In 2006, NATO member countries agreed to commit a minimum of two per cent of their Gross Domestic Product (GDP) to spending on defence. This guideline principally served as an indicator of a country’s political will to contribute to the Alliance’s common defence efforts. Additionally, the defence capacity of each member country has an important impact on the overall perception of the Alliance’s credibility as a politico-military organisation.
The combined wealth of the non-US Allies, measured in GDP, exceeds that of the United States. However, non-US Allies together spend less than half of what the United States spends on defence. This imbalance has been a constant, with variations, throughout the history of the Alliance and more so since the tragic events of 11 September 2001, after which the United States significantly increased its defence spending. The gap between defence spending in the United States compared to Canada and European members combined has therefore increased.
Today, the volume of the US defence expenditure effectively represents 73 per cent of the defence spending of the Alliance as a whole. This does not mean that the United States covers 73 per cent of the costs involved in the operational running of NATO as an organisation, including its headquarters in Brussels and its subordinate military commands, but it does mean that 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.
The 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.
While 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.
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