Two Coproduction Programs

Coproduction is a program wherein the United States enables an eligible country or international organization to acquire the expertise to manufacture, assemble, repair, and maintain a specific weapon, support system, or individual military item. It might be limited to the assembly of a few end items, with small input of local country parts, or it might be extended to a major manufacturing effort requiring the buildup of capital industries. The long-run economic impact of coproduction is that it establishes or expands a production base and increases management and technical skills that will enable the buying country to become less dependent on foreign sellers.

The long-term economic value of the Philippine M-16 rifle and Taiwan F-5E coproduction projects is reflected by the enhanced technological, production, and managerial capabilities of these countries. The Philippines is investing in a technological upgrading of its industrial sector, which is expected to result in long-term economic benefits beyond rifle production. Taiwan is gaining moderate technological ability with its coproduction program, of which a significant portion of the manufacture remains in the United States. The financial impact of the coproduction project on the Philippines has been positive. There has been a decrease in the outflow of foreign exchange and the local economy has been aided. Taiwan has experienced a negative impact in the increase of outflow of foreign exchange; however, in that portion of cost being spent on Taiwanese goods and services, the local economy has been aided. These two coproduction programs are meeting their objectives, including expansion of technical and military support capabilities. There has been no important adverse impact on U.S. labor.