were not at issue. Rather it was a matter of other countries intervening in the market in ways that progressively cost more U.S. jobs and put the U.S. technological base and future industrial capabilities at risk. Is there a way to change the rules of the game to make it more equitable for U.S. producers and workers?

Another participant remarked that exports are, to some degree, independent of offsets in the sense that a buyer must want the exported product in the first place; otherwise there would be no offsets attached to them. In this sense, offsets and exports are not as inextricably linked as has been claimed.

Johnson responded by saying that no company sets out to do offsets, but rather is forced to grant them in order to make sales. All U.S. defense exports are, after all, to other governments; it is foreign governments that insist on offsets. Offsets are in a sense a bundling of a number of activities, which can be bought openly on the market from any number companies and would show up on the balance sheet as exports. Offsets simply bundle those activities in order to make them more palatable to foreign politicians. They are not alone; the U.S. government imposes many "domestic" offsets, $40 billion in fact. The aerospace industry is good at doing domestic offsets—for example, allocating production to ensure Congressional support for defense programs. The Congress also requires them of U.S. companies doing business in the U.S., in the form of minority set-asides, small business set asides, women-owned set-asides, etc. All of these requirements are market distortions placed on industry by government. In the case of offsets, it is just a foreign government introducing the distortion.

With the conclusion of the last panel, Dr. Wessner called on Ambassador Wolff for his summary of the day's discussion.



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