Summary: Pursuant to a congressional request, GAO examined the implementation of recent congressional legislation involving offsets in military exports, focusing on the steps the executive branch has taken to: (1) establish a comprehensive policy on offsets; (2) negotiate with foreign governments to limit the adverse effects of offsets; and (3) require U.S. industries to notify the Department of Defense (DOD) of offset arrangements exceeding $50 million.
GAO found that: (1) the President's April 1990 policy statement did not specifically address technology transfers and the effects of offsets on U.S. industrial base subsectors; (2) although the President's policy did recognize that certain offsets were economically inefficient and market-distorting, the policy was consistent with the government's traditional policy of non-involvement in offset arrangements; (3) as part of his policy statement, the President directed an interagency team to consult with foreign nations to limit the adverse effects of offsets on defense procurement; (4) DOD did not develop regulations requiring U.S. industry to notify the Secretary of Defense of offset arrangements exceeding $50 million; and (5) DOD had received only three voluntary negotiations from industry since Congress enacted the law in 1988.
