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Panel IV: Offsets in the International Marketplace: An Aerospace Industry View
Pages 47-54

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From page 47...
... International and Domestic Offsets Because the customers in the defense sector are governments, they want more out of their procurements than simply price and performance; they also want jobs. The industry faces these pressures even domestically in the form of a number of "domestic offsets," such as minority business set-asides and informal requirements for a large geographical distribution of production.
From page 48...
... He reminded participants that the United States essentially has a 100 percent offsets requirement. Contracts for almost every major weapons systems require 75-100 percent production in the United States.
From page 49...
... Direct offsets require bilateral sectoral and country balance; indirect offsets move toward only requiring bilateral country balance. The more the offsets are spread around the economy, the less damage is done to the aerospace sector and the more the transaction looks like real trade, because for every import there has to be an export in the economy sooner or later.
From page 50...
... This raises politically dangerous questions, including the use of tax dollars and national security research by private companies for parochial deals abroad. Over the next few years, politicians are likely to look more carefully at these issues of the use of tax dollars under the mantra of "corporate welfare." This is very worrisome to those who believe there is a government role in the development of the technology.
From page 51...
... Earlier speakers drew a clear distinction between offsets as a government requirement and strategic alliances. Measuring these offsets due to specific government requirements is much easier than obtaining data on commercial strategic alliances.
From page 52...
... He cited the example of a popular General Electric engine for which more manufacturing occurs in Europe than in the United States. He also expressed concern that it is unclear how the data account for cases such as Rolls-Royce engines sold to Boeing for aircraft sold outside of the United States.
From page 53...
... Most have simply hoped that the issue would not receive a lot of attention. Efforts were confined to reporting requirements with the mantra of "take no unilateral action." Although there is a concern about Congress doing something, the corporate community has not initiated anything that might work multilaterally or might respond to the major concerns.
From page 54...
... What is being discussed as "sound business practices" are not sound practices by the standard of American economics. Economic theory would predict that the United States should be dominant in the aerospace industry because it has the most efficient production.


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