Analysis: NATO's defence budget formula is flawed — and Canada isn't going to meet its target

Trump is angry that a number of NATO nations haven't met an agreement, reached five years ago, to spend two per cent of their annual Gross Domestic Product on defence

DAVID PUGLIESE, OTTAWA CITIZEN

Another NATO summit brings another chance for U.S. President Donald Trump to browbeat America's allies for not spending enough on defence.

Trump is angry that a number of NATO nations haven't met an agreement, reached five years ago, to spend two per cent of their annual Gross Domestic Product on defence.

But that GDP yardstick has been rendered almost meaningless this year as the tiny nation of Bulgaria has joined the U.S. super power as being one of NATO's top military spenders.

Bulgaria's GDP is so small that by purchasing eight F-16 fighter jets in a one-time outlay of $1.5 billion, the country will now be spending 3.25 per cent of its economic output on its military.

Only the U.S., which spends 3.4 per cent of GDP on defence, is higher.

Using the GDP measurement means that Estonia, which has one of the smallest navies in the world with four ships, has reached the NATO gold standard of two per cent. Canada, which spends more than 20 times the amount in actual dollars on its military, is viewed as a NATO deadbeat.

For that reason, both Conservative and Liberal governments have pushed back on the GDP measurement, which was agreed to by NATO nations at a summit in Wales in 2014.

Prime Minister Stephen Harper, arguably the most supportive leader of the Canadian military that the country had seen in decades, dismissed the notion of reaching that two per cent target, even though Canada signed on to the goal.

At the Wales summit, Harper's staff pointed out that reaching the two per cent mark would have required the military's budget to almost double, something that was not fiscally or politically possible.

Harper himself had come under fire from defence analysts who pointed out that under his government, the percentage of GDP spent on defence reached almost an all-time low of around 1 per cent.

But Harper countered that it's the amount of actual spending and capability of a country's military that matters, not the GDP measurement.

Prime Minister Justin Trudeau was essentially using the same argument Tuesday when he met with Trump at the NATO summit.

“I think it's important to look at what is actually being done,” with defence dollars, Trudeau said.

Canada only spends about 1.3 per cent of GDP on defence.

But tabulate the defence dollars actually being spent on the military and Canada ranks an impressive sixth among the 29 NATO nations.

The Liberal government's defence policy has promised even more money in the future. Military spending is set to increase from the current $21.8 billion to $32.7 billion in 2026-2027.

Trudeau also noted in his meeting with Trump on Tuesday the key role Canada is playing in NATO operations in both Latvia and Iraq.

Germany has taken a similar approach to the one used by Canada's Conservative and Liberal governments. It believes the amount of money actually being spent on military forces is more important than measuring it as a percentage of the GDP. Germany has also pointed out it is the second largest provider of troops for NATO operations.

Trump is expected to once again criticize Germany for its level of defence spending.

But the country does not seem to be in a hurry to make the two per cent goal. Germany currently spends about 1.4 per cent or around $64 billion annually. Earlier this year it told NATO it would reach 1.5 per cent of GDP by 2024.

The other issue facing the Department of National Defence and the Canadian Forces related to the two per cent goal is one of capacity. Even if the defence budget was boosted to meet two per cent, the department simply doesn't have the ability to spend that amount of money.

Around half the defence budget is for salaries and while the senior military leadership would welcome an increase in the ranks the problem they face is that young Canadians aren't exactly rushing out to join the forces.

The military could spend more money on acquiring additional equipment. But a lack of trained procurement staff has been an obstacle standing in the way of even getting approved programs underway.

Trudeau's explanation Tuesday about Canada's military spending being on a steady increase seemed to placate Trump, at least for now. The U.S. president responded that he views Canada as “slightly delinquent” when it comes to defence spending. “But they'll be okay,” he told journalists. “I have confidence. They'll get there quickly, I think.”

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