Military Exports: Offset Demands Continue to Grow (Letter Report,
04/12/96, GAO/NSIAD-96-65).

Pursuant to a congressional request, GAO reviewed offset requirements
associated with military exports, focusing on: (1) how the offset goals
and strategies of major buying countries have changed; (2) the offset
requirements of these countries and how they are being satisfied; and
(3) the impact of offsets and any governmental action taken.

GAO found that: (1) the demand for offsets in the countries reviewed has
increased during the last 10 years; (2) the value of these offset
agreements is over $84 billion; (3) many countries have begun demanding
more technology transfer, higher offset percentages, and higher local
content requirements; (4) many countries use long-term offsets to help
further their industrial policy goals; (5) countries with well developed
economies use offsets to enhance their defense or aerospace industries;
(6) countries with newly industrialized economies use offsets to
increase technology transfer and develop their defense and nondefense
industries; (7) countries with underdeveloped economies use offsets to
create businesses and build infrastructure; (8) while company officials
accept offsets as a necessary part of selling defense products overseas,
critics claim that offsets hurt the defense industry and other domestic
interests; (9) the impact of offsets on the economy and defense industry
is indeterminable because there are limited data available; and (10)
actions taken to address offsets include consultations with other
countries on specific procurements, but defense industry officials are
concerned the United States unilaterally limit offset use and will not
be able to enforce offset restrictions.

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

 REPORTNUM:  NSIAD-96-65
     TITLE:  Military Exports: Offset Demands Continue to Grow
      DATE:  04/12/96
   SUBJECT:  Foreign military sales policies
             Exporting
             Foreign military sales contracts
             Developing countries
             Defense industry
             Foreign governments
             Economic analysis
             Technology transfer
             International trade restriction
IDENTIFIER:  Kuwait
             Saudi Arabia
             United Arab Emirates
             South Korea
             Singapore
             Taiwan
             Canada
             Spain
             United Kingdom
             Netherlands