By 

Multi-Security Disciplined Management & Program Analyst

Introduction

On March 22, 2016, Reuters reported on comments by Republican Presidential front-runner Donald Trump during an interview with CNN’s Wolf Blitzer a day earlier [1]. In response to Blitzer’s question [2] “Do you think the U.S. needs to rethink [its] involvement in NATO” Trump replied “Yes, because it’s costing too much money… and frankly, they have to put up more money … they need to put something up also … we’re paying disproportionately… it’s too much and frankly, it’s a different world than it was when we originally conceived of the idea and everyone got together.” Later he says “maybe we have to pay a lot less towards NATO itself.

Who Else Has Advocated Against NATO?

I see the argument about the U.S. support for and participation in NATO  crop-up occasionally here on LinkedIn. Often the source is pro-Kremlin Trolls, pursing what Czechoslovakian defector Latislav Bittman identified as the goal of the Soviet Union and to which the the State Security of the USSR, the KGB (Komitet gosudarstvennoy bezopasnosti) and its Warsaw Pact proxies actively worked towards: “the dissolution of [the NATO alliance]” by creating tension between its members [3] (the 2:00:00 mark in the below documentary though I highlyrecommend the entire video).

Since candidate Trump began his latest Presidential campaign, his supporters have been pushing arguments similar to those of the forefather of the Russian Federation’s current Foreign Intelligence Service, the SVR (Sluzhba vneshney razvedki).

This Anti-NATO Argument Contains Flawed Premises

Having prepared budget requests within the Executive Branch of the U.S. Government prior to the President’s annual budget submission to Capital Hill for Congressional consideration, I can say I have no doubt NATO’s funding is farmore complicated than slanted sound bites. By focusing on what is often described as the “Two Percent Requirement” one can see how disingenuous such irrespective of the rationale behind, or the intentions of the person utilizing them.

NATO funding is divided into two categories; “Direct” and “Indirect” and both are intended to be “contributions to[wards] the costs of running NATO and implementing its policies and activities.” [4]

To take news headlines at face value, NATO member nations must contribute 2% of their Gross Domestic Product (GDP) is chiseled into stone and is ‘the way it’s always been’ since 1949 when the ink was drying on the North Atlantic Treaty. Not really. According to NATO, only as recently as 2006 have “member countries agreed to commit a minimum of two per cent of their Gross Domestic Product (GDP) to spending on defence.” The rationale: that “[the] guideline principally serve[s] as an indicator of a country’s political will to contribute to the Alliance’s common defence efforts’ and that doing so has an effect “on the overall perception of the Alliance’s credibility as a politico-military organisation.”

Further, the Organization states that “[w]ithin the principle of common funding, all 28 members contribute according to an agreed cost-share formula, based on Gross National Income [5], which represents a small percentage of each member’s defence budget. This “common funding arrangement” is used by NATO to finance what it describes as its “principal budgets: the civil budget (NATO HQ running costs), the military budget (costs of the integrated Command Structure) and the NATO Security Investment Programme (military capabilities).”

In June 2015, Defense One and other outlets were reporting that of the 28 nations which comprise NATO, only “five members [the U.S., Greece, Poland, the UK and Estonia] are expected to meet the alliance goal of spending at least 2% of GDP on defense.” [6]

In response to my having posted the Reuters article about Trump’s NATO-spending statements here on LinkedIn, someone asked whether Greece, Poland, and Estonia, for example, can “take the lead in this fight?” Well, let’s compare Hellenic spending to that of the United States. According to the World Bank [7], Greece’s 2014 GDP in U.S. Dollars (USD) was $235.5 Billion whereas the U.S’. GDP was $17.4 Trillion, or 73.8 times larger than that of Greece.

The combined wealth of the non-US Allies, measured in GDP” NATO points out, “exceeds that of the United States. However, non-US Allies together spend less than half of what the United States spends on defence.

Based on the percentage of each country’s “Military Expenditures” [8] there is only 1.2% difference between each circa 1994 according to the World Bank, with the U.S. spending 3.5% to Greece’s 2.3%. “This imbalance” between countries, NATO states “has been a constant, with variations throughout the history of the Alliance and more so since the tragic events of 11 September 2001. Post-9-11 the United States significantly increased its defence spending. The gap between U.S. and Canada-Europe’s combined defence spending “has therefore increased.”

“Today,” according to NATO, “the volume of the US defence expenditure effectively represents 73 per cent of the defence spending of the Alliance as a whole.” However, it points out that “[t]his DOES NOT MEAN (emphasis added) that the United States covers 73 per cent of the costs involved in the operational running [the] organisation, including its headquarters in Brussels and its subordinate military commands”. Further it acknowledges “there is an over-reliance by the Alliance as a whole on the United States for the provision of essential capabilities, including for instance, in regard to intelligence, surveillance and reconnaissance; air-to-air refuelling; ballistic missile defence; and airborne electronic warfare” areas in which the U.S. has significant experience and/or historically excelled. NATO’s ‘budget cost share’ for calendar years 2014 through 2015 [9] showed the U.S. contributed 21.73% of the Organization’s “Civil Budget,” 22.2% for its “Military Budget” and 22.2% for NATO’s Interoperability Standards and Profiles (“NISP”) [10] for a total of 66.13%.

The problem with an arbitrary percentage of GDP spending used to fund NATO whether actually or perceptually is that it doesn’t factor-in real-world economic factors such as: asset prices, buying power, commodity prices, consumer confidence, earnings, exchange rates, interest rates, real wages, political instability, and weather.

Carnegie Europe blogger Claudia Major, in “Time to Scrap NATO’s 2 Percent Pledge?” [11] described the two-percent goal as “snappy and plausible [with] the pleasant taste of solidarity and equity.” However, “the pledge” whereby “allies commit to spend the equivalent of 2 percent of their GDP on defense and 20 percent of that amount on investment” she argues “is utterly useless for solving NATO’s readiness and capability problems.”

In light of 2008’s ‘Great Recession’ and effects still being felt to various degrees in individual member nations, NATO has admitted “[t]he effects of the financial crisis and the declining share of resources devoted to defence in many Allied countries have exacerbated this imbalance and also revealed growing asymmetries in capability among European Allies. France, Germany and the United Kingdom together represent more than 50 per cent of the non-US Allies defence spending, which creates another kind of over-reliance within Europe on a few capable European Allies. Furthermore, their defence spending is under increasing pressure, as is that of the United States, to meet deficit and indebtedness reduction targets. At the Wales Summit in 2014, NATO leaders agreed to reverse the trend of declining defence budgets and decided:

  • Allies currently meeting the two per cent guideline on defence spending will aim to continue to do so;
  • Allies whose current proportion of GDP spent on defence is below this level will halt any decline; aim to increase defence expenditure as GDP grows; and will move toward the two per cent guideline within a decade.”

Yet, to Ms. Major’s point, the Organization has acknowledged “[w]hile the two per cent of GDP guideline alone is no guarantee that money will be spent in the most effective and efficient way to acquire and deploy modern capabilities, it remains, nonetheless, an important indicator of the political resolve of individual Allies to devote to defence a relatively small, but still significant, level of resources at a time of considerable international uncertainty and economic adversity.”

What Does A National Defense Budget Cover?

“National defence budgets” NATO explains, “cover essentially three categories of expenditures: personnel expenses and pensions; research, development and procurement of defence equipment; and, lastly, operations, exercises and maintenance.” It clarifies that while “[b]udget allocation is a national, sovereign decision, … NATO Allies have agreed that at least 20 per cent of defence expenditures should be devoted to major equipment spending, perceived as a crucial indicator for the scale and pace of modernisation.” Nevertheless, it warns:

“The arbitrary correlation between GDP and defense spending sends absurd messages” says Major as “[t]he 2 percent target only cares about input, that is, how much states spend on defense.” Quite simply she says, “[i]t does not care about output, or what countries get for their money, be it tanks or well-trained soldiers. Yet, what counts is what resources NATO ultimately has at its disposal, not how much its member states pour into their defense establishments.”

“In times of defense austerity,” she argues “calling for allies simply to spend more—rather than spend more wisely—means fooling those who spend their money efficiently and rewarding those who waste money without visible results for NATO.” Trump’s argument about decreasing ‘U.S. spending on NATO’ is just as damaging as he clearly fails to recognize that at least 20% of the nation’s defense spending is actually for the “development and procurement of defence equipment” used for the provision of “the common defense” referenced in the preamble of the Constitution. [12]

Further, of the entire $495.9 billion authorized by the National Defense Authorization Act (NDAA) for Fiscal Year 2015 [13], only 27.2% is spent on troops [14] whereas according to Major, “Athens spends almost 70 percent of its defense budget on personnel.”

NATO, Major argues “should focus on cooperation and efficiency. There are two things that all European allies have in common: poor spending efficiency, and foot-dragging when it comes to cooperation” … “using their dwindling defense money better: by focusing on priority projects, specializing in distinct military tasks, and seeking savings in collaboration.”

Conclusion

Unlike Ms. Major, retired U.S. Navy Admiral and former SACEUR (Supreme Allied Commander Europe), James Stavridis doesn’t offer suggestions for improving spending by NATO member nations rather he has a stark warning for prospective voters [15]:

By aligning himself with Russia, North Korea, and China on the need to get the United States out of the world and our military back to the piers and barracks where he evidently thinks it belongs, Trump would sow the seeds of global instability and cede significant portions of the world to regional domination. Notably, the South China Sea would be highly at risk of Chinese hegemony, and Eastern Europe would be under significant Russian influence. The ripple effects to other parts of the world would follow, and the already unstable Korean Peninsula would take another step toward open war. All of this would undermine the global economy and diminish U.S. power. …

“After the apocalyptic events of World War I in Europe” Admiral Starvidis reminds us, “the United States departed the continent, declined to join the nascent global organizational structure offered by the League of Nations, and essentially withdrew from the world, judging it to be complicated, expensive, and unnecessary to maintain a policy of wider engagement. The result was the rise of fascism in Europe, the violent expansion of Imperial Japan, and World War II.”

So, the next time you hear someone questioning the U.S’. participation in the Organization or lamenting the money spent versus the nation’s Return on Investment, evaluate the logic of their argument and ask yourself just what their motivation might be?

Sources:

[1] http://www.reuters.com/article/us-usa-election-trump-foreign-idUSKCN0WN1VU

[2] https://youtu.be/5xSN6n0Bm80

[3] https://www.youtube.com/watch?v=diT9oQjb8Ik

[4] http://www.nato.int/cps/en/natohq/topics_67655.htm

[5] http://www.bea.gov/faq/index.cfm?faq_id=484

[6] http://www.defenseone.com/politics/2015/06/nato-members-defense-spending-two-charts/116008/

[7] http://databank.worldbank.org/data/download/GDP.pdf

[8] http://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS?order=wbapi_data_value_2014+wbapi_data_value+wbapi_data_value-last&sort=desc

[9] https://web.archive.org/web/20150310031222/http://www.nato.int/cps/en/natohq/topics_67655.htm

[10] https://nhqc3s.hq.nato.int/Apps/Architecture/NISP/volume1/ch02.html

[11] http://carnegieeurope.eu/strategiceurope/?fa=59918

[12] http://www.archives.gov/exhibits/charters/constitution_transcript.html

[13] http://www.armed-services.senate.gov/press-releases/senate-committee-on-armed-services-reach-agreement-with-house-counterparts-regarding-the-national-defense-authorization-act-for-fiscal-year-2015

[14] http://www.businessinsider.com/how-the-us-military-spends-its-billions-2015-8

[15] http://foreignpolicy.com/2016/03/22/the-brussels-bombings-highlight-just-how-wrong-trump-is-about-nato