Foreign governments use offsets to expand their own economic capabilities, gain technology, and create skilled jobs. Developed countries with established defense industries (i.e.,Europe) use offsets to channel work and technology to their domestic high-tech firms. Countries with newly industrialized economies utilize both military and commercial-related offsets to gain new technology and build manufacturing capacity. Offsets can displace U.S. subcontractors when they require work to be outsourced. Foreign competitors may also use transferred capabilities to bid away future contracts from the firms.
At both the 2006 and 2007 London Conferences, there was considerable interest shown in expanding offsets beyond defence procurement to cover government purchases in the Commercial Sector. This is already happening in Civil Aviation, as a natural progression from Military Aerospace.
There is also interest in applying the same principles to light railways, power plants, medical equipment and other high-value sectors where governments feel they can extract technology, capital, and a share of the work from exporters.
Govts. Need to articulate their defence offset policies in best interests of their countries rendering the desired flexibility to meet the contract imperatives.
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(William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council).
Brigadier (Retired) Sukhwindar Singh