Offset Policy: An Advanced Countertrade Practice

This paper explains offset and develops a strategic approach for the implementation of offset-policy for a buyer country. Offset emerges when a country cannot afford to pay cash for non-essential imports, and cannot get cash for many of its products. Offset arrangements are most frequently found in the defense-related sector. However, recently, it refers to a range of industrial and commercial compensation practices as well. The Australian experience showed that such policy contributes significantly to industry development and economic growth. Review of twenty-three offset cases showed that they had several features in common, including; maximized prospects of both seller and buyers, greater flexibility, complexity, creativity, and timely arrangements. These features require adopting a strategic approach for implementation. The process covers policy development, appointment of an executive committee, analysis of the country’s needs and priorities, call for proposals and bids, appraisal of offers, negotiation, publicity, agreement, and operation of offset arrangements. The article concludes that if Iran continues to spend its cash for financing large defense and civil projects it will only satisfy the vendors’ needs, not its own needs. Offset is common for such deals and is a