From Messy Beginnings to Modern Policy

This chapter explains key milestones in U.S. policy starting with a 1975 fighter aircraft deal, when the Department of Defense co-signed for industry responsibility on offsets associated with F-5 exports, leading to default and political fallout on obligations to Switzerland. This prompted the 1978 “Duncan Memorandum” prohibitions against government involvement in offsets, with exceptions for national security. In the 1980s, the White House-level Office of Management and Budget reported on support for offsets with Patriot missile sales to the Netherlands (1984) and intervention to put a cap on South Korea’s extraction from American arms exporters (1989). In 1990, President George H.W. Bush formalized Duncan Memorandum prohibitions while introducing the president as the final authority for national security exceptions. Policy evolved as federal statute in 1992 through the “Declaration of Offset Policy” amendment to the Defense Production Act of 1950. The Department of Commerce took over national reporting, with different phases of transparency alternating between explaining and obscuring the president’s role. Each administration restated support for defense exporters, with U.S. Government attorneys arguing in federal court on behalf of the White House in 2024 that offsets are in America’s national interest.