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Offset refers to requirements for industrial compensation that is imposed by governments on procurement contracts, particularly in the sectors of defence, energy and transport.
The Government Procurement Agreement (GPA) signed within the framework of the World Trade Organisation (WTO) defines Offset as “measures used to encourage the local development or improve the balance of payments by means of prescriptions relative to the content in elements of national origin, the grant of license for technologies, prescriptions in investment, compensated exchanges or in similar prescriptions”.
These measures engender the transfer of benefits from the supplier country – generally Western countries – to the purchasing country. These benefits become a condition to the contract and can include the transfer of know-how and technology, and work packages that ensure jobs.
The European Commission states that Offset is a trade barrier and therefore unfair trade practice. In an effort to increase competition and free intra-EU trade to ensure opportunities for a competitive European defence industry, the EC introduced the so-called European defence package. It includes a directive on defence and security procurement and another on intra-EU trade in defence equipment. The procurement directive states that Offset in EU will only be agreed to in cases where the procuring government can prove that the Offset is essential for its national security.
EU member states had to transpose the procurement directive in August 2011.
EU countries selling defence equipment to non-EU countries still have to comply with Offset requirements in those countries. Offset practices in the United Arab Emirates (UAE) and Brazil will be discussed at the next European Club for Countertrade & Offset (ECCO) Symposium, to be hosted at Eurosatory 2012 in Paris, France.
The sponsor of this ECCO event is GICAT, the French Land Defence Manufacturers Association. The programme for the one-and-a-half-day conference is:
- 14 June, morning: Forum on Offset in the UAE
- 14 June, afternoon: Forum on Offset in Brazil
- 15 June, all day: Workshop on Offset and SMEs
Forum on Offset in UAE
The Offset Program Bureau (OPB) is a centre of excellence in the development and fast-track execution of new and diverse commercial projects in the UAE. The government strategy has formulated certain public policies designed to stimulate economic growth, strengthen the competitiveness of the national economy, increase participation of UAE nationals and upgrade the legislative and regulatory frameworks to match current and expected economic growth. The new UAE Offset Policy has dynamic features that can accommodate the fast growing UAE economy, while enabling defence contractors to meet and fulfil their obligations in a rewarding manner. Representatives of OPB and the investment company, Tawazun, will share the aims of the new policy.
Forum on Offset in Brazil
With the adoption in 2008 of its National Defence Strategy, Brazil launched a significant modernisation programme of its armed forces. Since then two major contracts have been awarded for the supply of four diesel and nuclear submarines and 50 helicopters. Other major contracts are expected for combat aircrafts; frigates; integrated border surveillance systems, including radars, armoured vehicles and unmanned aerial vehicles (UAVs). Brazil maintains a competitive bidding approach for defence acquisitions, prioritising the lowest price with the maximum technology transfer. Any defence deal worth more than US$5-million has an Offset obligation equivalent to 100% of the contract value.
The ECCO forum will explain Brazil’s Offsets requirements and share best practices and case studies.
Workshop on Offset and SMEs
Offset generally requires that work packages be placed in the purchasing country and therefore results in the reorganisation of the supply chains of defence prime contractors. If the prime contractor is a small and medium enterprise (SME), such demands can pose either a big burden, or a huge opportunity. Offset offers SMEs the opportunity to find new partners and establish new global markets.
The workshop will discuss Offset mechanisms and their potential impacts on SMEs, followed by success stories of cooperation between prime contractors and SMEs. Best practices and pitfalls will also be shared.
About ECCO
ECCO is an European association for companies, individuals and institutions involved in Offset and countertrade. The association organises symposiums where members and guests can unravel matters related to trade, international law and government procurement. Offset research and training are also aims of ECCO.
View www.ecco-offset.eu for more information.
Visit www.ecco-offset.eu to become a member of ECCO, or enquire about the next symposium.
