foreign military sales
             Export regulation
             International trade restriction
             Foreign governments
             Department of Defense contractors
IDENTIFIER:  DOD Foreign Military Financing Program
             Israel
             Egypt
             Greece
             Turkey
             M1A1 Tank Coproduction Program
             
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