All these concepts require information superiority.

The QDR underscores the importance of greater international arms cooperation because of the increased likelihood of coalition operations. With the rise of these joint operations, interoperability becomes a guiding principle in the procurement of weapons systems. In addition to allowing for common logistical support, the use of the same equipment fosters a bond between forces.

Budgetary pressures are also contributing to an increase in international cooperation. In a time of needing to do more with less, it is important to avoid duplication of weapons systems. This requires early harmonization of requirements and increased incentives for international teaming. Mr. Hoeper stressed that defense systems cooperation and trade contributes to improved efficiencies and interoperability.

He also pointed out that the view of offsets as necessarily bad is not correct; only bad offsets are bad. Offsets are bad if they destroy economic value and foster weapons proliferation. Good offsets are those which reduce costs and create long-term value.

These issues of offsets become especially important in the task of equipping U.S. forces for coalition operations. Critical here is C4I—command, control, communications, computers, and intelligence. For example, our NATO allies are balking at adopting U.S. C4I standards and equipment for reasons of cost, national sovereignty, jobs, and industrial competitiveness. This moves an important defense issue into the area of industrial policy. It also creates a technical divergence between the defense forces of the U.S. and our allies that should be avoided.

Mr. Hoeper stressed the need to work together with our allies on these issues. He suggested three ideas that should be explored. First, recognize and exploit the world industrial base as a source of important defense components and subsystems. Second, understand that much technology has a short half-life, thus it is better to expend resources to run faster in technological development, than waste them in trying to trip up the other guy. Third, begin cooperation early in the process and compete weapons systems programs among international teams from the partner nations.

Offsets: Drivers and Technological and Policy Consequences

Carol Evans

Assistant Professor of International Business Diplomacy, Georgetown University

Cautioning that offsets have differential impacts, Dr. Evans suggested that the analysis of offsets must go beyond good and bad impacts—and look at offsets "for whom?" In that context, there seems to be less concern about offsets with our NATO allies and more concern about offsets with developing countries—for a number of reasons.

First, offsets encourage indigenous production of weapons systems in developing countries. This production can lead to serious but unintended proliferation problems. For example, technology transferred to Brazil through an offset program ended up improving the targeting capability of the Iraqi Scud missiles. Thus, offsets can have a major impact on U.S. national security through indirect routes. Even if the offset, or the country involved, may seem relatively unimportant, we must take a broad view of proliferation, since aerospace offsets can enhance the platforms used for the delivery of chemical or biological weapons.

The question must also be raised whether we have the capability of monitoring where the technology goes. Companies often fail to keep direct evidence of exactly where the technology is being transferred to and need to have more "due diligence" in tracking offsets. It is clear that offsets have encouraged greater defense capabilities in some developing countries, which now pose a greater defense threat to the United States. In addition, offsets have a spiraling effect, by creating an arms industry in certain developing countries that seeks even further offsets.

A second issue concerns the impact of offsets on the sub-tier supplier base. This sub-tier base is critical. It underpins both the defense and information technology industries that are key for both economic and national security. Consequently, there is a need to be concerned about the continued viability of this critical dual base and the impacts of offsets on that base. Offsets adversely affect the supplier base by aiding foreign competitors at the same time that the supplier base is being hit by shrinking defense budgets. Shrinking budgets then lead to a further squeeze on suppliers to give even more offsets. Yet, the Defense Department does not have adequate information on the companies that make up the sub-tier base and on the impact of offsets on these firms.

On the policy side is DoD's push for greater inter-operability. The new report from the Under Secretary for Acquisition makes clear that DoD sees offsets as a means of increasing interoperability. The issue has moved beyond whether offsets are good or bad, to how to make offsets work better. In that respect, DoD is looking at the lessons that can be learned from the commercial sector. For instance, what alliances and joint ventures in the commercial side might be used as models in defense? Of greater importance is the recommendation that DoD should not necessarily get involved in labor issues of job sharing. Instead, these is-



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