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Reciprocal Trade At Highest Levels Of Government Used To Justify Spending Billions

Offsets typically involve foreign military sales, and sales of “big ticket” high technology civilian products and services, i.e. fighter aircraft, communications equipment, guided missile systems, advanced telecommunications, and computer systems.

It’s a legal and necessary part of doing business internationally these days. But actually it all began after World War II, based on the theory that co-production agreements were needed to help European countries rebuild military-industrial bases so they could resist communism.

Well, communism has died, and the European arms makers got back on their feet. But the offsets stayed, as the genie was out of the bottle and nations figured out how they could play the game.

Offsets are now such a fixture that major contractors have entire departments that focus on this effort, which includes “twisting the arms” of their suppliers into participating as well.

Today 120 countries require offsets in military sales and purchases. The biggest recipients of offsets are among the most sophisticated countries: Finland, Britain, Israel, Switzerland and the Netherlands.

Basically, when a country spends millions (sometimes billions) to acquire military equipment or other large scale products and services they press the sellers to reciprocate for getting their business.

Such requests include creating work for their citizens by transferring sub-assembly jobs to their country, helping export their goods or foodstuffs, financing medical clinics, or building shipyards.

These offset demands generally range from 20% to 100% of the invoice value of the sale. As can be imagined, these are sometimes enormous transactions and take decades to complete—it’s a form of reciprocal trade at the highest level.