In recent years, initiatives to improve NATO burden sharing—that is, the extent to which allies are sufficiently contributing to the common defense—have resulted in marginal defense spending increases. Yet publics and parliaments remain concerned that most allies are not spending 2 percent of their gross domestic products on defense. The political focus on the 2 percent metric also obscures the many contributions allies are making to transatlantic security that fall outside defense budgets. This brief recommends that allies should therefore spend 4 percent of their GDP on defense and security annually: States should spend a minimum of 2 percent of GDP on defense, though NATO should continue to explore and allow more flexibility in the way those monies are spent nationally, particularly for states that do not have sufficient absorptive capacity to spend 2 percent on their defense capabilities and programs. The balance—between 2 and 4 percent—should be allocated toward activities that are strategically vital to the alliance but are not accounted for in NATO’s methodologies for defense spending, such as peacetime preparedness and resilience.
Soon approaching its 75th anniversary in 2024, the North Atlantic Treaty Organization (NATO) remains one of the most powerful and critically important alliances in modern history. To name but a few benefits, it is the forum of choice for members’ consultation on a wide range of security matters, it creates mechanisms for building common interoperability standards across members, it allows for multilateral military training, it establishes a common bulwark against which Russian aggression is deterred, and it creates a framework through which terror threats emanating from the Middle East and North Africa region are managed. All these benefits not only allow NATO to be strategically effective but also allow smaller groups of allies to pursue coalition operations independently of NATO. The European Union and the United States can form coalitions for military operations relatively easily, primarily due to the benefits that accrue to allies from NATO membership.
Yet despite these strategically critical benefits, the transatlantic relationship finds itself rehashing an at-times emotional debate on burden sharing, or the extent to which allies contribute to the defense of Europe and whether those contributions are sufficient. For the past decade, at nearly every NATO-related discussion or meeting between U.S. leaders and their NATO-allied counterparts, the question of whether allies are spending enough on their defense capabilities is raised—and with less-than-satisfactory resolution.
Over successive administrations, U.S. officials have made—and continue to make—the argument that though their European counterparts increased defense spending after a 2014 pledge to spend 2 percent of gross domestic product (GDP) on defense by 2024, most are still not meeting the actual target. European counterparts respond in one of two ways: either by politely acknowledging this fact but noting their governments have other priorities, many of which contribute to transatlantic security but are not strictly defense spending, or by thanking the United States for making this request as it helps them make the case to sometimes skeptical parliaments for increased defense spending. Unfortunately, particularly over the past decade, what was once a fairly routine back-and-forth about defense spending has at times become a source of political toxicity in the transatlantic relationship.
For the past decade, at nearly every NATO-related discussion or meeting between U.S. leaders and their NATO-allied counterparts, the question of whether allies are spending enough on their defense capabilities is raised—and with less-than-satisfactory resolution.
Today the range of security risks that the NATO alliance must collectively confront is vast—from Russia and China to climate change and cybersecurity, to name but a few. NATO is too important to allies on both sides of the Atlantic to be generating political acrimony and friction over defense cost sharing. It is time for NATO to develop better processes for articulating the different ways allies are sharing their strategic responsibilities.
There remains a good deal of controversy about whether 2 percent of GDP is the right figure to promote. Despite the figure’s detractors, officials are unlikely to reduce the 2 percent target. Indeed, in advance of the 2023 NATO summit in Vilnius, allies were reportedly considering whether to make 2 percent a floor rather than a target for defense spending. Given that defense requirements have increased, particularly after Russia’s invasion of Ukraine, spending at least 2 percent of GDP on defense remains sensible. Furthermore, the 2 percent target has arguably prompted concrete increases in defense spending across Europe; therefore, retaining the 2 percent target establishes an important political commitment that should not be disregarded or lessened.
Yet, despite the concrete gains associated with the 2 percent target, political leaders on both sides of the Atlantic—many of whom are unfamiliar with NATO and its processes—remain concerned that allies are still falling short of the 2 percent target. As of 2022, only seven NATO nations actually met the goal. This puts the alliance in a strategically tenuous position and creates risk that future NATO governments might deprioritize the transatlantic relationship. What is needed, therefore, is an augmentation of how NATO accounts for states’ activities—many of which are not presently counted as defense spending—in the pursuit of common strategic objectives that build upon the 2 percent defense spending baseline. It is often overlooked, but NATO’s collective strength isn’t just in its ability to defend its members from an attack (Article V of the 1949 Washington Treaty) but also in its requirements to ensure members are undertaking necessary domestic activities to prepare for crisis response and, potentially, military action (see Article III of the Washington Treaty). This allows for resilience, something which, in a dynamic world, needs to be more deeply invested in and more comprehensively approached.
To that end, this brief recommends allies spend 4 percent of their GDP on defense and security annually.
- States should spend a minimum of 2 percent of GDP on defense, though NATO should continue to explore and allow more flexibility in the way those monies are spent nationally, particularly for states that do not have sufficient absorptive capacity to spend 2 percent on their defense capabilities and programs.
- The balance—between 2 and 4 percent—should be allocated toward activities that are strategically vital to the alliance but are not accounted for in NATO’s methodologies for defense spending such as peacetime preparedness and resilience.
This short CSIS analysis lays out a framework for recalibrating the NATO political-strategic conversation on burden sharing by members to something more akin to “responsibility sharing” with members. It then briefly discusses the evolution of the burden sharing debate and why it has become counterproductive. The brief then explores examples of activities NATO members are undertaking that yield insights on how NATO might recast its thinking about—and accounting for—how allies share security and strategic responsibilities going forward. The recommendations are designed as a starting point for elaboration and discussion by NATO writ large, its member states, and policymakers and lawmakers, with the goal of strengthening bonds across Europe and North America for nearly 75 years.
A Short History of Burden Sharing
“Let us be fair. If the peril exists in Europe, who should know this better than the Europeans? If they, who should know it better than we, say the peril is imminent, then why do they not live up to their share—100 percent?”
— Senator John Pastore, August 31, 1966
Squabbles about the sufficiency of allied investment in, and commitment to, the common defense of Europe have been an enduring feature of the NATO political-military discourse since its establishment in 1949. During the Cold War, however, successive U.S. administrations judged that the costs of defending Europe and having the United States pay an outsize share of the costs were worth it. The allies, including the United States, contended they were better prepared to deal with the challenge presented by the Soviet Union through the stationing of more than 400,000 troops in the European theater, undergirded by the U.S. and British nuclear deterrent. Importantly, throughout the Cold War, the alliance overall agreed on the shared threat the Soviet Union posed to western Europe, Canada, and NATO, and despite the occasional dispute among allies, there was general acceptance of the distribution of responsibilities among allies to address that threat.
At the conclusion of the Cold War, the burden sharing debate began to take on a new tenor due to the intersection of two somewhat contradictory trends. On the one hand, allies on both sides of the Atlantic, eager to see the rewards of a “peace dividend” prompted by the collapse of the Soviet Union and the Warsaw Pact, slashed their defense budgets and let their investments in defense capabilities and technologies lag.
Simultaneously, allies began taking on enormously complicated and logistically intensive expeditionary operations in places outside NATO territories including the Balkans, Afghanistan, Iraq, and Libya. In short, across many European capitals, defense capabilities and investments declined through the majority of the post–Cold War period while expeditionary military requirements across nearly all mission sets increased. The tension between these two trends became enough of a strategic-level problem that U.S. presidents George W. Bush and Barack Obama raised the question of sufficient defense investment and burden sharing with their allied counterparts.
Across many European capitals, defense capabilities and investments declined through the majority of the post–Cold War period while expeditionary military requirements across nearly all mission sets increased.
Russia’s illegal annexation of Crimea in 2014 served as a wake-up call when NATO’s leaders met at the Wales summit in 2014. Recognizing that the strategic circumstances in Europe were profoundly changing—and that military power would thereby become a greater priority for the allies—the allied heads of state and government agreed to a series of measures designed to reverse decades of declining European defense. These included a defense investment pledge to increase defense spending to at least 2 percent of GDP by 2024 and allocate 20 percent of that investment toward new procurements and research and development—investments that are publicly reported. Allies also agreed to a series of nine metrics that, taken together, built a picture of allies’ military effectiveness, though reporting is not released publicly. Other innovations in burden sharing followed: NATO allies determined that no one member state should field more than 50 percent of a given capability and that common funding ought to be used to offset the expenses of allies’ participation in common operations. In 2019, NATO nations agreed to a recalibrated cost-sharing formula that lessened the U.S. contribution to NATO common-funded budgets.
For better or worse, burden sharing became most commonly associated with the publicly tracked 2 percent target and whether allies were meeting it. Indeed, failure to achieve the 2 percent benchmark arguably led the administration of President Donald J. Trump to state that NATO was “unfair, economically,” and “disproportionately too expensive.”
Russia’s brutal February 2022 invasion of Ukraine—and the threat Russia now poses to NATO territorial integrity—underscored the urgency of ensuring European defense spending is sufficient to meet the task of deterring Russia. In 2022, 16 NATO members increased their defense spending over 2021 levels, and a further seven NATO capitals pledged to raise their level of defense spending. As NATO prepares for its 2023 summit, allies are debating whether to make the 2 percent target a defense spending floor rather than a target.
Yet despite these positive developments, only 7 out of 31 NATO members spent at least 2 percent of GDP on defense in 2022. As a result of this failure to meet this basic requirement even in the face of Moscow’s aggression in Ukraine and in conjunction with U.S. strategic priorities shifting to the Indo-Pacific, transatlantic tensions over burden sharing may once again hit a crisis point absent a more holistic and flexible mechanism to account for everything allies do to shoulder their security responsibilities.
Necessary but Insufficient: The Need for Change
A consideration of recent transatlantic security developments suggests it may be prudent for NATO to reopen its aperture on what kinds of activities ought to be factored into its assessments of whether, and how, allies are collectively addressing strategic-level risks and related shared responsibilities to protect and defend the alliance and support its members. What follows is a series of mini case studies that together illuminate the different ways allies are practically working together to shore up NATO’s common defense that are not sufficiently accounted for in the contemporary burden sharing or risk management debates.
As Russian forces illegally invaded Ukraine in February 2022, NATO allies immediately expressed their support for Ukrainian president Volodymyr Zelensky and sought ways to support Ukrainian forces against Russian belligerents. It quickly became apparent that NATO lacked the mechanisms to rapidly send military equipment and other matériel to third-party states. Further, national decisions to supply Ukraine with weapons and other lethal aid left gaps in stockpiles and capabilities that needed to be backfilled in order to prevent erosion of NATO’s territorial defense. For example, when Warsaw decided to send T-72 tanks to Ukraine, the United Kingdom agreed to send Challenger tanks to Poland to plug the subsequent capability shortfall. This raises the question: How might these capability donation arrangements be accounted for in allied estimates of risk sharing?
Logistics and Host Nation Support in NATO’s East
Logistics win wars. After the 2014 invasion of Crimea, planners across the alliance recognized that building military capabilities alone was insufficient. To defend against a possible Russian incursion, allies needed to build and demonstrate capacity to move forces across Europe to NATO’s eastern borders. This proved challenging, as former Warsaw Pact members had, for example, different railroad gauges and load standards for roads. As such, frontline NATO states must make significant investments in capabilities to absorb allied troops, send them to the front lines, and then resupply those forces. As much of this spending is done through public-private partnerships and used for dual civilian-military purposes, many of these critical investments in logistics, infrastructure, and mobility are categorized as nondefense spending. As a result, a substantial portion of allied government spending necessary for deterring attacks on NATO territorial integrity is not counted toward satisfying defense investment pledges.
Lithuania, 2021–Present: China’s Economic Coercion
Lithuania, in pursuit of its values-based antiauthoritarian foreign policy, has taken steps in recent years to curtail its economic and political relationship with China. In 2021 Lithuania withdrew from the 17+1 group—a forum designed to enhance Chinese business interests and economic relationships with central and Eastern Europe—and it urged other countries to do so as well. That year, Lithuania also allowed Taipei to establish a Taiwan Representative Office in Vilnius. In retaliation, China downgraded the Lithuanian embassy in Beijing and applied primary and secondary sanctions on Lithuania. China kicked Lithuania off its customs register, effectively ending bilateral trade between the two countries. But perhaps more disturbingly, China exerted economic and political pressure on other European countries to curtail their trade with Lithuania. As Jonathan Hackenbroich notes:
“This approach—which left no paper trail but appeared to have at least some success—involved warning unrelated companies based in third countries, such as German Continental, that they would lose access to that market if they continued trading with Lithuanian firms. . . . By threatening German Continental and others, Beijing is trying to redirect global trade flows away from Lithuania and even prevent one EU member state from doing business with the others—a form of interference in the single market.”
Looking forward, both Lithuania and the European Union writ large now need to consider how to better insulate themselves from a critical strategic risk: Chinese economic coercion designed to rend Europe’s political-economic fabric.
These examples show how the challenges nations are grappling with and allocating resources toward often fall outside the scope of what is traditionally conceived of as burden sharing. These include investing in dual-use mobility assets and critical infrastructure, using defense resources to support third-party states like Ukraine or even frontline states within the alliance, and making costly strategic-level decisions to cut economic and financial ties with authoritarian regimes. What is needed, therefore, is a process by which these kinds of actions can be recognized and accounted for in a manner that underscores the urgency of spending at least 2 percent of GDP on defense.
From Burden Sharing to Responsibility Sharing
Burden sharing is most closely associated with the Defense Investment Pledge, which is tied to NATO force planning processes. Defense investment is necessary, but not sufficient, for enabling the alliance to contend with the broad array of security challenges of the current and emerging strategic environment. NATO’s core tasks are deterrence and defense, crisis prevention and management, and cooperative security. Article IV of the Washington Treaty also ensures there is “consultation” among the allies when one or more are threatened by an external force or may have to respond to a crisis. Given that allies are simultaneously managing recapitalization of equipment after operations in Afghanistan, countering terrorism, and building capabilities to deter Russian aggression against NATO territories, as well as increasingly responding to a wide range of natural and man-made disasters, significant investment in military capability continues to be required.
Further, NATO does not operate in a political-economic vacuum. A system to identify key nonmilitary risks to meeting the alliance’s capability goals or achieving its strategic objectives is also needed to show the complicated strategic landscape and the different ways allies are stepping up to address those risks. It is time for NATO and its member states to move beyond traditional burden sharing constructs when gauging whether allies are taking on their fair share of security responsibilities.
As part of standing up to the current threat environment, NATO should move to a 4 percent defense and security investment target with a 2 percent minimum on defense and the balance on security.
Showing Responsibility Sharing
To operationalize a cumulative 4 percent goal that shows the different ways allies contribute toward the common security and defense of the alliance, two conditions must be met:
- Greater flexibility must be built into the process for meeting the 2 percent target.
- A new system must be built to account for security spending outside traditional defense programs.
The precise contours of a process that accounts for the many allied activities that reduce risk is beyond the scope of this piece. Still, NATO should consider the following design principles for a process that accounts for how allies collectively shoulder their security responsibilities.
Building Flexibility into the 2 Percent Target
NATO has adopted an integrated planning concept called Deterrence and Defense of the Euro-Atlantic Area (DDA), which articulates military risks that NATO and its member states must plan against and the attendant forces needed to do so. The next step is to recalibrate how nations meet the 2 percent target in order to deliver the capabilities needed to mitigate NATO’s military risk as follows:
- Incorporate defense performance and readiness. Build upon insights from DDA and other planning processes to assess NATO’s military capabilities to address key risks. Given bureaucratic tendencies to prepare for the last war, assessment of NATO nations’ military tactical and operational adaptability—that is, the ability to innovate on the battlefield—should be more directly linked to assessments of allies’ ability to meet immediate and future challenges.
- Increase transparency. NATO has developed a complex internal system for measuring outputs associated with allied defense spending. Much of this reporting is unclassified but remains shielded from public view. In order to reframe the transatlantic discussion on outputs rather than defense spending inputs, NATO and its member states should make unclassified data and reporting on allied spending and defense capability outcomes publicly available.
- Consider including interallied risk offsets when accounting for actions that reduce collective risk. As evident from the instance of allied support to Ukraine, a responsibility sharing framework should incorporate the provision of monies, matériel, and capabilities to designated third parties as well as efforts to backfill capabilities donated to the front lines.
- Continue to encourage nations to flexibly use their defense budgets toward capability gaps in other NATO or key non-NATO nations. Some NATO nations do not have the absorptive capacity to spend 2 percent on their national defense. The debate, therefore, is not about whether nations can afford to spend 2 percent but how they can spend their resources more effectively to reduce waste within national systems. If a NATO ally cannot absorb 2 percent for its own national needs, it should have greater ability—and acceptance by other allies—to use the resources for another ally’s needs or to fill common capability gaps. And while NATO experts may contend such flexibility exists within current regulations, the reality is that any transfer of monies from national coffers to another nation’s is inherently political. This hurdle needs to be overcome if responsibilities across the alliance are to be truly shared.
Since 2022, NATO headquarters has launched 20 multilateral procurement initiatives, known as High Visibility Projects, which address long-standing gaps in member state arsenals. Such initiatives include ammo warehousing, space communications, and long-range fires. NATO member states should contribute to these initiatives to help fellow members who lack the short-term resources to procure such items.
Building a Holistic Picture of Security and Defense Spending
One major risk is associated with moving to a 4 percent target: if done improperly, NATO and its member states might include miscellaneous spending that does not add value or capability to the alliance. In order to mitigate this risk, the secretary general and international staff should centrally manage the process. To that end, the secretary general should be tasked at the initiation of the tenure with producing a report that articulates nonmilitary risks that have strategic importance to, or impact upon, NATO’s defense capabilities. Annual updates should also be issued by the secretary general’s office. From there, NATO’s international staff should develop a list of the kinds of activities or spending that would count against the target. Much like the defense investment pledge, nations would then report what they are doing to meet the goal. In designing this process, NATO leaders should take the following into account:
- Factor in temporality. NATO must account both for actions taken in the short term to mitigate against immediate threats and for plans and concrete steps taken to prepare for, deter, and mitigate longer-term risks.
- Assume strategic shocks. Many of the crises that have demanded allied attention rapidly move from more peripheral concerns to the top of the allied agenda. A responsibility sharing framework must therefore be routinely updated and have mechanisms for when an issue moves to the top of the strategic agenda.
- Identify nonmilitary investments that have bearing on alliance strategic positioning. As noted earlier in regard to NATO’s Article III preparedness requirements, such investments could include those in dual-use logistics and infrastructure to enhance military mobility, societal resistance capabilities (in areas such as hybrid warfare and information operations), and energy independence, to name a few. Some NATO nations pride themselves on having resilient domestic infrastructure to manage shocks, disruptions, and contingencies. These efforts should be applauded but also be shared within NATO as part of the greater capability set needed to enable alliance responsiveness.
- When appropriate, allow states to report spending through other organizations, including the European Union. A number of strategically important investments, such as improvements to infrastructure that enhance military mobility, occur through the European Union. But, at the end of the day, member nations and national budgets still form the building blocks for that spending. Such investments, when aligned with NATO strategic priorities, as outlined by the secretary general, should therefore be reportable by nations as they show how they are meeting the 4 percent target.
- Make reports publicly available on security spending toward the 4 percent. Part of the reason the burden sharing debate has become so toxic is many of the measures of what allies are doing and how they are doing it remain shielded from public view. A more holistic assessment of how allies are risk sharing should therefore inform the public discourse on the many ways allies are contributing to the common defense and security of the transatlantic community.
Over time, the burden sharing debate has come to focus too much on the money spent on defense rather than on what these figures represent in terms of sharing responsibilities and honoring mutual commitments. It is time to change that discussion. What is needed, and is being proposed in these pages, is a flexible framework by which NATO can capture the different ways allies are stepping up to defend against assessed threats.
Developing mechanisms to better show publics and parliaments the many ways NATO states are reducing their collective strategic risks will help take unproductive heat out of the transatlantic relationship. Ultimately, a new methodology that shines light on these risk reduction activities must be bolstered by serious action by allies to defend against common threats. Defending alliance territory should not fall on only a few nations and should not focus on only a few borders. NATO is a collective defense alliance; it must collectively and actively shoulder the responsibilities before it.
Kathleen J. McInnis is a senior fellow with the International Security Program and director of the Smart Women, Smart Power Initiative at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Daniel P. Fata served as the former U.S. deputy assistant secretary of defense for Europe and NATO policy from 2005 to 2008 and is a non-resident senior adviser at CSIS.
This brief is made possible through support from the Royal Norwegian Ministry of Defence.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
© 2023 by the Center for Strategic and International Studies. All rights reserved.