THE ECONOMICS of OFFSETS Downloaded by [University of Defence] at 20:29 19 May 2016 Studies in Defence Economics

Downloaded by [University of Defence] at 20:29 19 May 2016 THE ECONOMICS OF OFFSETS Downloaded by [University of Defence] at 20:29 19 May 2016 Studies in Defence Economics Edited by Keith Hartley and Nicholas Hooper, Centre for Defence Economics, University of York, UK. This monograph series adopts a wide definition of defence economics to cover all aspects of the political economy of defence, disarmament and peace. Volume 1 European Armaments Collaboration: Policy, Problems and Prospects Ron Matthews Volume 2 Military Production and Innovation in Spain Jordi Molas-Gallart Volume 3 Defence Science and Technology: Adjusting to Change edited by Richard Coopey, Matthew Uttley and Graham Spinardi Volume 4 The Economics of Offsets: Defence Procurement and Countertrade edited by Stephen Martin Downloaded by [University of Defence] at 20:29 19 May 2016 This book is part of a series. The publishers will accept continuation orders which may be cancelled at any time and which provide for automatic billing and shipping of each title in the series upon pub lication. Please write for details. The Economics of Offsets Defence Procurement and Countertrade Edited by Stephen Martin The Centre for Defence Economics University of York, UK Downloaded by [University of Defence] at 20:29 19 May 2016 ~ ~~o~!~:n~~~up LONDON LONDON AND NEW YORK Copyright © 1996 by OPA (Overseas Publishers Association) Amsterdam B.V. Published by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN 270 Madison Ave, New York NY 10016 Transferred to Digital Printing 2007 All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying and recording, or by any information storage or retrieval system, without permission in writing from the publisher. British Library Cataloguing in Publication Data Economics of Offsets: Defence Procurement and Countertrade. - (Studies in Defence Economics, ISSN 1062-046X; Vol. 4) I. Martin, Stephen II. Series 382 ISBN 3-7186-5782-1 Publisher's Note The publisher has gone to great lengths to ensure the quality of this reprint but points out that some imperfections in the original may be apparent Downloaded by [University of Defence] at 20:29 19 May 2016 Contents Acknowledgements vii 1 Introduction and Overview 1 Stephen Martin 2 Countertrade and Offsets: An Overview ofThe Theory and 15 Evidence Stephen Martin 3 The Defence Offsets Policy in Australia 49 Stefan Markowski and Peter Hall 4 Offsets and Weapons Procurement: The Belgium Experience 75 Wally Struys 5 In Search of a Strategy: The Evolution of Canadian Defence 107 Industrial and Regional Benefits Policy James Fergusson 6 Offsets and French Arms Exports 139 Jean-Paul Hibert 7 Offset Benefits in Greek Defence Procurement Policy: Developments and Some Empirical Evidence 163 Nicholas Antonakis 8 Defense Industrialisation Through Offsets: The Case of Japan 177 Michael W Chinworth and Ron Matthews 9 Saudi Arabia and Offsets 219 Abdulla M. Al-Ghrair and Nick Hooper 10 The Teeth of the Little Tigers: Offsets, Defense Production and Economic Development in South Korea and Taiwan 245 Dean Cheng and Michael W Chinworth 11 From Offsets to Industrial Cooperation: Spain's Changing 299 Downloaded by [University of Defence] at 20:29 19 May 2016 Strategies as an Arms Importer Jordi Molas-Gallart 12 US - Swiss F-5 Transaction and the Evolution of Swiss Offset 321 Policy Bernard Udis 13 The UK Experience with Offsets 337 Stephen Martin and Keith Hartley v vi CONTENTS 14 US Offset Policy 357 Bernard Udis and Keith E. Maskus 15 The Business of Offset: A Practitioner's Perspective 381 Case Study: Israel Alon Redlich and Maison Miscavage 16 Concluding Remarks 407 Stephen Martin Index 411 Downloaded by [University of Defence] at 20:29 19 May 2016 Acknowledgements The preparation of this volume was funded by the Economic and Social Research Council (R000233146). The editor would like to thank all those who have assisted in the publication of this book. Thanks are due to Professor Keith Hartley, who read and commented upon the manuscript, and to Roberta Blackburn and Margaret Cafferky, who provided excellent secretarial and editor ial assistance in the final stages of publication. Downloaded by [University of Defence] at 20:29 19 May 2016 vii This page intentionally left blank Downloaded by [University of Defence] at 20:29 19 May 2016 List of Contributors Abdulla M AI-Ghrair, BS King Faisal Air Academy, MDA Cranfield, Brigadier General, Royal Saudi Air Force, pilot. His research interests include economic offsets, Saudization and conflict resolution. Nicholas Antonakis has a PhD in Defence Economics from the University of Athens. He is an expert economist in the Greek Ministry of Industry, Energy and Technology. His research interests include the determinants and growth effects of military expenditure, and the structure and performance of defence industries. Dean Cheng has worked for several years as a researcher and writer on Asian defence and foreign affairs. He is completing his dissertation, which examines Asian perceptions of the United States and Japan in the post-World War II era. He lives in Washington, DC. Michael Chinworth is the Senior Analyst ofAsian Technology for The Analytic Sciences Corporation of Arlington, Virginia. He has published widely on the technological capabilities of the Far East, including Inside Japan's Defence: Economics, Technology and Strategy (published by Brassey's (US) in 1992). He writes a monthly column on Asian science, technology and business trends in Automotive Engineering (published by SAE International) Dr James Fergusson is the Deputy Director of the Centre for Defence and Security Studies at the University of Manitoba, Winnipeg, Canada. He has writ ten extensively on issues related to Canadian defence industrial policy and prac tices, and is currently examining the defence industrial implications of Canadian participation in Ballistic Missile Defence. Peter Hall has a long standing research interest in industry economics and, in Downloaded by [University of Defence] at 20:29 19 May 2016 particular, in the economics of technological innovation. This culminated in his book Innovation, Economics and Evolution, published in 1994, which has also led to specialist work in defence industry economics. He has recently been one of the leaders of a major government inquiry into R&D activity and policy in Australia. ix x LIST OF CONTRIBUTORS Keith Hartley is Professor of Economics and Director of the Centre for Defence Economics, University of York. He has continuing research interests in defence economics, including procurement policy, the Single European Market for defence equipment and various aspects of disarmament. Jean-Paul Hebert has a PhD in economic theory and is a member of the Defence Sociology group in the Ecole des hautes Etudes en Sciences Sociales (GSDIEIIESS, Paris). He is a specialist on the French armaments industry and his latest book is Production d'Armement, Mutation du Systeme Fran~ais, Editions de la Documentation Fran~aise, Paris, 1995. Nick Hooper is currently Deputy Director of the Centre for Defence Economics at the University of York. Previous appointments included Industrial Development Analyst for Aramco from 1982 to 1985. His current research inter ests include defence industries, procurement policy and industrial and manpower adjustment to reductions in military expenditure. Dr Stephen Martin is a Research Fellow in the Centre for Defence Economics at the University ofYork. His current research interests include the economics of defence procurement and the impact of privatisation on corporate performance. Stefan Markowski is the convenor of the postgraduate Management Studies Program for the Australian Defence Force Academy at the University of New South Wales in Canberra. His research interests include applied microecon omics, in particular defence economics, and operations and logistics manage ment. He has also been retained by a wide range of private and public sector clients, including the Australian Defence Organisation, as an economic and man agement consultant. Keith Maskus is an Associate Professor of Economics at the University of Colorado (Boulder). He received his PhD from the University of Michigan in Downloaded by [University of Defence] at 20:29 19 May 2016 1981. His research interests lie in empirical modelling of trade theories and in aspects of multilateral trade policy. Recently he has devoted considerable atten tion to the economics of international differences in intellectual property rights regimes. Ron Matthews is a senior lecturer in economic and financial management at the School of Defence Management, Cranfield University. He has research interests in technological offsets and defence industrialisation and is the author of numer ous articles on these related subjects. He is also the co-editor of a recent book, entitled Japan's Military Renaissance, published by Macmillan. L~TOFCONTRmUTORS Xl Maison Miscavage is the Projects Coordinator at International Technology Sourcing Inc. His responsibilities include project research and structuring, as well as competitive analysis. He also takes a special interest in Russia and FSU affairs. Dr Jordi Molas-Gallart is an economist working as a Research Fellow at the Science Policy Research Unit, University of Sussex. His doctoral dissertation, Military Production and Innovation in Spain, has been published by Harwood Academic Publishers. Alon Redlich is the President of International

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