This blog post is part of a Carnegie Europe project that takes a critical look at the implications of meeting NATO’s 2 percent defense investment pledge.

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With Russia’s aggression in Ukraine high on leaders’ agendas, NATO’s 2014 summit in Wales was never going to be the occasion on which the alliance would give up on its 2 percent target. But the specific guidelines for delivering this aspiration—by which allies aim to devote 2 percent of their GDP to defense—were carefully crafted to ensure that most governments could meet them without substantial policy changes.

Those countries that currently spend less than 2 percent of their income on defense (24 out of 28 states) made three promises in Wales.

First, they committed to halt further cuts in the cash they spend on defense. This commitment will not always be easy to achieve, especially for states whose economies remain mired in recession. But couching this commitment in cash, not real, terms makes it much easier to meet. It is compatible with existing plans for most states.

Second, they agreed to “aim to increase” defense spending in real terms as their economies grow, while declining to promise that these increases would match GDP growth.

#NATO2percent pledge leaves open the possibility of future dilution.
 
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Finally, they pledged to “aim to move towards the 2% guideline within a decade.” This was the minimum on which the allies could agree without abandoning the 2 percent yardstick altogether. But it leaves open the possibility of further dilution at future NATO summits.

The United States, NATO’s biggest spender in absolute terms and as a proportion of GDP, also ensured that the summit agreement did not constrain its freedom to make its own budgetary choices. Using its national budget definition, the United States has already cut spending on national defense from 4.7 percent of GDP in 2010 to 3.5 percent in 2014 and is due to cut expenditure to 2.6 percent by 2020 under its Budget Enforcement Act.

Because Washington meets the 2 percent guideline, however, it has been excluded from the NATO commitment to halt the decline in defense budgets. That decision will remain a matter for ongoing negotiations within the U.S. Congress, within the constraints of its sequestration process.

That leaves the three European states—the UK, Greece, and Estonia—that still met the NATO target in 2013. Estonia is strongly committed to 2 percent, and Greece has other, more pressing, concerns in relation to its partners.

In the case of the UK, Prime Minister David Cameron has committed his country to meet the 2 percent guideline, but without any realistic chance of securing the financial resources to do so after 2015–2016.

It will be difficult enough for the UK to find the resources to fund current defense plans, known as Future Force 2020, which are based on 1 percent real growth in equipment spending and flat real spending for the rest of the budget. To continue to meet the 2 percent guideline through to 2019–2020, however, the Treasury would have to find an additional £6 billion ($9 billion) per year.

With the UK still carrying one of the largest budget deficits of any advanced economy, and no indication that any major party is prepared to contemplate significant tax increases, such an increase is beyond the bounds of political plausibility. Rather, on current plans, the UK is on course to reduce spending to 1.7 percent of GDP by the end of the decade.

Over time, the strength of Britain’s commitment to 2 percent is likely to be further weakened by the failure of its European neighbors to do so. The impending end of the UK’s adherence could, in turn, weaken its remaining normative power for other member states.

As the importance of the 2 percent commitment declines, a more qualitative approach to burden sharing within the alliance could emerge. This is likely to involve a greater acceptance of the importance of distinctive national threat perceptions and strategic roles. All, or nearly all, member states would take part in all major NATO missions. But the relative priority that different states give to various tasks will vary according to their national preferences and capabilities.

In this approach, bottom-up pressures play the main decisive role in shaping how alliance defense and deterrence capabilities are maintained and improved. Top-down targets are used to coordinate these national trends, rather than supplant them.

Recent developments on NATO’s Eastern frontier illustrate the point. Since they joined the alliance, both Latvia and Lithuania have typically spent less than 1 percent of GDP on defense, preferring instead to prioritize social and economic development, despite NATO’s formal target. With the recent heightening of concern over Russia, however, both countries are now committed to raising defense spending sharply.

Poland and Estonia may soon be the only European allies to meet #NATO2percent.
 
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Poland and Estonia, already relatively high spenders, could soon be the only European NATO members to reach the 2 percent target. Sweden—despite not being a NATO member—is also increasing defense spending in response to Russian belligerence.

In most of Western Europe, pressures to increase defense budgets has so far been less strong. But this may be changing. Germany could be key to a shift in NATO priorities further toward territorial defense in the East. Berlin is already playing an important role in helping set up new command infrastructure in Eastern member states and in supporting NATO’s most exposed states in improving their own capabilities for territorial defense.

Other European states have different priorities. Spain and Italy look toward North Africa with growing alarm, while both the UK and France are committed to a wider military role outside Europe, especially in the Middle East and Africa. Both will continue to try to maintain a wide spectrum of significant military capabilities, albeit on a fraction of the scale that the United States is able to generate.

At times, U.S. frustration with European debates is palpable. But most U.S. leaders understand that while NATO remains the primary framework for military coordination and cooperation between America and Europe, it is still an alliance of independent states, which will continue to set their own budgets in light of their own priorities.

It will be up to those states, acting together, to ensure that the conglomeration of their efforts is enough to respond adequately to the new security challenges of our time.

 

Malcolm Chalmers is research director and director for UK defense policy at the Royal United Services Institute.