International Procurement: NATO Allies' Implementation of Reciprocal Defense Agreements

GAO discussed how various European NATO allies are implementing their reciprocal defense procurement memorandums of understanding (MOU) with the United States. GAO noted that: (1) the United States and European government officials generally recognize the national security aspects of the agreements, but European officials also recognize the agreements' economic and trade aspects, since the United States waives the Buy American Act to implement the MOUs; (2) MOU do not ensure fair treatment for either U.S. or European defense firms, since U.S. statutory and regulatory restrictions limit procurement opportunities for European contractors and allies reserve the right to to direct contracts to domestic or other European sources; (3) the allies' waiver of duties and tariffs depends upon how each government views its obligations to pay European Community (EC) tariffs on defense imports from non-EC countries, but U.S. government and industry officials agree that tariffs are not a barrier to defense trade; (4) allied contract-award grievance procedures are rarely used by either U.S. or European contractors, since it is not considered a customary business practice in Europe to formally protest a contract award; and (5) the Department of Defense needs to systematically monitor the extent to which all European NATO allies are implementing their MOU procurement procedure annexes, since increased monitoring of those annexes helps to promote more openness and accountability in European defense procurement and ensures equitable treatment for U.S. contractors.