(general) In non-defense trade, governments sometimes impose offset requirements on foreign exporters, as a condition for approval of major sales agreements in an effort to either reduce the adverse trade impact of a major sale or to gain specified industrial benefits for the importing country. In these circumstances, offset requirements generally take one of two forms. In one formulation, an exporter may be required to purchase a specified amount of locally-produced goods or services from the importing country. For example, a commercial aircraft manufacturer seeking sales to an airline in another country might be required to purchase products as different from airplanes as canned hams. In other instances, an exporter might be required to establish manufacturing facilities in the importing country or to secure a specified percentage of the components used in manufacturing his product from established local manufacturers. See countertrade.
(defense related-U.S.) In trade of defense items, “offsets” are industrial compensation practices mandated by many foreign governments when purchasing U.S. defense systems. Types of offsets include mandatory coproduction, subcontractor production, technology transfer, countertrade, and foreign investment. Countries require offsets for a variety of reasons: to ease (or “offset”) the burden of large defense purchases on their economies, to increase domestic employment, to obtain desired technology, or to promote targeted industrial sectors. See countertrade.

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