''Offsets,'' Standardization, and Trade Liberalization in NATO

Efforts to standardize NATO weapon systems encounter resistance because of NATO concerns for domestic defense industries, employment, dependence on U.S. equipment, and balance of payments difficulties that might result from standardized procurement from U.S. suppliers. The result is a demand by NATO members that the United States subcontract part of the production abroad or buy other military items from Europe as an offset. The author suggests such offsets have reverse consequences. He proposes to avoid or reduce the need for offsets by trade liberalization measures to lower barriers to nonmilitary exports to the United States by NATO members. Commodity categories are identified in which NATO has a cost advantage and current exports are impeded by tariff and nontariff barriers. A proposal is outlined that links trade liberalization to standardization of NATO forces. The proposal also includes encouragement for joint bidding by European and U.S. firms in defense contracts, and reduction or elimination of "Buy America" restrictions in U.S. procurement.