In Search of a Strategy: The Evolution of Canadian Defence Industrial and Regional Benefits Policy
Arguably, the practice of seeking industrial offsets is most pronounced in the case of defence purchases. For the majority of nations, defence purchases generally represent the largest proportion of capital or industrial goods bought by governments. As a result, these procurement decisions have significant economic, political, and social implications. In addition, industrial offsets are also driven by national security considerations. States seek to maintain, in varying degrees, a viable defence industrial capacity as a means to avoid dependence on foreign sources which could have significant implications during times of war. Although the practice of obtaining industrial offsets is generally viewed negatively from a economic efficiency perspective, because it promotes the inefficient allocation of resources, undermines industrial competitiveness and productivity, and distorts trade, the combination of political, economic, social, and security considerations makes states willing to absorb these inefficiencies.