Germany’s direct contribution to NATO now equals that of the United States. What does that mean and is there a lesson there for the UK?
Starting this year, Germany and the United States are both contributing the same amount to NATO’s budget. Yet, while the United States already exceeds NATO’s defence spending target, Germany won’t do so until the early 2030s.
For those people who don’t pay close attention to NATO’s budgeting practices, this might seem like a contradiction, but it isn’t: “direct contributions to NATO” are not the same thing as “spending on defence”. Far from it, as the numbers clearly show.
Defence Spending: A note on the Numbers
All the amounts cited are from NATO’s own figures and definitions which can differ from national figures because they are adjusted to compensate for different national defence accounting practices. Spending on civil defence, for instance, is excluded, while military pensions are included, whether they are paid by from a nation’s defence budget or any other ministry. Also included is the funding for deployable, militarily equipped armed forces – gendarmerie, carabinieri, coast guard, border troops etc.– which are not funded from their national defence budget
In 2020, NATO member nations spent over $1,092 billion on defence. Almost 72 per cent of that – about $785 billion – was spent by the United States. Put another way, the United States spent more than twice as much on defence as the rest of Alliance put together.
As a global power, of course, not all US defence spending should be counted as a contribution to the Alliance, but no matter how the figures are massaged, the United States is by far the largest contributor to the Alliance in terms of financial outlay and military capability.
This situation isn’t new, and there have been numerous attempts to boost the non-US share.
The latest effort was launched in 2014, just after Russia occupied Crimea and while ISIS was occupying swathes of Syria and Iraq. In their summit in Wales that year, NATO’s leaders agreed upon an impressive range of initiatives to deal with new security challenges, and to address this “burden sharing” problem.
They decided that defence cuts would be halted, and that all Allies would aim to spend at least 2 per cent of GDP on defence by 2024.
There has been a lot of progress since then, but – as 2024 draws closer – it’s clear that not all the Allies are going to meet the 2 per cent goal by then, and Germany has declared as much: it won’t reach 2 per cent until early in the next decade.
Needless to say, that did not go down well with former President Trump – nor will it with President Biden, who was Vice President when the Allies made all those momentous decisions in 2014, although at least he has frozen the withdrawal of 9,500 US troops from Germany that former President Trump announced in July 2020.
Burden sharing will inevitably feature in the NATO summit on 14 June 2021 and Allies will certainly want to highlight a ray of budgetary sunshine: Allies’ direct contributions to NATO.
This is what all the Allies chip in to cover the costs of running NATO headquarters, the military command structure, certain forms of support for military operations, and some shared infrastructure. €2.6 billion has been budgeted for 2021, a significant amount, although rather less than 0.3 per cent of NATO’s total spending on defence.
NATO has a cost-sharing formula for this common funding which is based – for the most part – on Gross National Income. Until about 20 years ago, the formula was updated rather infrequently, but since then, it has been tweaked roughly every couple of years, and when needed to incorporate new Alliance members.
The common-funding formula announced in January 2021 is remarkable in that both the United States and Germany will contribute an identical share – just over 16 per cent each. Never before has the United States share been less than 20 per cent, and never before has Germany’s share been as high as 16 per cent.
Overall, the new formula should save the United States about €120 million a year, with all the other Allies picking up a share of that. Germany’s increase, for instance, amounts to about €33 million compared with the previous year.
As a concrete example of America’s Allies doing more, the new cost-sharing formula has potentially significant PR and political value, and it might well help to deflect or soften some of the anticipated criticism on burden sharing. Stories about “Germany matching the US on funding for NATO” will certainly catch the eye.
This recalibration of cost shares will also subtly shift perceptions about “standing” within NATO’s administrative structures, and there might be a lesson here for the UK, which is currently in third place, contributing just over 11 per cent to the common budget.
Brexit raised concerns among many neighbours that the UK might be becoming less engaged internationally. Twenty-one of those neighbours are members of both NATO and the European Union, and it would be surprising if their attitudes were completely unaffected by the whole Brexit experience.
British political leaders and diplomats are quick to reassure their international counterparts that the United Kingdom has not wavered in its commitments to other international bodies – especially NATO – and the United Kingdom makes a good case for itself.
Even so, additional reassurance wouldn’t go amiss, so why not join the “big league” by upping the UK’s contribution to NATO’s common budget to match those of the United States and Germany?
And to avoid upsetting the current framework which will be in place until 2024, if could be proposed as a budget augmentation rather than a means of reducing the contributions of others. NATO could use the funding boost: indeed, a cogent case was made in the recent “Wise Persons’ group, which can be seen as a precursor to preparing a new NATO Strategic Concept, an initiative likely to be announced at NATO’s next Summit. That extra funding would put the UK in an excellent position to influence the nature of additional HQ priorities.
The price tag would be about €150 million a year, but it could – and should – be phased in: new programmes need to be thought through and grown carefully.
Having the UK spend as much as the US on NATO wouldn’t just be an appealing headline: it would provide unassailable reassurance about the UK commitment, while also placing the UK even more squarely on the moral high ground in any discussions on burden sharing.
And it would be nice to be in joint first place rather than a slightly distant third…
ATA UK 1 February 2021