Military contractors say they have been brokers for imported figs, tomato paste and wine; for years, McDonnell Douglas, now part of Lockheed, provided Christmas hams to its employees under a fighter-jet offset deal with Denmark.
"The whole system is mad," said Kevin L. Kearns, president of the US Business and Industrial Council, which represents small businesses, many of them military subcontractors. "Everything about offsets is totally counter to a free-trade philosophy. If we have the world's best armaments, other countries should buy them free and clear. The mice here are in charge of the cheese."
So complicated are offsets that most major contractors have entire departments to devise them and to twist the arms of suppliers into participating as well. Contractors usually agree to pay damages if they fail to deliver on a deal; in practice, though, offset agreements that run into trouble are often renegotiated.
Officially, the federal government frowns on offsets as economically inefficient and bars the use of taxpayer dollars to finance them. They are negotiated directly by American contractors with foreign governments, though the Commerce Department keeps data on them.
Those statistics show that more than 120 countries require offsets in military sales. In 1998, the last year of available figures, American contractors signed 41 agreements with 17 countries. From 1993 to 1998, they provided US$21 billion in aid to foreign countries under 279 agreements. Lockheed has entered into more than 300 offset arrangements in more than 30 countries in the last two decades. New data, as yet unreleased, will show increases across the board, said Daniel O. Hill, director of the Commerce Department's office of strategic industries.
Aside from obvious distortions they cause in global trade, offsets have cost the United States thousands of precious manufacturing jobs, unions say.
A 2001 presidential commission on offsets found that they led to an annual loss of 4,200 manufacturing jobs in the 1990s, mostly among subcontractors.
"The government does not know the full impact of these deals because there is such a lack of information," said Owen E. Herrnstadt, director of the international department of the International Association of Machinists and Aerospace Workers.
"It's a puzzle that policy makers have yet to put together, and the threat is growing. Workers are being sacrificed."
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