Tuesday, 2 March 2021

NATO at 70: Why Britain should push for higher European defence spending

On 4th December 2019, the North Atlantic Treaty Organisation (NATO) will host a ‘Leader’s Meeting’ in London to celebrate the 70th anniversary of the alliance. This essay – which assesses defence spending and burden-sharing in the alliance – is the first part of a three-part series by Dr Andrew Foxall, Matthew Henderson and James Rogers, focused on NATO at 70.

The blunt reality is that there will be dwindling appetite and patience in the United States [US] Congress – and in the American body politic writ large – to expend increasingly precious funds on behalf of nations that are apparently unwilling to devote the necessary resources or make the necessary changes to be serious and capable partners in their own defence. […] Indeed, if current trends in the decline of European defence capabilities are not halted and reversed, future US political leaders – those for whom the Cold War was not the formative experience that it was for me – may not consider the return on America’s investment in NATO worth the cost.

Those are the words of Robert Gates, then US Secretary of Defence, at the Security and Defence Agenda in Brussels on 10 June 2011. His statement came just a couple of months before Hilary Clinton, then US Secretary of State, announced her country was going to ‘pivot’ or ‘re-balance’ towards the Indo-Pacific region, raising eyebrows in European capitals. Since then, Russia invaded Ukraine, the United Kingdom (UK) voted to leave the European Union (EU), and the US elected a president who pledged to implement a strategic policy centred on the maxim ‘America First!’ Indeed, President Trump has made the reduction of his country’s burden to European allies one of the priorities of his presidency, continuously tongue-lashing Germany and other Europeans for their failure to pull their weight.

Like Mr Gates, Mr Trump has reason to be annoyed. Back in 2006 at the Riga Summit, NATO allies committed – albeit informally – to hold defence spending at 2% of Gross Domestic Product (GDP). However, by 2012, only the US, the UK and Greece were meeting the target, with most other allies spending less and less each year. For this reason, at NATO’s 2014 Annual Summit in Newport, the UK and US pushed their allies to halt – with immediate effect – further military spending reductions and to commit to two targets, which were outlined in the final declaration. These included:

  1. A primary guideline to spend closer to 2% of GDP on defence by 2024; and,
  2. A supplementary guideline to spend 20% of total defence outlay on new military equipment, including research and development (to ensure efficiency of spending).

Since then, the number of allies meeting the primary guideline has grown from five in 2015 to seven in 2019. Equally, as Graph 1 shows, there has been some overall improvement, both in relative and actual terms. NATO’s total relative spending has increased from 1.4% of GDP in 2015 to 1.61% since 2019. The balance between ‘achievers’ and ‘non-achievers’ – those achieving and not achieving the primary spending commitment – has also begun to reverse: in 2015, non-achievers spent on average 1.18% of GDP on defence between them, while achievers managed to spend an average of 2.42%. However, by 2019, this was 1.39% and 2.28%, respectively. Moreover, absolute spending – so-called ‘real’ spending, based on constant 2015 exchange rates and prices – has grown from US$895.2 billion in 2015 to US$983.2 billion in 2019, representing almost a US$90 billion increase.

Graph 1: Improvements in NATO defence spending, 2015-2019

However, despite these improvements, the US and UK – NATO’s biggest defence spenders and nuclear custodians – are unlikely to pop the corks and party, not least because their allies should have achieved more by now if the alliance as a whole is to meet its primary spending target by 2024. Not only have the majority of allies failed to meet their commitment, but they have also failed to do much to attempt to meet it. As Graph 2 shows, the success and progress of allies can be delineated by placing them on a chart with two axes, one measuring their relative military spending (as a percentage of GDP), and the other the increases they have made in meeting it. This leaves each ally in one of four categories:

  1. Succeeders – allies that have always met NATO’s primary spending commitment, or have reached it by increasing spending by less than 50% since 2015;
  2. Crusaders – allies that have met the primary spending commitment by increasing their spending by 50% or over since 2015;
  3. Improvers – allies that have not yet met the primary spending commitment, but have increased their spending by 50% or over since 2015; and,
  4. Shirkers – allies that have failed to meet both the primary spending commitment or make any sizeable increase in spending since 2015.
Graph 2: NATO defence spending in context

Since 2015, it is clear there have been six ‘Succeeders’ (Estonia, Greece, Romania, Poland, the UK and the US), one ‘Crusader’ (Latvia), and two ‘Improvers’ (Lithuania and Slovakia). Unfortunately, there are still 20 ‘Shirkers’, including Germany, France and Italy, the third, fourth and fifth biggest defence spenders in the alliance. These shirkers are still by far the largest category, with wealthy Luxembourg, Belgium and Spain spending well below even 1% of their GDP on defence, and showing little sign of improvement.

What is significant is that the allies that have made the greatest strides, or have managed to achieve their spending commitments, are those – besides the UK and the US – that are among the least wealthy in the alliance. Estonia and Greece have both maintained defence spending above 2% of GDP, despite facing significant economic setbacks since the Financial Crisis in 2008-2009. Likewise, Latvia and Lithuania have moved from spending significantly less than 1% of their GDP on defence in 2014, to spending 2.01% and 1.98%, respectively, in 2019 – a phenomenal achievement, given that their per capita GDP is less than half of that of Belgium’s, an ally that has failed abysmally to reach its primary commitment.

What does this mean?

The unwillingness of most NATO allies to meet their own targets means that non-achievers have in effect ‘short-changed’ the alliance, shifting the burden for the defence of Europe onto those who achieve or exceed the primary guideline. As Graph 3 shows, each of the largest non-achievers has a significant shortfall in military spending. By subtracting the non-achievers’ committed defence expenditure (2% of GDP) from their actual spending for the period between 2015 and 2019, it is possible to identify what they have failed to spend. Even if a quarter of this vast sum of money – a whopping ‘real’ US$504 billion – had been made available, it could have plugged many of the capability shortfalls in the alliance, re-balanced further burden-sharing between achievers and non-achievers, and strengthened Europeans’ ability to defend themselves (the International Institute for Strategic Studies has identified that it would only take between US$288 billion and US$357 billion to prepare NATO allies on the European mainland to counter a Russian attack).

Graph 3: Spending shortfalls compared, 2015-2019

Consequently, the shirkers’ unwillingness to meet their spending commitments also means that NATO remains lopsided. Just two Succeeders – the US and UK – account for 76% of the alliance’s collective defence spending (albeit down from 78% in 2015). Indeed, as Graph 4 shows, the UK’s ‘real’ defence spending – at US$315 billion over the past five year period – is greater than the lowest 20 NATO spenders put together. This means that Britain has spent US$98 billion more than Germany and US$89 billion more than France over the past five years. Seen from another angle, the surplus in Britain’s defence expenditure – boosted by a top-up of £2.2 billion in 2019 – subsidises the shortfalls of the lowest nine NATO non-achievers. Every year that they fail to meet their spending commitments, NATO’s shirkers undermine the solidarity and security of the alliance, which forces, potentially, the UK, the US and other NATO achievers to make up for the shortfall, using military assets that might be used to combat security threats outside of the Euro-Atlantic area.

Graph 4: British defence spending in context, 2015-2019

So, as NATO’s leaders meet in London on 4th December to celebrate the alliance’s 70th anniversary, they would do well to remind themselves of the strategic reality. NATO’s shirkers – Germany, Italy, Spain, Canada, the Netherlands and Belgium chief among them – would do well to recall that America’s patience is not unlimited. In many ways, the forceful demands of Mr Trump are not unlike those that Mr Gates predicted back in 2011. Such demands are unlikely to disappear; they are only likely to grow louder. The US needs help as an age of ‘wider state competition’ – in the words of the UK 2018 National Security Capability Review – takes hold. In particular, Washington looks on anxiously as the PRC, an authoritarian, revisionist power, rises on its Pacific flank. It wants European allies to spend more to uphold their own defence – and not only in Eastern Europe, but also in the Mediterranean, the Levant, and the Middle East, potentially as far as the Strait of Malacca.

NATO leaders would also do well to ignore those among them who believe that ‘European sovereignty’ is the answer to shirking. While intra-EU efforts to boost capabilities may be harmless, only NATO – which includes both the UK and US – has the means to uphold the defence of Europe. Indeed, Jens Stoltenberg, NATO’s Secretary-General, pulled the wool from European eyes when he asserted: ‘we have…to understand that, especially after Brexit, [the] EU cannot defend Europe.’ In particular, those Europeans on the more exposed flanks of the alliance ought to remind the ‘European sovereignists’ that the UK is the only European nuclear power in NATO that has explicitly pledged to use its nuclear forces ‘for the purposes of international defence of the Western Alliance in all circumstances’, just as it is the only ally, bar America, that has established numerous ‘tripwires’ on and around the European mainland – in Estonia, Cyprus, Germany, Iceland, Lithuania, Poland, and Romania – to make its deterrent effective.

As for Britain’s leaders, they would do well to bring NATO’s shirkers down with a bump. Any attempt by non-achievers – such as proposals to establish a ‘group of experts’ – to draw attention away from spending failures should not be indulged. Instead, military spending needs to keep increasing, and efficiently. If not, the UK may find itself leading a future alliance that lacks the capabilities to hold the line in the event of a crisis. Then, there might be little option other than to move to the higher rungs of the escalatory ladder more rapidly than would otherwise be necessary.

This is the first part of a three-part series focusing on NATO at 70. The second essay, by Dr Andrew Foxall, looks at NATO’s growing role in Space, while the final essay, by Matthew Henderson, explains why NATO would do well to respond to the rise of the PRC.

The author would like to acknowledge the assistance of Thomas Bryant and Jack Richardson in helping to collect and depict the data used in this essay.

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