You Should Know

You Should Know

Do NATO Allies Owe the United States?

By John Cookson

At a meeting of NATO countries in Brussels on May 25, President Trump proposed that NATO allies not currently meeting an agreed-to target, step up their defense spending to support financial obligations of the alliance.  Here’s what you should know about NATO and defense spending.
 

The North Atlantic Treaty Organization was created in 1949 by 12 nations, including the United States, to provide collective security against the Soviet Union. Today there are 28 NATO countries. An attack against one is considered an attack against all.

Since the end of the Cold War, US officials have expressed concern that NATO allies spend too little on defense, relying too much on the American military. Both Republicans and Democrats have called on allies to spend more.

During the 2016 US presidential election, Donald Trump went further, saying “We are getting ripped off by every country in NATO.”

Members of Trump’s administration, including Defense Secretary Jim Mattis and Vice President Mike Pence, pressed this point directly with European leaders and NATO officials in February, calling on them to increase their spending and share in the burden of defense for the alliance.

In March, after meeting with German Chancellor Angela Merkel, President Trump tweeted that Germany owes “vast sums of money to NATO & the United States must be paid more for the powerful, and very expensive, defense it provides to Germany!”

In April, while meeting with NATO Secretary General Jens Stoltenberg, President Trump said, “In facing our common challenges, we must also ensure that NATO members meet their financial obligations and pay what they owe. Many have not been doing that.”

So, do NATO allies owe money to the United States?

Not directly. The collective defense is supported by two sources: direct funding to NATO civil and military budgets based on a cost-sharing formula, and indirect funding of NATO allies spending on their own defense forces and capabilities.

It is the indirect funding – the largest source of NATO funding – that has been a concern for US officials in this and previous administrations.

In 2006, at a summit in Riga, Latvia, NATO leaders put forward a nonbinding guideline – known as the “two percent” target – for each country to spend at least two percent of its gross domestic product (GDP) on defense.

In 2007, the first full year after the “two percent” guideline, five of the then 26 NATO countries met this target: Bulgaria, France, Greece, the United Kingdom, and the United States.

After Russia’s annexation of Crimea in 2014, NATO gave this nonbinding guideline new authority, pledging at a summit in Wales of that year to halt the decline in defense spending and to have each country spend two percent of its GDP on defense by 2024.

Most NATO countries still do not meet the target. Only five of the current 28 NATO countries – Estonia, Greece, Poland, the United Kingdom, and the United States – spent more than two percent of their GDP on defense in 2016.

At the NATO meeting in Brussels on May 25, President Trump is expected to propose that by the end of 2017 all NATO allies either spend two percent of their GDP on defense or provide a detailed plan, with annual benchmarks, on how they will reach that target.

Do you think NATO allies should step up their defense spending to support financial obligations of the alliance?

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©2017 Chicago Council on Global Affairs