European Union Limits Offsets
Offsets are the practice of when one country buys a system or services from a company in another they require that company to invest in their economy. They are not uncommon in the defense business. Right now India especially has very strict offset rules that have led to some controversy.
The European Union announced yesterday some rules to make offsets more targeted and defense related among its member countries. In the past some country’s have requested offset investment in their civil economy rather then in defense work. Normal procedure is to buy services, parts or maintenance related to the contract awarded.
The new rules require that the offsets be defense related. They also limit the total value to no more then equivalent to the awarded contract. Most often offsets are some percentage of the value so these rules are not to onerous. The EU has moved recently to tighten up competition among the various countries penalizing Italy for favoring their own internal industry over other available sources for example.
The offset rules announced will probably have limited effect since many of the projects are already shared among a variety of suppliers such as the Typhoon. If there is a decline in defense spending and the number of large contracts available there will probably be more efforts to expand competition and restrict protectionist policies.
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