We’re reporting on this way of doing business to keep you abreast of the wide range of possibilities in the barter world. We’ve published articles in BarterNews about compensatory arrangements, also known as offsets, this is just a brief look at this most interesting high-level way deals are done.

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 all but 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 offset 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 around the globe now require offsets in military sales/purchases. And the biggest recipients of offsets are among the most sophisticated countries: Finland, Britain, Israel, Switzerland and the Netherlands.

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

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

Things like 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.

Such 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.

BarterNews.com has a large countertrade section with scores of articles…
OFFSETS

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This entry was posted on Thursday, May 22nd, 2008 at 9:05 am and is filed under Best & Brightest Barter. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.