Offset Agreement

Offset Agreement

Defense offset agreements are legal trade practices in the aerospace and military industries. These commercial practices do not need state regulations but, since the purchasers are mostly military departments of sovereign nations comparable to the US Defense Department, many countries have offset laws, public regulations or, alternatively, formal internal offset policies. The international names for these commercial practices connected to weapons trade are various: industrial compensations, industrial cooperation, offsets, industrial and regional benefits, balances, juste retour or equilibrium, to define mechanisms more complex than counter-trade. Offset agreements are protectionist, and distort competition.

Counter-trade can also be considered one of the many forms of defense offset, to compensate a purchasing country. The main difference between a generic offset and counter-trade, both common practices in the international defense trade, is the involvement of money. In counter-trade goods are paid through barters or other mechanisms without the exchange of money, while in other defense offsets money is the measure and the medium of exchange.