oversight

U.S.-NATO Burden Sharing: Allies' Contributions to Common Defense During the 1980s

Published by the Government Accountability Office on 1990-10-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

,
                     .._____
                         “..I,- -_1-- ----         -_---..--._-_--_._        IJnited   States   General   Accounting   Office

                                                                             Report t,o the Chairmati, Cormnittee on
                 GAO                                                         Armed Services, House of
                                                                             liepresentatives

     .l_-_._l__-l-




                                                                             U.S.-NATO BURDEN
      Oct.ol,er                  l!mo



                                                                             SHARING
                                                                             Allies’ Contributions to
                                                                             Common Defense
                                                                             During the 1980s


                                                                                                                                142501




                                                                        -_
    GAO,/NSIAI)-!)I                          -32
National Security and
International Affairs Division

B-234472

October 23,lQQO

The Honorable Les Aspin
Chairman, Committee on Armed
  Services
House of Representatives

Dear Mr. Chairman:

This report is the unclassified version of our classified report, which responds to your
request that we review the efforts of US. NATO allies to share the common defense burden.

We are sending copies of this report to appropriate congressional committees and members of
the Congress, the Secretaries of Defense and State, and other interested parties. Copies of the
report will be made available to others upon request. Major contributors to this report are
listed in appendix II. If you have any questions about the report, please call me on (202) 275-
4128.

Sincerely yours,




Joseph E. Kelley
Director, Security and International
  Relations Issues
Executive Summary


                   Although defense burden sharing lacks a commonly accepted definition,
Purpose            it is often associated with the financial contributions made by the
                   United States and each of its allies toward the common defense of the
                   free world.

                   The Chairman, House Committee on Armed Services, requested that GAO
                   determine (1) the status of U.S. burden sharing initiatives proposed to
                   the North Atlantic Treaty Organization (NATO) allies since 1980 and the
                   allies’ responsiveness to those initiatives, (2) the allies’ record in
                   meeting their military commitments, and (3) the effect of future force
                   reductions on defense burden sharing.

                   This report provides a historical presentation of defense burden sharing
                   for use by the Congress in its deliberation on the future U.S. role in NATO.
                   With the collapse of the Warsaw Pact, a potential treaty on conventional
                   armed forces in Europe, the closer association between East European
                   countries and the West, and the reunification of East and West Ger-
                   many, the role of NA?D and the defense burden to be shared among its
                   members will likely undergo changes. A historical perspective provides
                   valuable insight into the likelihood that U.S. allies will be willing to
                   assume a greater share of the defense burden, even though that burden
                   will be considerably lighter to bear.


                   Since NATD'S establishment in 1949, the cost of providing for the collec-
Background         tive protection of the alliance was to “be shared equitably among the
                   member countries.” NATO addresses its defense requirements through the
                   defense planning process. As part of this process, force goals are estab-
                   lished and agreed to by each NATO member, after considering economic,
                   political, and financial constraints. Force goals are expressed in a
                   variety of ways, such as number of forces, level of readiness, quantity
                   and capability of equipment, and stockpiles of critical munitions.


                   According to commonly used indicators, during the 198Os, the United
Results in Brief   States had one of the best records of burden sharing performance among
                   all member nations and assumed a relatively greater share of the eco-
                   nomic burden of defending NATOthan its allies. It has spent more on
                   defense as a percent of its gross domestic product (with the exception of
                   Greece in some years) and on a per capita basis than its allies. The
                   United States has consistently been among NATO'S top performers in
                   meeting its force goals.



                   Page2
                            ExecutiveSummary




                            Many NATD members, however, have made expenditures and taken polit-
                            ical risks within and outside NATO'S boundaries to support common inter-
                            ests. Although these activities have benefited free world interests, they
                            have not obviated the need for individual allies to address their military
                            commitments to NATO.

                            With the prospects of the conclusion of a NAm-Warsaw Pact conven-
                            tional armed forces agreement within a year and perhaps even further-
                            reaching agreements in the future, defense burden sharing will remain
                            as important, if not more so, in coming years, Improved NATo-Warsaw
                            Pact relations and budgetary problems reported by many NATO nations
                            make it questionable whether the necessary resources will be made
                            available to address some of the NATOmembers’ most serious and expen-
                            sive problems. According to Department of Defense (DOD) officials, some
                            of these problems will become “less serious” as a result of Warsaw Pact
                            reductions; however, many still need to be addressed as member nations
                            evaluate the future role of NATO.



GAO’s Analysis

Factors Used to Assessthe   Measuring each ally’s share of the burden has caused considerable
Relative Burden             debate and disagreement within the alliance. However, two economic
                            measures-percentage of and per capita gross domestic product spent
                            on defense-are among those most commonly used. From 1980 through
                            1988, the United States devoted an average of 6.2 percent of its gross
                            domestic product to defense, while the remaining NATOmembers devoted
                            an average of 3.5 percent. On a per capita basis, the IJnited States has
                            spent more on defense than other NATO countries, including those that
                            have higher per capita gross domestic products than the United States.

                            While some generalizations can be made in comparing IJ.S. and other
                            NATO allies’ burden sharing, a wide variance exists arnong individual
                            NA’m allies. For example, DOD notes in its 1990 Report on Allied Contribu-
                            tions to the Common Defense that Turkey, Greece, and the United
                            Kingdom “look strong” in terms of the economic sacrifice made towards
                            defense, while Luxembourg, Denmark, and Canada “look substantially
                            below par.” The remaining non-US. NATO allies’ performance was consid-
                            ered “mixed.”




                            Page3                                  GAO/NSIAD-91-32U&NATOBurdenSharing
                          Executive Summaxy
                                                                                                     I




                          Measuring the burden in terms of defense outputs-that    is, the number
                          and types of equipment and the number of personnel-provides       a more
                          favorable view of allied contributions than input measures such as the
                          percent of gross domestic product spent on defense. However, output
                          measures have numerous limitations, and the relative contributions
                          made through output measures cannot be assessed.


NATO’sProgress in         The United States, the United Kingdom, and West Germany rank among
                          NATO'S top performers in meeting force goals. DOD, however, considers
Addressing Its Military   West Germany’s overall burden sharing efforts “mixed” in light of its
Commitments               economic strength and relatively low defense expenditures. Conversely,
                          countries with weaker economies, such as Turkey and Greece, rank low
                          in force goals performance but are considered good performers in terms
                          of economic effort. Others, such as Luxembourg, Denmark, and Canada,
                          rank low in both force goals performance and in economic sacrifice
                          towards the common defense of NAKI.

                          According to a NATO report, some of NATO'S defense deficiencies could
                          result in a failure to accomplish important NATOmissions. Most NATO
                          members have experienced deficiencies in addressing their force goals,
                          even though they could financially afford to correct their most serious
                          shortfalls. None of the NATO members-including      the United States-
                          have implemented all of the force goals considered critical to the accom-
                          plishment of their missions. However, DOD officials noted that, by their
                          nature, the NATD reports are deficiency oriented and may therefore be
                          overly pessimistic. Nevertheless, the relative efforts of individual coun-
                          tries can be determined and are an important indicator of future willing-
                          ness to undertake NATO defense responsibilities.

                          Many allies have not been willing to spend more on defense because
                          they perceived the Soviet/Warsaw Pact threat to be less serious than
                          has the United States. This factor will undoubtedly take on even greater
                          significance as NATI attempts to adjust to reduced tensions with Eastern
                          Europe.

                          During the 1980s NATO adopted several initiatives to correct long-
                          standing military deficiencies. Most of these initiatives did not achieve
                          their intended purposes. For example, most NATO nations fell far short of
                          increasing their defense spending by 3 percent per year (after inflation),
                          a goal that existed within NATOthroughout the 1980s. The alliance was
                          more successful in implementing limited initiatives rather than those
                          requiring large financial contributions. DOD officials agreed that


                          Page4                                  GAO/NSIAI&9132U.S.-MBurdenSharing
                               Bxecutlve Summary
E




                               although these initiatives did not achieve their intended goals, they were
                               a positive influence within the alliance and resulted in some allied
                               efforts that would probably not have been made otherwise.


    Host Nation Support        Host nation support generally refers to assistance provided to U.S.
                               forces by other allies in both wartime and peacetime. Wartime host
                               nation support encompasses all civil and military assistance provided to
                               allied forces located in or being deployed to and through the host
                               country in times of war. Peacetime support includes cost sharing and
                               other arrangements primarily for providing and supporting U.S. bases.

                               Negotiations requiring large financial commitments from the host nation
                               have generally been less successful than requests for initiatives consid-
                               ered to be low cost. However, much of the support the United States has
                               received from these countries has indirectly benefited the United States
                               through cost avoidance. For example, West Germany provides most of
                               the land used by U.S. forces on a rent-free basis. The United States has
                               concentrated its host nation support efforts-and    been more suc-
                               cessful-in negotiating agreements for wartime support.


    Effect of Proposed Force   Notwithstanding the prospects for force reductions, defense burden
    Reductions on Defense      sharing will likely remain as important, if not more so, in the coming
                               years. Based on proposals being discussed in the Conventional Armed
    Burden Sharing             Forces, Europe talks, NATO European forces would be cut 5 to 15 percent
                               below current levels in certain major weapons categories; the Warsaw
                               Pact would have to make more massive cuts in order to reach relative
                               parity. The proposals would also result in a troop reduction of 80,000
                               US. forces in Europe. If the U.S. force structure is reduced by that
                               amount, substantial savings may be achieved.

                               Although savings may be achieved as a result of a conventional forces
                               agreement, some additional costs will have to be shared among alliance
                               members, Cognizant U.S. officials note that a reduction of NATO and
                               Warsaw Pact forces would result in a greater reliance on the quality of
                               defense. Therefore, more balanced, modern, and technologically
                               advanced forces will be necessary. In addition, a more complex verifica-
                               tion process would be required. Decisions would also be required on
                               whose equipment should be destroyed to meet treaty limitations. If the
                               older, less capable equipment is destroyed first, NATO will have to con-
                               sider (1) the redistribution of more advanced equipment and (2) possible



                               Page 6                                 GAO/NSIAD9132 U.S.-NATOBurden Sharing
                      ExecutiveSummary




                      compensation from the recipient countries to those allies who, in the
                      past, have made investments in more modern forces.

                      If much greater force and equipment reductions take place, substantial
                      savings or “peace dividends” may be possible for NATD forces. At that
                      time, benefit sharing rather than burden sharing will need to be
                      addressed.

                      Not all reductions and associated savings necessarily flow directly from
                      implementation of the proposed treaty provisions. Savings will also
                      most likely be achieved through a reconsideration of the level of defense
                      believed necessary to counter the perceived threat.


                      GAO is making no recommendations.
Recommendations

                      GAO did not obtain written agency comments on this report but did dis-
Agency Comments and   cuss its contents with cognizant officials in the Departments of State
GAO Evaluation        and Defense. Their comments have been incorporated throughout the
                      report, as appropriate.

                      Overall, DOD officials noted that while U.S. initiatives to correct long-
                      standing allied military defense deficiencies have not been fully suc-
                      cessful, many of the NATOpartners made contributions that would not
                      have been made otherwise. DOD officials expressed a general concern
                      that the report (1) was too critical of output measures as an indicator of
                      burden sharing and (2) relied too much on NATOevaluations of force
                      goals performance.

                      GAO believes that output measures do not provide an adequate indication
                      of defense burden sharing because they exclude factors such as training,
                      readiness, and sustainability; are subject to differences in accounting for
                      equipment that is included; and exclude major categories of defense
                      investment such as U.S. transport capability. Also, there is no way to
                      combine the contributions of the diverse categories used to measure
                      output.

                      GAO believes that NATO evaluations of force goals performance offer a
                      viable alternative because force goals are determined with consideration
                      of each member’s economic, political, and financial constraints. A
                      country’s output can be measured against goals agreed to within the


                      Page6                                  GAO/NSIAD-9132U.W-NATDBurdenSharing
Executive Summary




NATD framework. Moreover, opinions expressed and conclusions reached
in U.S. reports of individual members’ performance closely parallel
those in NA?D’S evaluations.

State Department officials commented that the report is generally a
complete and accurate historical account. They added that as the United
States begins to reduce its forces in Europe, it may become increasingly
difficult to persuade other NATO allies to adequately address their
remaining defense commitments.




Page 7                                GAO/NSIAD91-32 U.S.-NATOBurden Sharing
Clmtents


Executive Summary                                                                              2

Chapter 1                                                                                     10
Introduction          Congressional Concerns About NATO Defense Burden                        10
                          Sharing
                      Assessing the Relative Burden                                           13
                      Use of Force Goals to Assess the Burden Shared                          14
                      Other Burden Sharing Considerations                                     15
                      Perception of the Threat Affects Allied Defense Spending                16
                      Objectives, Scope, and Methodology                                      18

Chapter 2                                                                                     20
NAm’s Progress in     Force Goals Determined During NATO’s Defense Planning                   20
                           Process
Addressing Military   Efforts to Meet Force Goals Affect NATO’s Military                      21
Commitments                Strategy
                      Defense Improvement Programs in NATO During the                         28
                           1980s
                      Effect of Proposed Force Reductions on Defense Burden                   36
                           Sharing

Chapter 3                                                                                     39
West German and       Federal Republic of Germany: More Progress for Wartime
                           Than for Peacetime Support
                                                                                              39
British Host Nation   United Kingdom Responses: Limited Overall Progress                      48
Support for U.S.
Forces
Appendixes            Appendix I: Factors Used to Reflect Each Country’s Share                56
                          of the Burden
                      Appendix II: Major Contributors to This Report                          70

Tables                Table 2.1: NATO Members’ Defense Contributions in                       24
                          Selected Areas (1988)
                      Table 2.2: NATO Real Defense Spending Growth (1980-88)                  30
                      Table 2.3: Estimated Costs for Construction of Crotone                  35
                          Air Base
                      Table 3.1: Estimated Costs to Implement the Wartime                     41
                          Host Nation Support Agreement (1983-94)



                      Page 8                               GAO/NSIAD-9132 U.S.-NAlOBurden Sharing
          Table 1.1: Military-Related Expenditures Absorbed by                     64
              West Germany (1988)

Figures   Figure 1.1: NA’IC Nations’ Total Defense Expenditures                    11
               and Gross Domestic Product (1988)
          Figure I. 1: NATO Defense Spending as a Percentage of the                57
               Gross Domestic Product ( 197 l-88)
          Figure 1.2: Relationship of Per Capita Gross Domestic                    58
               Product and Per Capita Defense Spending (1988)
          Figure 1.3: Percent of Gross Domestic Product Spent on                   63
               Defense and Development Assistance (1988)




          Abbreviations

          DOD Department of Defense
          NA'NINorth Atlantic Treaty Organization
          Page9                                 GAO/NSIAD-91-32U.S.-NATOBurden Sharing
Chapter 1

Introduction


                                In 1989, the North Atlantic Treaty Organization                      (NATO)
                                                                                           celebrated its
                                40th birthday. The purpose of the North Atlantic Treaty, signed on
                                April 4, 1949, was primarily to provide for the collective protection of
                                Europe and North America from the Soviet territorial expansion that
                                had already begun during World War II. In one of the most important
                                provisions of the Treaty, the NATO allies formally committed themselves
                                to the collective defense of the alliance, stating that “the Parties agree
                                that an armed attack against one or more of them in Europe or North
                                America shall be considered an attack against them all....”

                                The building of a defense base capable of responding to the perceived
                                threat is, according to NATO, “based on the principle that the burden of
                                defending the West should be shared equitably among the member coun-
                                tries....” Although “burden sharing” is a frequently used term, its defini-
                                tion and measurement have been the source of considerable debate
                                among the alliance members virtually since NAID’S founding and have
                                fostered many disagreements regarding how equitably that burden is
                                being shared.


Congressional        level of the defense burden shared by other NATO allies, particularly com-
Concerns About NALTO pared with the large costs incurred by the United States in support of
DefenseBurden        the alliance. In 1988, the United States spent 6.1 percent of its gross
                     domestic product’ on defense, while the other allies spent an average of
Sharing              3.1 percent. Although the U.S. expenditures, expressed as a percentage
                                of the gross domestic product, have fluctuated during its 40-year mem-
                                bership with NATO, even at its lowest level, the United States has devoted
                                relatively more of its resources to defense than the rest of the alliance.

                                As figure 1.1 shows, the United States overwhelmingly spends the most
                                among the alliance members as a percentage share of total defense
                                spending by NATO countries or gross domestic product.




                                ‘According to the Defense Department, “GDP reflects the total value of all goods and services pro-
                                duced within the national borders of a country in a given year and, thus, is a good indication of the
                                magnitude and rate of growth of a country’s economy.” Report on Allied Contributions to the
                                Common Defense (Washington, D.C.: Department of Defense, Apr. 1987), p. 67.



                                Page 10                                               GAO/NSIADSl-32 U.S.-NAIDBurden Sharing
                                           Chapter 1
                                           Introduction




Flgurs 1.l: NATO Nations’ Total Defense Expenditures and Gross Domestic Product (1988)
      Total Defense Spending                                                       Gross Domestic Product
                                        7.6%
                                        West Germany
                                        7.5%
                                        United Kingdom

                                        4.4%
                                        Italy

                                        2.2%
                                        Canada
                                        6.6%
                                        All Others a/
                                                                                                                          United States




                                        United States




       -                               7.6%
                                       France
                                          %elgium, Denmark, Greece, Luxembourg, the Netherlands, Norway, Portugal, Spain, and Turkey.
                                          Source: Department of Defense (DOD).


                                          While the United States carried about 64 percent of the financial burden
                                          of the collective alliance defense (according to the                NATO
                                                                                                    definition of
                                          defense spending) in 1988, the U.S. share of the collective gross
                                          domestic product was 47 percent.

                                          Historically, the executive branch and Congress have emphasized dif-
                                          ferent approaches to        NATO
                                                                      defense burden sharing. The executive branch
                                          has called upon the allies to do more to increase their defense capabili-
                                          ties. On the other hand, members of Congress have called for the Euro-
                                          pean allies to pay a greater share of U.S. stationing costs. Congress has
                                          also occasionally questioned whether the executive branch was doing


                                          Page 11                                            GAO/NSIAD-91-32U.S.-NA’LO
                                                                                                                     Burden Sharing
chapter 1
Introduction




enough to encourage the NATO allies to assume more responsibility in this
area.

Congressional dissatisfaction has been reflected in the recurring debate
over the withdrawal of U.S. troops from Europe. Withdrawal has been
proposed at various times during NATO'S history but has never been
enacted into law. In the 195Os, Senator Robert Taft opposed stationing
U.S. troops in Europe because he feared that Europeans would depend
on them indefinitely. During the 1960s and 1970s Senate Majority
Leader Mike Mansfield argued for a reduction in U.S. troops in Europe
while encouraging West European countries to contribute more. Mans-
field sought withdrawal of U.S. troops partly because postwar European
recovery was considered to be complete and the U.S. military was
making large expenditures in support of Vietnam.

Withdrawal initiatives continued in the 1980s sometimes combining
troop reduction proposals with admonitions that the allies should
increase their contributions. For example, the 1984 Nunn-Warner-Roth
amendment2 proposed setting a timetable for phased U.S. troop with-
drawals if NATO did not take specific actions to improve its conventional
defenses. The proposed amendment received widespread attention and
considerable congressional support, but it did not pass.

The State and Defense Departments’ budget authorization legislation for
fiscal year 19893 expressed the sense of the Congress that U.S. allied
costs related to defense alliances were not proportional to economic
resources and that the administration should negotiate agreements with
NATI and Japan on a more equitable distribution of the burden of finan-
cial support for mutual defense. In response to congressional criticism,
in March 1988, the President asked the NA?I) allies to redouble their
burden sharing efforts. A task force was subsequently formed, led by
the Deputy Secretary of Defense, who visited NATO capitals to impress
upon the allies the need for growth in defense budgets and more equi-
table sharing of the allied defense burden.

On December 18,1987, the Chairman, Committee on House Armed Ser-
vices, created a “Defense Burdensharing Panel,” whose mission was to
“review worldwide defense commitments, the costs of those commit-
ments, and how the burden of providing for the defense of the United

2S.3266,98th Congress.
3P.L. 100-204 and P.L. 100-466, respectively.



Page 12                                         GAO/NSIAD91-32 U.S.-NA’IOBurden Sharing
                         chapt4w 1
                         Mroduction~




                         States and its friends and allies is shared among nations.” The Panel
                         held a series of hearings on these subjects and, in an interim report
                         issued in August 1988,4 reached numerous conclusions. It concluded that
                         the United States was bearing a disproportionate share of the defense
                         burden and that Japan and Europe, as a whole, were not contributing to
                         defense in a manner commensurate with their economic ability. Simi-
                         larly, a Senate appropriations report stated that “Given the very real
                         pressures caused by the budget deficit and the current trade imbalance
                         with these same allied nations, it is not reasonable to expect U.S. tax-
                         payers to continue to finance such a large percentage of the cost of
                         common defense.“6


                         Most of the measures used to assess defense burden sharing generally
Assessing the Relative   show that the United States contributes a relatively greater share to the
Burden                   common defense than the other alliance members. For example, from
                         1980 through 1988, the United States devoted an average of 6.2 percent
                         of its gross domestic product to defense compared to an average of
                         3.6 percent by the remaining NATO members. Even during the 1970s
                         when the U.S. defense budget was decreasing and those of other allies
                         were increasing, the percentage of U.S. gross domestic product spent on
                         defense remained higher than that of the rest of the alliance. The only
                         countries that individually exceeded the US. share in any particular
                         year since the 1970s were the aid recipient countries---Greece, Portugal,
                         and Turkey.

                         Per capita measures-widely     accepted indicators of economic develop-
                         ment and standard of living- do not change the conclusion that the
                         United States has borne a greater burden for defense than other NATO
                         nations. U.S. per capita defense spending for fiscal year 1988 was
                         reported by the Department of Defense (DOD) at $1,190. No country
                         makes per capita defense expenditures relative to its gross domestic
                         product on a level equal to that of the United States, although some per-
                         form notably better than others. Countries such as Canada, Luxem-
                         bourg, and West Germany have per capita gross domestic products
                         approaching that of the United States but spend substantially less on
                         defense on a per capita basis. Denmark and Norway, with higher per
                         capita gross domestic products than the United States, spend only
                         38 and 68 percent, respectively, of what the United States spends on a

                         4Report of the Defense Burdensharing Panel of the Committee on Armed Services (Washington, DC.:
                         House of Representatives, Aug. 1988).
                         %nat.e Report loo-402 on Department of Defense Appropriations Bill for 1989, June 24,1988, p. 12.



                         Page 13                                            GAO/NSIAD9132 U.S.-NAXUBurden Sharing
                        Chapter 1
                        Introduction




                        per capita basis, according to the 1990 DOD Report on Allied Contribu-
                        tions to the Common Defense.

                        In appendix I, we discuss in greater detail the use of gross domestic
                        product as well as some arguments against its use as a sole criterion to
                        compare relative defense burdens. In addition, we discuss NATD nations’
                        contributions in terms of military capabilities, often referred to as “out-
                        puts,” as another measure of the burden shared.


                        Assessments of the progress that countries make towards addressing
Use of Force Goals to   their force goals serve as indicators of their efforts to contribute to the
Assessthe Burden        burden of the common defense of NATO. Force goals are established in
Shared                  consideration of members’ economic, political, and financial constraints
                        and are agreed to by each NATO member. According to NATO'S Deputy
                        Assistant Secretary General for Defense Planning, the assessment pro-
                        cess provides the most comprehensive view of the shared burden within
                        NATO. The Eurogroup” Chairman also expressed this opinion, noting that
                        NATO force goals are an equitable measure of effort in that they present
                        an equal, reasonable challenge to all participating nations.

                        The concept of fairness within NATO dates back to 1951 when the first
                        attempt was made to reconcile military requirements with the economic
                        and financial resources of member countries. Recognition was given to
                        the principle that no country should be called on to bear a defense
                        burden beyond its means. In some instances, military assistance from
                        NATD'S more prosperous members has been sought for those who have
                        difficulty in financing, from their own resources, the full range of con-
                        tributions to the common defense.

                        Despite efforts to ensure that adequate resources are applied to fulfill
                        defense programs and that consideration is given to the individual
                        ability to contribute, all NATOnations have experienced deficiencies in
                        addressing their force goals. With the exception of aid recipient coun-
                        tries, however, most NATO nations that have failed to meet force goals
                        could have financially afforded to correct many of their most serious
                        shortfalls.



                        “The Eurogroup is a strategic and political forum within NATO, including as members the defense
                        ministers of 12 European countries. Excluded are the llnited States, Canada, France, and Iceland. An
                        aim of the Eurogroup is to strengthen the European defense contribution to NATO and publicize this
                        effort.



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                           Chapter1
                           Introduction




                           Some NA?D members argue that the United States does not adequately
Other Burden Sharing       consider a number of varied efforts as part of the burden they share.
Considerations             These NATO members believe that the United States-in particular, the
                           Congress-has been too preoccupied with defense outlays as the pri-
                           mary indicator of burden sharing. They believe that other efforts or con-
                           tributions that are not reflected in defense spending measures should be
                           considered, For example:

                       l Virtually every country in NATO Europe hosts U.S. forces on its territory.
                         West Germany hosts the greatest concentration of military forces in the
                         western world; more than 400,000 allied troops are located in Germany
                         (about 260,000 are U.S. forces). West Germany also hosts thousands of
                         small and large annual military exercises that have increasingly become
                         a sensitive domestic political issue.
                       . In 1988, the United States and Spain signed a new base agreement
                         requiring the United States to relocate its 401st Tactical Fighter Wing
                         based at Torrejon Air Base by May 1992. Italy agreed to accept the U.S.
                         401st when the Spanish agreement expires, and NATD agreed to fund a
                         large amount of the costs associated with establishing the new base in
                         Crotone, Italy.
                       l Italy was the first country to allow U.S. ground-launched cruise missiles
                         on its soil, opening the way for similar agreements with other NATO coun-
                         tries. Subsequently, Belgium, the Netherlands, the United Kingdom, and
                         West Germany agreed to base these missiles, sometimes in the face of
                         strong public opposition. West Germany also agreed to have Pershing II
                         missiles stationed on its territory. (Under the Intermediate-Range
                         Nuclear Forces Treaty, these missiles will be withdrawn and destroyed
                         by June 1991.)
                       . France, the United Kingdom, the Netherlands, Belgium, and Italy con-
                         tributed forces to join U.S. units in support of naval operations in the
                         Persian Gulf. Luxembourg shared in the costs incurred by the Belgian
                         forces. The United Kingdom took a leadership role in coordinating the
                         naval efforts of other European nations in the Gulf and provided sup-
                         port to the minehunting ships deployed by Belgium and the Netherlands.
                         West German naval units deployed to the Mediterranean to compensate
                         for other allied forces active in the Gulf.
                       l Turkey has approved U.S. requests for assistance with activities outside
                         of NATO. For example, it allowed units of the U.S. Navy’s Sixth Fleet
                         engaged in peacekeeping activities in Lebanon to stop at Turkish ports
                         for rest and recreation and, according to DOD, for extensive refueling.
                       . The United Kingdom allowed the United States to develop a major stra-
                         tegic base on Diego Garcia, located in the Indian Ocean, significantly
                         improving the U.S. ability to support its policies in the region.


                           Page 15                               GAO/NSIAD-91-32U.S.-NATOBurden Sharing
                          chapter 1
                          Introduction




                        . Most NATO members have participated in various United Nations’
                          peacekeeping activities throughout the world, and some were members
                          of the Multinational Force and Observers, a U.S. organized effort to
                          monitor the Sinai peace accord between Israel and Egypt.

                          As the preceding examples illustrate, the cooperative relationship
                          among the NATO allies is complex, and their efforts often extend beyond
                          defense spending and the implementation of force goals. Many of these
                          efforts have involved assistance to the United States at considerable
                          political risk. Clearly, these other activities advance and protect U.S.
                          and allied interests. These activities have not, however, obviated the
                          need for the individual allies to address their military commitments to
                          NATO. Allies cannot substitute these activities for the often expensive
                          task of establishing an adequate defense capability.


                          Through the 1970s and 1980s the NATO allies perceived the Soviet/
Perception of the         Warsaw Pact threat to be less severe than the United States did. This
Threat Affects Allied     perception affected their willingness to spend more on defense.
DefenseSpending           In our 1984 report assessing the allies’ progress in the Long-Term
                          Defense Program, we discussed differences in views about the Soviet
                          threat and what was required to meet the threat. In the report, we
                          referred to DOD’S Report on Allied Contributions to the Common Defense,
                          which stated that “emphasizing social and economic viability as their
                          first priority, many Europeans continue to view the threat less seriously
                          than the United States and European views of how best to counter the
                          Soviet threat remain divergent.”

                          Former Secretary of Defense James Schlesinger noted that since the
                          early 196Os, the United States has regularly pressed its European part-
                          ners to develop a full-fledged conventional deterrent7 He added that
                          such pressures have been resisted, first on doctrinal lines and later
                          because of budgetary considerations. In Dr. Schlesinger’s view,
                          Europeans have generally regarded the Soviet military threat as “far
                          less menacing” than has the United States. Consequently, they have felt
                          much less need to create the appropriate military counters to Soviet con-
                          ventional strength.



                          7James R. Schlesinger, “Problems Facing the Alliance,” 35 Years of NATO, ed. Joseph Godson (New
                          York: Dodd, Mead & Company, 1986).



                          Page 16                                            GAO/NSIAlk91-32 U.S.-NATOBurden Sharing
Chapter 1
Intraduction




According to DOD’S 1989 Report on Allied Contributions to the Common
Defense, most West Germans were satisfied with their current level of
defense and would be reluctant to spend more in this area. In addition,
German people were concerned that significant increases in defense
spending could lead to higher levels of tension between West Germany
and the Soviet Union and could damage inner German relations. More-
over, the majority of West Germans did not believe that Soviet conven-
tional forces were strong enough to make aggression in Central Europe a
realistic possibility, especially in view of the effects of perestroika on
the Eastern European states. Other NATO nations have voiced similar sen-
timents. For example, Denmark’s perception has been that the Soviet
threat is rapidly decreasing. Therefore, the majority of people saw no
reason to spend more on defense and would oppose such an idea as
counterproductive to peace. In their view, such actions would have sent
the wrong signal to the Soviets at a time when prospects for further
disarmament were better than ever in the postwar period.

The possibility of NA?o-Warsaw Pact agreements to place limitations on
both nuclear and conventional forces appears to be placing greater pres-
sure on governments to hold their defense spending to current levels or
decrease it. Such pressures may also result in an inability to adequately
address the force goals remaining after such agreements are reached,
especially among some of the NATOmembers that have the lowest imple-
mentation rates.

According to a 1988 Defense Planning Committees report, the
Intermediate-Range Nuclear Forces Treaty and signs of real change in
Soviet policy have raised public expectations for further arms control
negotiations and reductions in defense spending. It is within this envi-
ronment that the Committee notes that a major challenge to all countries
is to educate and persuade their citizens to support defense spending.
Given many NATD nations’ prior reluctance to spend more on defense
when the Soviet threat appeared more menacing than it now does, this
is likely to be a most difficult challenge. Threat perceptions will
undoubtedly take on even greater significance as NATO attempts to adjust
to proposals being discussed in the Conventional Armed Forces, Europe,
talks and to political developments taking place within Eastern Europe.




sNAWs Defense Planning Committee is composed of representatives of the member countries partici-
pating in NATD’s integrated military structure. It deals with matters specifically related to defense.



Page 17                                               GAO/NSIAD-91-32U.S.-NAl0 Burden Sharing
                            The Chairman of the House Committee on Armed Services asked us to
Objectives, Scope,and       obtain information on U.S. efforts to urge its NATO allies to assume a
Methodology                 greater role in defense burden sharing, the responsiveness of those allies
                            to such efforts, and the effect of future force reductions on defense
                            burden sharing. In August 1989, we issued a report on U.S.-Japan
                            burden sharing.e This report addresses U.S.-NATOburden sharing efforts.
                            Our objectives were to determine

                        l the various ways in which NATO defense burden sharing contributions
                          are measured;
                        l what major burden sharing initiatives the United States proposed within
                          NAX) during the 1980s and the NATO allies’ responses;
                        l how well NAKI allies, including the United States, have met their defense
                          commitments; and
                        . the extent of bilateral support sought and received by U.S. forces from
                          West Germany and the United Kingdom, the two European countries
                          hosting the largest contingents of U.S. military personnel.

                            We interviewed officials and reviewed records at the Departments of
                            State and Defense. We reviewed applicable legislation, treaties, and con-
                            gressional reports and testimony. We also reviewed NA~D reports as well
                            as those issued by the Congressional Budget Office, Congressional
                            Research Service, and private organizations pertaining to NATO defense
                            burden sharing. In addition, we interviewed officials and reviewed
                            records at the U.S. Mission to NAKI in Brussels, Belgium; the US. Embas-
                            sies in Bonn, West Germany, and in London, England; the U.S. European
                            Command Headquarters in Stuttgart, the U.S. Air Forces Headquarters
                            for Europe in Ramstein, the U.S. Army Headquarters for Europe in Hei-
                            delberg, West Germany; and the U.S. Naval Forces Headquarters for
                            Europe in London; England.

                            We discussed defense burden sharing at NATO headquarters with repre-
                            sentatives of West Germany, the United Kingdom, and the Netherlands
                            governments and with NATO and Eurogroup officials. In addition, we
                            obtained information from representatives of West Germany’s Minister
                            of Foreign Affairs and Minister of Defense and from the United
                            Kingdom’s Minister of Defense. Although we did not independently
                            assess U.S. or allied efforts to address force goals, we reviewed U.S. and
                            NAP assessments and related U.S. and NAP documents and obtained
                            views from appropriate U.S. and foreign officials.

                                      Burden Sharing:JapanHasIncreasedIts Contributions but Could Do More(GAO/



                            Page 18                                       GAO/NSIAD-9132 US.-NKlO Burden Sharing
As agreed with your staff, we did not obtain written agency comments
on this report. However, we discussed the contents of this report with
cognizant officials in the Departments of State and Jkfense. Their com-
ments have been incorporated throughout the report, as appropriate.
Our review was conducted from February 1988 to April 1990 in accor-
dance with generally accepted government auditing standards.




Page 19                               G1Ao/MsIADBls2
                                                   U&-m     Burden Sharing
NATO’sProgressin Addressing
Military Commitments

                    Efforts to enhance or maintain military capabilities are generally made
                    within NAID'S defense planning process. As part of this process, force
                    goals are established and agreed to by each NAKI member. Each
                    member’s economic, political, and financial constraints are considered.
                    Annual assessments of allies’ progress towards meeting their force goals
                    provide an indication of their contribution to NATO'S common defense.
                    These assessments generally indicate how responsive the allies have
                    been in achieving agreed-to initiatives to enhance or maintain NATO'S mil-
                    itary capabilities.

                    During the 198Os, the United States pursued numerous initiatives to
                    enhance or maintain NATO'S military capabilities. Once the commitments
                    resulting from these initiatives were agreed to, they became NATO
                    actions; that is, all members of the alliance adopted them. Some initia-
                    tives addressed broad issues, such as an increase in each country’s real
                    defense expenditures by at least 3 percent annually. Others focused on
                    more specific issues, such as increasing contributions to the NATO infra-
                    structure fund and paying for the relocation of the U.S. Air Force’s
                    401st Tactical Fighter Wing.

                    Assessments of force goals performance serve as indicators of countries’
                    efforts to contribute to the common defense of NATO. From a burden
                    sharing perspective, force goals performance and related efforts to
                    improve military capabilities are considered along with a country’s indi-
                    vidual ability to contribute. With some notable exceptions, most NATD
                    nations that have a poor record in meeting force goals can financially
                    afford to correct many of their most serious shortfalls.

                    NATO'S progress in addressing its military commitments is considered
                    from two separate but interrelated perspectives. First, we discuss allies’
                    efforts to address their force goals and the impact that current weak-
                    nesses could have on NATO as a whole. Second, we address various U.S.
                    efforts pursued during the 1980s to improve NATOmilitary capabilities.
                    These sections overlap somewhat because many U.S. initiatives were
                    later incorporated into countries’ force goals.


                    The principal method used by NATO to address its defense requirements
Force Goals         is the defense planning process. During this process, force goals are
Determined During   established and tailored towards the accomplishment of defense mis-
NAm’s Defense       sions that each NA?I) member agrees to. Force goals are generally defined
                    in terms of military requirements that are expressed in a variety of
Planning Process    ways, such as the number of forces; level of readiness, quantity, and


                    Page20                                  GAO/NSLAD-91~32U.S.-NATOBurdenSharing
                        chapter 2
                        NATO’sProgpw~ein Addressing
                        MIlItary Commitmenta




                        capability of equipment; and stockpiles of critical munitions. Packages
                        of force goals for each participating nation are designed to promote the
                        proper balance between force levels and the modernization, readiness,
                        and sustainability of those forces. The force goals, numbering roughly
                        100 to 200 per nation, address land, air, and maritime force
                        improvements.

                        The force goals for each country are collectively approved by NATO, and
                        each country is asked to adopt these goals for implementation. The
                        expenditures necessary to implement a country’s force goals may exceed
                        its planned defense budget, but the goals are intended to present a rea-
                        sonable challenge and an equal challenge when political, fiscal, and eco-
                        nomic circumstances are taken into account. Reconciling NATO'S military
                        requirements with the economic and financial resources of member
                        countries dates back to 1951 and is based on the principle that “defense
                        must be built on a sound economic and social basis and that no country
                        should be called on to shoulder a defense burden beyond its means.”

                        Every year, NATO reviews each nation’s efforts to meet force goals,
                        including progress made during the current year and plans for the next
                        5 years. NATO members’ progress is documented in the Defense Planning
                        Committee’s General Report and in accompanying country chapters.
                        This report is preceded by a multilateral meeting in which the defense
                        gains and shortfalls of each country are discussed and encouragement is
                        provided to countries to correct deficiencies. In preparation for the
                        meeting, the U.S. Mission to NATD, th8 U.S. embassy in each NATO country,
                        the Department of State, and DOD assess each member’s defense progress
                        through a series of internal messages.


                        Each member of NA?D'S integrated military structure is tasked with force
Efforts to Meet Force   goals designed to enhance its capabilities to address agreed-to military
Goals Affect NAm’s      missions. The military missions are based on a NATO assessment of
Military Strategy       Warsaw Pact capabilities. These missions reflect each country’s geo-
                        graphic location, economic strength, and nature of the particular threat
                        against it. Some countries’ missions are more limited than others. For
                        example, the Netherlands’ missions emphasize maritime defense, the
                        provision of reception areas for external reinforcements, and the
                        defense of a sector in West Germany. The United States, on the other
                        hand, as the leading power of the Western world interested in promoting
                        stability on a global scale, has force goals affecting both conventional
                        and nuclear forces and has military missions in all NATO regions.



                        Page 21                               GAO/NSIAD91-32 U.S.-NAl0 Burden Sharing
Chapter 2
NATO’sPro@-essin Addressing
lWlit.ary Ckmmitment.9




In the following sections, we discuss NATO'S and U.S. analysts’ assess-
ments of alliance members’ efforts to meet force goals and how those
efforts affect NATO as a whole. Table 2.1 illustrates selected defense
capabilities of NA?D countries relative to the alliance as a whole. DOD
presents these and other comparisons to the Congress in its annual
Report on Allied Contributions to the Common Defense. While no single
table could cover all of the factors constituting NATO'S total defense,
table 2.1 provides a perspective on the relative size of the countries’ mil-
itary contributions and is useful in discussing their efforts to meet force
goals.




Page 22                                 GAO/NE&D91432 U.S.-NAIDBurden Sharing
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                                         Chapter 2
                                         NATO’sProg~-~ss
                                                       tn Addressing                                       .
                                         Mtlltary   Commitments




Table 2.1: NATO Members’ Defense
Contributions in Selected Areas (1988)   (Percentage by Country)
                                                                                       Share of
                                                                                      collective
                                         NATO country                                      GDP’    Manpoweti
                                         Belaium                                             1.5           1.9
                                         Canada                                              4.7           1.3
                                         Denmark
                                         --                                                  1.1           0.9
                                         France                                              9.3          10.1
                                         Germany                                            11.8          11.8
                                         Greece                                              0.5           3.8
                                         ltalv                                               8.2          5.8
                                         Luxembourah                                         0.1          0.0
                                         Netherlands                                         2.2          2.2
                                         Norway                                              0.9          1.9
                                         bortuaal                                            0.4          1.3
                                         Soain                                               3.3          5.0
                                         Turkey                                              0.6         10.1
                                         United Kingdom                                      8.1          5.2
                                         United States                                      47.3         38.7
                                         Total NATO’                                      100.0         100.0




                                         Page 24                       GAO/NSIAD-9132 U.S.-NATOBurden Sharing
                                                        Chapter 2
                                                        NA!l’O’sProgn?sein Addressing
                                                        Mllltary C4mmitments




           Dlvlrion                                Maritime                                                              Ballistic                        Strategic
        Equivalent         Naval force                  atrol                  Naval           Air Force                  missile             Ballistic    nuclear
        Firepower
.-. . ----    _--~~-_.-._._   tonnage0
                         -..-_~                     a Prcraft               aircraftd           aircraW                    tubes’            missilesg    bombers
                                                                                                                                                            __-
                  1.5 - ._..._ .-._____-0.3
 ".^.___.._.. -._.......                                  0.0                    0.0        __-         2.3                   0.0                   0.0         0.0
..___"._ -        0.9                        1.7
                 _. ._ .- _- ...._...--.-.______          3.3                    0.0                    2.5                   0.0                   0.0         0.0
                  1.3                       0.4           0.0                    0.0                    1.0                   0.0                   0.0         0.0
                  6.2                       7.1           5.5                    4.5                    9.9                  11.8                   1.8         4.4
                 10.9.                      3.1           2.6                    4.5                    6.3                   0.0                   0.0         0.0
 -. .. -.... . -.5.4                         1.8          2.4                    0.0                    5.0                   0.0                   0.0         0.0
                  4.4                       2.2           2_6                    0.0                    5.5                   0.0                   0.0         0.0
                  0.0                       0.0           0.0      --            0.0                    0.0                   0.0                   0.0         0.0
                  3.3                       1.4           2.4                    0.0                    2.4                   0.0                   0.0         0.d
                  1.4                       0.6           1.3                    0.0                    0.9                   0.0                   0.0         0.0
-.       _.  _..._0.6..~ ~-..----           0.6
                                            -_            0.0                    0.0                    0.9                   0.0                   0.0      ~- 0.0
- ._--..._..      3.4                       2.7
                             ..-_.-..- ---______   --     1.1                    0.5                    2.6                   0.0                   0.0         0.0
                 10.4                       2.7           3.3                    0.0                    4.0                   0.0                   0.0         0.0
              ^   3.9       -.-. ._~~.._  11.9            6.2                    2.8              -    10.2                   7.8                   0.0         0.0
__,             "46;4 _.. .-.--.. .-.-__
   .. .._____ ._.__..                   63.5
                                         .--_            69.3                   87.7                   46.5                  80.4                  98.2        95.6
              100.0                100.0                100.0                  100.0                  100.0                 100.0                100.0         100.0
                                                        aGross domestic product.

                                                        bActive duty military and civilian manpower and committed reserves.

                                                        ‘All ships less strategic submarines.
                                                        dTactical fixed-wing naval combat aircraft.
                                                        BTactical Air Force combat aircraft.

                                                        ‘Submarine-launched       ballistic missiles tubes.
                                                        olntercontinental    ballistic missiles and intermediate-range     ballistic missiles.

                                                        hLuxembourg has neither an air force nor a navy. Its army of 635 is too small to show up statistically.
                                                        ‘Iceland is omitted from the table because it has no military forces.

                                                        Source: Derived from various charts presented in DOD’s 1990 Report on Allied Contributions        to the
                                                        Common Defense.




                                                        Page 26                                                      GAO/NSIAD91-92 U.S.-NATOBurden Sharing
                              Chapter 2
                              lvAm?J Progressln Addreseing
                              Mllltary commitments




Accomplishment of Force       Contained in the Defense Planning Committee’s annual country assess-
Goals Related to Countries’   ments are separate evaluations by three major NATO military com-
                              manders-the Supreme Allied Commander, Europe; the Supreme Allied
Key Missions                  Commander, Atlantic; and the Commander-in-Chief, Channel area.1
                              These commanders evaluate force goal efforts as they relate to 10 key
                              mission components. According to DOD, these components are the critical
                              elements necessary to maximize NATO'S chances of prevailing in a conflict
                              with the Warsaw Pact.

                              The Supreme Allied Commander, Europe, assessment contains an “index
                              of worth” for each force goal that, according to the Defense Planning
                              Committee, is “derived from an assessment of cost, priority, and the
                              degree of KMC [key mission component] relevance to force goals.” The
                              index of worth is, in effect, a weighing of the force goals in recognition
                              that some are more important than others and vary in the expense
                              involved in their accomplishment. The other two commanders’ assess-
                              ments do not provide this index of worth, and their analyses are there-
                              fore not included in our discussion of key mission components.
                              According to the Supreme Allied Commander, Europe, assessment, in
                              1988 none of the NATO members-including       the United States-imple-
                              mented all of the force goals considered critical to the accomplishment
                              of their missions.2

                              The implications of members’ efforts to meet force goals were discussed
                              in the Defense Planning Committee’s 1988 report. In the report, it was
                              noted that, although countries have made a number of positive develop-
                              ments in efforts to meet force goals, the lack of adequate efforts, espe-
                              cially those highlighted under the Conventional Defense Improvements
                              Program, gives cause for concern, For example, although air forces will
                              continue to be reinforced, serious deficiencies remain in many of the
                              receiving countries’ ability to provide for their protection. Defense Plan-
                              ning Committee reports also noted that extensive obsolescence of arms


                              ‘The Supreme Allied Commander, Europe, is responsible for air, ground, and naval forces in Northern
                              Europe, including the Baltic approaches; Central Europe; Southern Europe, including the Mediterra-
                              nean; United Kingdom air forces; the Allied Command Europe Mobile Force; and NATO’s Airborne
                              Early Warning and Control Force Command. The Supreme Allied Commander, Atlantic, is responsible
                              for guarding the sea lanes in the North Atlantic area. The Commander-in-Chief, Channel and
                              Southern North Sea, is responsible for controlling and protecting merchant shipping from the
                              Southern North Sea through the English Channel.
                              %ve countries were omitted from the assessment.France is omitted because it is not part of NATO’s
                              integrated military structure and therefore has no force goals. Spain will commit forces to NATO
                              commanders but does not yet have force goals. Greece and Turkey are assessedbut do not allow their
                              reports to be shared outside of NA’ID’s Defense Review Committee. Iceland has no military forces.



                              Page 26                                             GAO/NSIAD91-32 U.S.-NATOBurden Sharing
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                          Military Commitments




                          and equipment in Greece, Portugal, and Turkey continue to represent
                          one of the most serious weaknesses in NATO’S defense posture.

                          According to the 1988 Defense Planning Committee report, some of
                          NATO’S  defense deficiencies-as identified through the members’
                          responses to their force goals-could result in a failure to accomplish
                          important NATD missions. These weaknesses are considered preventable
                          in that, except for aid recipient countries, most of the allies have the
                          financial capability to correct many of their deficiencies. US. and NATD
                          reports expressed concern that widespread constraints on defense
                          spending continue to widen the gap between the acceptance of defense
                          obligations by its members and the financial means made available to
                          address them.


Countri .esCan Increase   As discussed earlier, efforts to meet force goals must be considered
Efforts to Meet Force     along with the ability to contribute. The only exception to this general
O--l‘.                    rule of thumb is that NATO aid recipient countries (Greece, Portugal, and
UUillY
                          Turkey) are asked to do more, with the help of other alliance members,
                          than they alone can afford.

                          NATO considers only West Germany, the United Kingdom, and the United
                          States as consistently implementing force goals at high levels. In the con-
                          text of sharing the burden for the collective defense, however, West Ger-
                          many, with the highest implementation rate, is not considered among
                          the top performers. This is because West Germany’s deficiencies are con-
                          sidered less than acceptable in light of its economic strength and rela-
                          tively low defense expenditures (2.9 percent of gross domestic product
                          in 1988) compared to the United Kingdom (4.2 percent) or the United
                          States (6.1 percent). Greece, on the other hand, is considered a top per-
                          former in terms of its economic burden (defense expenditures were 6.4
                          percent of gross domestic product in 1988), although it has a low force
                          goals implementation ratea

                          DOD officials pointed out that non-U.S. allied force goals performance in
                          the Central Region4 was generally good during the 1980s especially in
                          the area of equipment modernization. This is true because, aside from
                          the United States, the countries contributing most of the forces and

                          3A factor affecting Greece’s relatively large defense burden is its adversarial relationship with
                          Turkey.
                          4The NATO European Central Region consists of Belgium, West Germany, Luxembourg, and the
                          Netherlands.



                          Page 27                                                GAO/NSIAD-91-32U.S.-NAlDBurden Sharing
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                         equipment to the Central Region are West Germany and the United
                         Kingdom, both of which are recognized as having high force goal imple-
                         mentation rates.

                         One of the most serious weaknesses in NATO'S defense posture is the
                         obsolete arms and equipment of the forces of the Southern Region aid
                         recipient countries. Much of these countries’ budgets goes towards per-
                         sonnel expenses and the maintenance of equipment that is considered
                         incapable of matching modern Warsaw Pact battlefield mobility, range,
                         and lethality. Over the years, NATO has urged its more wealthy potential
                         donor nations to provide increased assistance. Only the United States
                         and West Germany have regularly provided substantial assistance.

                         With the exception of aid recipient countries, most NATD nations with a
                         poor record for meeting force goals can financially afford to correct
                         many of their most serious shortfalls, according to U.S. and NATO assess-
                         ments. This is also borne out in an analysis of economic indicators of
                         defense burden sharing (see app. I). Therefore, eliminating many force
                         goals weaknesses that the Defense Planning Committee identified is
                         within the financial reach of all but the poorest countries in the
                         Southern Region.

                         According to DOD officials, the NATO evaluations of countries’ force goals
                         performance are deficiency oriented and may therefore be overly pessi-
                         mistic. However, we also relied on U.S. reports of individual members’
                         performance. The opinions expressed and conclusions reached in those
                         reports closely paralleled those in NATO’S evaluations. Also, from NATO'S
                         reports we can determine individual countries’ relative efforts which, in
                         turn, are important indicators of future willingness to undertake NATO
                         responsibilities.


                         During the 198Os, the United States pursued various initiatives aimed at
Defense Improvemx        urging NATO nations to enhance or maintain their military capabilities.
Programs in NAIIY)       These initiatives, agreed to and adopted by NATO members, were long-
nilring the 1980s
--a**.,
                         term efforts aimed at correcting long-standing military deficiencies. We
                         identified four initiatives that were among the most important:

                     l increasing all members’ real defense expenditures by 3 percent
                       annually,
          Y          . correcting long-standing deficiencies through the Long-Term Defense
                       Program,



                         Page 28                                GAO/NSIAD-9132 U.S.-NATOBurden Sharing
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                                 lum’e Progressln Addressing
                                 Military Commitmenw




                             l correcting long-standing deficiencies through the Conventional Defense
                               Improvements Program as a follow-on to the Long-Term Defense Pro-
                               gram, and
                             . increasing the NAXI infrastructure fund.

                                 We also identified one multilateral effort-relocating    the 401st Tactical
                                 Fighter Wing from Spain to Italy-that,      although not directly related to
                                 force goals, reflects the NATO allies’ cooperation on defense burden
                                 sharing issues and maintenance of the alliance’s military capabilities.

                                 While these areas do not include all initiatives pursued by the United
                                 States, they represent some of the most important efforts made by the
                                 United States during the 198Os, according to U.S. officials. We chose
                                 these initiatives because of their importance and because they resulted
                                 in discrete programs with identifiable goals usually requiring an expen-
                                 diture of resources. Although most of these initiatives were aimed at
                                 correcting the alliance’s most serious defense problems, to a certain
                                 extent, they have not met expectations. The alliance has been more
                                 responsive to limited initiatives, such as increasing the NATO infrastruc-
                                 ture fund or assisting in the relocation of the 401st Tactical Fighter
                                 Wing.


Goal of 3-Percent Increase       In the spring of 1978, NATO'S defense ministers recognized that imple-
in Defense Spending              menting major defense improvements would require greater contribu-
                                 tions from each country. The defense ministers agreed that each country
                                 should seek an annual real increase of at least 3 percent in defense
                                 spending. They reaffirmed this goal every 2 years during the 1980s.

                                 Table 2.2 shows the amount of real defense spending growth by the
                                 United States and the average growth for the non-US. NATO countries for
                                 the period 1980 through 1988 and estimates for 1989.




                                 Page 29                                 GAO/NSIAD-91-32U.S.-NA’IUBurden Sharing
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Table 2.2: NATO Real Defense Spending Qrowth (1980-88)
Figures       in percent

...“..-.-__        ___.        ..-.- __....         1980      1981      1982      1983       1984      1985      1988       1987      1988 1989 (Est.)
Non-U.S.-NATO
- .._.
    -...--.....-- .--_ total, including
                               . ..-.-...   Spama    3.0        3.0       2.5        1.4       1.6       1.0      -0.5        1.8     -0.9        -- 1.1/1.6
United    States                                     4.2        5.0       6.7        7.8       4.3       6.6        6.4     -0.3      -1.5               0.2
                                                    Note: According to DOD, the spending totals from which these figures were derived reflect NATO’s
                                                    definition of defense spending and are the best estimates that can be made on the basis of information
                                                    now available. National fiscal years correspond with calendar years except for those of Canada and the
                                                    United Kingdom, which run from April to March, and the United States, which begins its fiscal year in
                                                    October. Turkish data through 1981 is based on a March-February fiscal year; in 1983, Turkey converted
                                                    to a January-December fiscal year.
                                                    ‘Weighted-average growth rates developed using constant 1988 prices and 1988 exchange rates.
                                                    Source: DOD’s 1990 Report on Allied Contributions to the Common Defense.


                                                    Through 1986, only the United States achieved or exceeded the
                                                    3-percent goal every year. Since 1983, NATO allies averaged, as a group,
                                                    significantly less than 3 percent in real increases in defense spending,
                                                    although every ally, with the exception of Denmark, achieved the goal,
                                                    individually, in one or more years, U.S. reports concluded that the allies’
                                                    failure to increase their defense spending to or near the 3-percent level
                                                    directly affected their performance in addressing initiatives and force
                                                    goals designed to correct long-standing conventional defense problems.

                                                    In addressing our discussion on the responsiveness of NATD allies to the
                                                    3-percent goal and other U.S. initiatives, DOD officials pointed out that
                                                    while these initiatives did not achieve 100 percent of their objectives,
                                                    they resulted in a number of important improvements in alliance capa-
                                                    bilities and efforts. For example, these officials noted that, although the
                                                    initiative to increase real defense spending by 3 percent annually was
                                                    not fully achieved, “it is generally agreed upon by NATO experts that
                                                    country spending efforts were better than they would have been
                                                    without the 3 percent objective.”


Plans to Correct Long-                              The Long-Term Defense Program was adopted by NATO in May 1978 to
Term Deficiencies                                   correct long-standing defense deficiencies. The program included over
                                                    120 qualitative and quantitative measures for improving nine areas:
                                                    readiness; reinforcement; reserve mobilization; maritime posture; air
                                                    defense; command, control, and communications; electronic warfare;
                                                    rationalization; and consumer logistics. Although designed to be a long-
                                                    term effort, the program ceased to exist as a discrete program in 1982-
                                                    3-1/2 years after its adoption.




                                                    Page 30                                               GAO/NSIAD-91-32U.S.-NA’NIBurden Sharing
                       chapter 2
                       NKKVe Progressin Addressing
                       Mllltary CXmmitment.9




                       Procedural difficulties were the primary reason for terminating the sep-
                       arate monitoring and reporting that made the program discrete. For
                       example, monitoring was often impeded by incomplete, inaccurate, and
                       untimely submission of progress data. Progress that could be measured
                       was also limited because of insufficient allied support. After the pro-
                       gram’s termination, the majority of the measures were incorporated into
                       force goals or other NATO planning efforts. Our 1984 report on the pro-
                       gram noted that some progress was made in measures involving little or
                       no cost, but generally, the allies made unsatisfactory progress in cor-
                       recting NATO deficiencies.

                       NATD  periodically issued status reports on the program, and in its final
                       NATO  report on the program in 1982, NATO indicated that 30 percent of
                       the measures were progressing unsatisfactorily compared to 60 percent
                       in 1981. However, NATO cautioned that most of the failures were concen-
                       trated among particularly important programs, such as antiarmor,
                       defense against chemical warfare, air-to-surface weapons and air
                       defense generally, maritime posture, electronic warfare, and war
                       reserve stocks of fuel and ammunition. Overall, NATO reports character-
                       ized the program’s progress as unsatisfactory in implementing measures
                       that required significant financial contributions by NATO members. More-
                       over, NATO assessments and U.S. officials expressed doubt concerning
                       NATO'S ability to carry out its defense strategy if the measures were not
                       completed. NATO and U.S. officials believed, however, that the program
                       contributed to NATO defense planning by emphasizing long-term and
                       functional area planning.


Improvements in        The Conventional Defense Improvements Program was introduced in
Conventional Defense   December 1984 by the United States to redress “the steadily growing
                       conventional imbalance favoring the Warsaw Pact.” The program repre-
                       sents the latest attempt to correct critical deficiencies previously identi-
                       fied by the Long-Term Defense Program. Although less comprehensive
                       than the Long-Term Defense Program, the Conventional Defense
                       Improvements Program addresses many of the same persistent issues
                       and problems.

                       The program is also addressed within NATO'S force goals process. Typi-
                       cally, force goals for each country receive a priority of I, II, or III, which
                       denotes their relative importance. In 1985, priority I force goals consid-
                       ered especially critical to NATO defense were highlighted by NATO defense
                       ministers as force goals to receive special attention and effort under the
                       Conventional Defense Improvements Program. Most of these program


                       Page 31                                  GAO/NSIAD-91-32U.S.-NAl0 Burden Sharing
chapter 2
NA!NYrProgp-essin Addreming
Military Commitmente




force goals number between 16 and 20 and, by definition, were to be
implemented in full. The program force goals address deficiencies in a
number of areas, such as modernization and readiness, related to con-
ventional forces.

Since 1986, efforts to address these force goals have been included in
the Defense Planning Committee’s annual report. Each force goal is
reported on by its members as either (1) fully implemented, (2) imple-
mented with some exceptions, (3) under consideration, or (4) not imple-
mented/implemented with serious shortfalls. A fully implemented force
goal may reflect substantial procurement but may also reflect plans to
procure during a specified time frame, or it may involve a low/no cost
force goal, such as participation in the development of a NATO identifica-
tion system.

A force goal reported as “implemented with some exceptions” generally
reflects a delay in completion, or it may involve a shortfall compared
with target acquisition amounts. The third category, “goals under con-
sideration,” usually involves studies to determine the best way to
address a problem, or may only involve consideration by the country to
determine if it is willing to accept the force goal. The final category, “no
implementation or implementation with significant shortfalls,” usually
reflects a less planned capability than necessary or no plans at all to
address the shortfall, at least within the time period required.

U.S. and NATO reports of allied performance on the program between
1986 and 1988 indicate that 9 of the 13 countries6 assigned program
goals have performed poorly, fully implementing less than one-half of
their goals. The only countries fully implementing more than one-half of
their program goals are the United States, the United Kingdom, West
Germany, and the Netherlands. As noted, implementation of these force
goals not only reflects actual attaintment of program objectives but may
also indicate plans to implement the highlighted force goals during a
specified time period. Therefore, it is possible that a goal which was
reported as fully implemented in one year may slip to a lower category
the following year due to a change in the plans of the reporting country
(for instance, delay or cancellation of a program).




6Three countries are omitted from this assessment.France is omitted because it is not part of NATO’s
integrated military structure and therefore has no force goals. Spain will commit forces to NA’ID
commanders but does not yet have force goals. Iceland has no military forces.



Page 32                                              GAO/NSLAD-91-32U.S.-NATOBurden Sharing
                           cllaptm2
                           NNO’r Progreooin Addressing
                           Mklltary   commitment-9




                           DOD officials stated that, while “a few” smaller nations reported quite
                           disappointing performance on NATO'S Conventional Defense Improve-
                           ments initiative, the larger non-US. allies-that is, those which account
                           for a large proportion of total non-U.S. NATO capability-reported     good
                           performance in implementing the program’s objectives. NATO reports
                           indicate that, while some progress was made in implementing program
                           force goals, the rate of implementation was far less than 100 percent.
                           Also, the countries that typically performed well in addressing their
                           force goals in general also addressed their goals highlighted by the Con-
                           ventional Defense Improvements Program better. Those countries that
                           generally had a low force goals implementation rate also performed
                           poorly on program goals. Therefore, it appears that the program did not
                           persuade those perennially poor performers to pay greater attention to
                           those priority I force goals considered the most critical in NATD'S view.


Efforts to Increase the    Another U.S.-initiated effort during the 1980s involved the NATO infra-
NATO Infrastructure Fund   structure fund. This common fund was established to finance the capital
                           costs of constructing jointly approved, standardized military facilities
                           and communications-electronics systems for single or joint use by NATO
                           members. Although small in comparison to national defense expendi-
                           tures, the NA?D infrastructure budget-currently     at about $2.0 billion
                           annually-is the largest commonly funded NATOprogram and is consid-
                           ered by the United States and its allies to be an important example of
                           NATD'S solidarity.

                           The infrastructure fund was established in the 1950s based on the
                           member nations’ ability to pay. As European economies grew, the U.S.
                           share of program costs decreased from almost 44 percent to its present
                           level of 28 percent. The United States and West Germany, at 27 percent,
                           are by far the largest contributors to the program. According to DOD,
                           about 36 to 40 percent of annual funding goes towards projects for U.S.
                           use.

                           In the 1979 and 1984 negotiations to establish the program’s budget (the
                           infrastructure budget is established in b-year increments), the United
                           States attempted with mixed success to increase the infrastructure
                           account to eliminate defense deficiencies. In 1979, a 5-year infrastruc-
                           ture funding ceiling of $4.7 billion, about $940 million annually, was
                           agreed on for the 1980-84 programming cycle. This was less than two-
                           thirds of the money required to fully support NATO military commitments
                           under the program. Money was subsequently added, partly to fund



                           Page33                                 GAO/NSIAD-9132U.S.~NAIDBurdenSharing
                                                     deployment of ground-launched cruise missiles to Europe, bringing the
                                                     total for the cycle to $6.9 billion, or about $1.2 billion annually.

                                                     The United States played a role in seeking to increase funding in 1984 in
                                                     a congressional climate of threatened troop withdrawals if NATO did not
                                                     upgrade its conventional defenses. NAKI agreed to increase funding for
                                                     the 1986-90 period to $11 billion-about    $2.2 billion annually-repre-
                                                     senting an increase of 66 percent, after adjusting for inflation. The
                                                     increase represented NATO'S effort to correct deficiencies in areas such as
                                                     aircraft shelters, ammunition storage, logistics for reinforcement, and
                                                     the storage of prepositioned supplies.

                                                    Based on the increase, countries raised the number of projects imple-
                                                    mented, and 90 percent of the projects for the fourth year of the cycle
                                                    were reported by DOD to deal with key NATO deficiencies, many of which
                                                    were highlighted under the Conventional Defense Improvements Pro-
                                                    gram. Projects included financing more aircraft shelters, antiaircraft
                                                    missile deployment facilities, fuel storage and pipelines, air defense com-
                                                    mand and control, and NATO wartime communications. According to a
                                                    U.S. official, this funding level would permit construction of more than
                                                    half of projected shelter requirements for U.S. reinforcing aircraft.


40 1st Base Relocation                              According to NATO and U.S. officials, the proposed action to relocate the
                                                    U.S. 401st F-16 Tactical Fighter Wing, although not specifically related
                                                    to force goals, indicates NATO'S willingness to cooperate on defense
                                                    burden sharing issues and maintain the alliance’s military capabilities.
                                                    On December 1, 1988, the United States agreed to Spain’s request to
                                                    remove the 401st from Torrejon. The Secretary of Defense reacted to
                                                    Spain’s decision by noting that if NA~O did not bear the financial burdens
                                                    involved in moving the unit to another European location, the 401st
                                                    would be deactivated and brought back to the United States.

                                                    In response to a May 1988 request by NATO'S defense ministers, Italy
                                                    agreed to station the 401st at Crotone. NATO agreed to pay construction
                                                    costs for the new base from its infrastructure program.6 NATD'S infra-
                                                    structure program normally restricts funding to minimum wartime oper-
                                                    ational capabilities. To keep the 401st in Europe, however, NATOtook the
                                                    unprecedented step of agreeing to fund construction of a new peacetime
                                                    base, including land acquisition and utilities costs. NATO also agreed to


                                                    eThe U.S. contribution to the NA'IDinfrastructure fund is 27.8 percent.



                                                    Page34                                               GAO/NSLAD91-32U.S.-NAIDBurdenSharing


_...   __   ._.. --   ..-, .-_- -. .- .,.....-^.__._._ _.”..__ . ..-. I.
                                   chaptm 2
                                   WlWa Progreae In Addressing
                                   Military   Commitments




                                   prefinance the cost of housing construction, which is to be repaid by the
                                   United States over 10 years without interest.

                                   In April 1990,           DOD
                                                       provided us with its latest estimate of the costs asso-
                                   ciated with relocating the 401st. According to             DOD
                                                                                        figures, the total cost
                                   to construct the new base at Crotone, without adjusting for inflation or
                                   the time value of money, is estimated at $732 million. Table 2.3 shows
                                   the breakdown of those costs.

Table 2.3: Eatimated Cost8 for
Conrtruction of Crotone Alr Base   Dollars in millions
                                   U.S. Costs
                                   Base construction (U.S. portion of NATO infrastructure fund)                    $196.6
                                   Housinakxefinanced     bv non-US. NATO)                                             89.0
                                   Recreation facilities                                                               12.9
                                   Training range (U.S. share)                                                          7.0
                                   Total U.S. Costs                                                           $305.5

                                   Non-U.S. Costs
                                   Base construction (non-US. portion of NATO infrastructure fund)                 $419.5
                                   Training range (Italy’s share)                                                    7.0
                                   Total Non-U.S. Costs                                                           $426.5

                                   Total                                                                           $732.0
                                   As table 2.3 shows, the United States will assume 42 percent of the con-
                                   struction costs of Crotone Air Base.          DOD
                                                                            estimates that annual expendi-
                                   tures will be required through 1994 for        NATO
                                                                                 and beyond 1994 for the
                                   United States.

                                   According to DOD, all non-U.S.        NATD
                                                                       costs will be incurred during the first
                                   6 years, while US. outlays are required for a 15-year period. The longer
                                   U.S. payment period resulted from       NATO'S
                                                                              agreement to prefinance U.S.
                                   housing costs without charging interest.  NATU also agreed to delay U.S.
                                   repayment of the first of 10 annual installment payments until 1994.
                                   DOD estimated that the present value of the $89 million to be repaid to
                                   NATD by the United States is $39 million.

                                    The United States will incur other costs associated with vacating the
                                    base at Torrejon.        DOD
                                                           estimated these costs at $130.3 million, which
                                    include severance payments to Spanish nationals whose employment
                                    will be terminated ($19.2 million) and transfer costs for the remaining
                                   .U.S. units at Torrejon ($14.8 million). In addition, the United States will


                                   Page 35                                          GAO/NSIAD9132 U.S.-NA3DBurden Sharing
                      Chapter 2
                      NAKSe Progressln Addressing
                      Military Commitmenta




                      lose the capital investment value of U.S. assets that will be left at Tor-
                      rejon ($96.3 million). All of these costs will be incurred regardless of
                      where the 401st is eventually moved.

                      In the fiscal year 1990 Defense Authorization Act, Congress limited total
                      DOD  expenditures for relocating DOD functions from Torrejon to other
                      non-U.S. locations (which would include Crotone) to $360 million.
                      According to DOD, this includes the $305.6 million in U.S. costs shown in
                      table 2.3 plus an estimated $14.8 million for transferring the remaining
                      units at Torrejon, or a total of $320.3 million.

                      In September 1989, we issued a report on the costs associated with relo-
                      cating the 401st.7 In that report we estimated that the U.S. costs for con-
                      struction of Crotone plus the transfer costs for the remaining units at
                      Torrejon amounted to $464.8 million-substantially      more than the
                      $360 million limitation on DOD expenditures imposed by Congress.
                      According to DOD, the difference between current and previous estimates
                      is due to a more favorable exchange rate, a better definition of require-
                      ments, and more refined cost estimates.


                      With the prospects of the conclusion of NATO-WarsawPact conventional
Effect of Proposed    forces agreement during the 1990s and perhaps even further-reaching
Force Reductions on   agreements in the future, will defense burden sharing remain an issue
DefenseBurden         within NATO? In all likelihood, defense burden sharing will remain as
                      important, if not more so, in the coming years, as we reported in April
Sharing               1990.R

                      Based on the proposals tabled in the Conventional Armed Forces,
                      Europe, talks, NA?D European forces would be cut 5 to 15 percent below
                      current levels in certain major weapons categories; the Warsaw Pact
                      would have to make more massive cuts in order to reach relative parity.
                      The NATO cuts would not result in any one country’s taking substantial
                      reductions in equipment, according to State and DOD officials. Also, in
                      January 1990, President Bush proposed a cap of 195,000 for U.S. and
                      Soviet air and ground forces deployed in Central Europe. NATO and the
                      Warsaw Pact agreed to this proposal in February 1990 and further


                      70verseas Baaing: Costs of Relocating the 401st Tactical Fighter Wing (GAO/NSIAD-89-226,
                      Sept. 21, 1989).

                      sNA’IO-Warsaw Pact: Issues Related to Implementation of a Conventional Forces Treaty (GAO/
                             _ 0_130, Apr. 16,199O).



                      Page 36                                            GAO/NSIAD9132 U.S.-NATOBurden Sharing
.   chapter 2
    N&lth l’rogress in Addressing
    IMIlitary Commitmenta




    allowed the United States to retain an additional 30,000 U.S. troops else-
    where in Europe while limiting the Soviet Union to 195,000 troops. The
    proposals would result in a troop reduction of 80,000 US. forces in
    Europe. If the U.S. force structure is reduced by that amount, substan-
    tial savings may be achieved.

    According to DOD officials, while the proposed treaty requires removal
    of these forces from Europe, it does not require that total U.S. forces be
    reduced by 80,000. However, these officials noted that total U.S. forces
    will be reduced by at least 80,000 personnel because of defense budget
    cuts. If, however, the U.S. commitment to NATO remains unchanged, espe-
    cially the commitment to supply 10 divisions to Europe within 10 days
    after a mobilization, greater demands will be placed on U.S. strategic lift
    capabilities.

    Although savings may be achieved as a result of a conventional forces
    agreement, some additional costs will have to be shared among alliance
    members. For example, cognizant U.S. officials note that a reduction of
    NATO and Warsaw Pact forces would result in a greater reliance on the
    quality of NATO'S defense. Therefore, more balanced, modern, and tech-
    nologically advanced forces among all allies will be necessary. In addi-
    tion, the implementation of the proposed treaty would require a
    verification process that is much more complex and demanding than
    that now required by existing agreements such as the Intermediate-
    Range Nuclear Forces Treaty. Decisions would also be required on
    whose equipment should be destroyed to meet treaty limitations. If the
    older, less capable equipment is destroyed first, NATO will have to con-
    sider (1) the redistribution of more advanced equipment and (2) possible
    compensation from the recipient countries to those allies who, in the
    past, have made investments in more modern forces.

    Considering improved relations between NATD and the Warsaw Pact and
    budgetary problems reported by many NATD nations, it is questionable
    whether the necessary resources will be made available to address some
    of the NATU members’ most serious and expensive problems, many of
    which are related to the lack of modernization.

    If future talks result in much greater force and equipment reductions
    than are being considered, substantial savings or “peace dividends” may
    be possible for NATO forces. An issue to be addressed within the alliance
    at that time will be benefit sharing rather than burden sharing. Given
    the greater NATO defense burden that the United States has assumed



    Page   37                              GAO/NSIAD-91-32U.S.-NATOBurden Sharing
Chapter 2
IVAltYs l’ro@eaein Addressing
Military Canmitmenta




during the last 40 years, will it be able to assume proportionate
benefits?

Not all reductions and associated savings necessarily flow directly from
implementation of the proposed treaty provisions. Savings will also
most likely be achieved through a reconsideration of the perceived
threat from the Warsaw Pact countries and the level of defense believed
necessary to counter that threat. For example, the developments in
Eastern Europe are prompting questions about a number of U.S. pro-
grams, including the modernization of European-based U.S. short-range
nuclear missiles and artillery, the number of B-2 Stealth bombers and
other aircraft required for an adequate defense, the size and composi-
tion of the future U.S. Army, and the number of aircraft carriers
required by the U.S. Navy.




Page 38                                 GAO/NSIAD-9132 U.S.-NA!lOBurden Sharing
Chapter 3

West German and British Host Nation Support
for U.S. Forces

                       Certain NATO nations contribute, on a bilateral basis, wartime and peace-
                       time host nation support to U.S. forces. This support is considered when
                       evaluating a nation’s overall contributions to the common defense of
                       NAII).

                       The large U.S. military presence in NATO Europe-about     322,000 mili-
                       tary personnel-and the increasingly high U.S. defense costs have
                       necessitated that the United States seek more allied support for its
                       forces. Wartime host nation support encompasses all civil and military
                       assistance provided by a host nation to allied forces located in or
                       deploying to and through the host country in times of war. Peacetime
                       host nation support includes cost sharing and other arrangements pri-
                       marily for providing and supporting U.S. bases.

                       Host nation support, however, is not easily quantified because these
                       contributions do not always fall under NATO'S definition of defense
                       spending. Generally speaking, any expenditure made by a host nation
                       specifically to meet the needs of U.S. forces stationed in that country
                       would be considered a defense expenditure. Other types of support, such
                       as the provision of land, housing, tax exemptions, and civilian assets for
                       wartime use, normally do not necessitate a financial outlay and are
                       therefore not reflected in a country’s percentage of gross domestic
                       product devoted to defense. In general, host nation support is provided
                       at no charge to the United States; in some cases, reimbursement is
                       required. This differs by country and by the type of support provided.

                       Although most NATO countries provide some support to U.S. forces, this
                       chapter concerns only West Germany and the United Kingdom. By the
                       end of fiscal year 1988, approximately 86.0 percent of all U.S. military
                       forces assigned to Europe were stationed in these two countries-
                       77.2 percent, or 250,000, in West Germany, and 8.8 percent, or 30,000,
                       in the United Kingdom.


                       Because of the large U.S. presence, the United States has requested a
Federal Republic of    wide range of wartime and peacetime host nation support from West
Germany: More          Germany-more than from any other NATO country where U.S. forces
Progress for Wartime   are stationed. At least since the early 198Os, U.S. initiatives for greater
                       West German assistance have focused on obtaining more wartime sup-
Than for Peacetime     port than offsetting U.S. stationing costs in peacetime.
support ”


                       Page 39                                 GAO/NSIAD91-32 U.S.-NA” Burden Sharing
                                                                                                                          --
                             Chapter 3                                                                                            .
                             We& Oerman Bnd British Ho& Nation
                             Support for U.S.Forces




U.S.-WestGerman Wartime      In 1980, the United States made a major effort to obtain greater host
Host Nation Support          nation support from West Germany. In that year, a formal message
                             called the Stoessel Demarche was presented to the German government
Agreement Concluded in       by the U.S. Ambassador, Walter Stoessel. The demarche listed, in order
1982                         of priority, a number of issues related to assistance for U.S. forces sta-
                             tioned in West Germany. The most important concern, from the U.S. per-
                             spective, was wartime host nation support. The concept proposed
                             relieving the United States of certain support functions in war, allowing
                             it to place more combat units in front line and reinforcing roles. The
                             other items related to peacetime host nation support.

                             The wartime host nation support concept, developed by the U.S. Army,
                             Europe, during the mid-1970s sought to address the U.S. forces’ lack of
                             combat service support’ capabilities by transferring some of this respon-
                             sibility to West Germany. In April 1982, West Germany agreed to dedi-
                             cate up to 90,000 German Army reserve forces to support U.S. forces in
                             times of crisis and war. The agreement also formalized Germany’s intent
                             to provide civilian sector support, such as transportation, maintenance,
                             and other field support services.

                             According to U.S. officials, this agreement represented a milestone in the
                             extent of support to be provided to U.S. forces during times of war. It is
                             also the first wartime host nation support agreement with any NATO ally
                             that provides for a large, dedicated host nation military force. Although
                             other NATO nations, such as Belgium and Norway, have committed forces
                             to support U.S. reinforcements, their support is not solely dedicated to
                             U.S. forces. That is, these forces may be required to fulfill other func-
                             tions and may therefore be unavailable for U.S. support. West Germany
                             is also the first NATO ally to agree to pay a portion of the support costs.


Implementation Costs and     The costs to establish and maintain the capability to provide wartime
Current Status of the 1982   host nation support are being shared by the United States, West Ger-
                             many, and NATO. Under the agreement, West Germany bears the per-
Wartime Host Nation          sonnel and certain equipment costs for the reservists as well as specific
Support Agreement            material investment costs for the military command, logistic, and
                             training organizations of the forces. The United States bears the costs of
                             all other material investment, the salaries of the civilian work force,
                             annual operations and maintenance, and general administration. The

                             ‘Combat service support is the assistance provided by nondivisional forces to air and ground combat
                             units in areas such aa equipment repair; distribution of ammunition, fuel, and other supplies; medical
                             care provision; and reinforcement receipt and support upon arrival in the theater.



                             Page 40                                               GAO/NSIALk91-32U.S.-NA’IOBurden Sharing
                                          Chapter 8
                                          WeotGermanand B&&h Host Nation
                                          Support for U.S.Forces




                                          NATO infrastructure program is funding the construction of the facilities
                                          needed to support the reservists. The United States and West Germany
                                          will split the costs equally for facilities that NATO does not fund.

                                          The peacetime cost of establishing the wartime host nation support
                                          capability over its first 6 years (1983-87) was originally estimated at
                                          about $600 million, excluding the cost of the facilities. DOD now esti-
                                          mates that the total implementation costs will be about $1.6 billion. The
                                          program’s implementation costs have grown, primarily due to the
                                          decline of the dollar against the mark-affecting     equipment procure-
                                          ment and construction costs-and because of an increase in the number
                                          of facilities needed to support the reservists. Full implementation, once
                                          targeted for 1987, has been delayed and is now scheduled for 1993, pro-
                                          vided all equipment is delivered on time and the required infrastructure
                                          is made available. Table 3.1 shows current estimated implementation
                                          costs.

Table 3.1: Estimated Costs to Implement
the Wart/me Host Nation Support           Dollars in millions                                                                       ___-
Agreement (1983-94)                                                                        United           West
                                          Cost category                                    States        Germany         NATO              Total
                                          Equipment, operations, and
                                          -- maintenance                                    $838.2              $542.0        0       1,380.2
                                          Infrastructure after NATO
                                             reimbursement                                      76.5           76.5        102.0a      255.0b
                                          Total                                            $914.7           $618.5       $102.0     $1,635.2
                                          aAssuming NATO reimburses 40 percent of total construction   costs.

                                          bThis amount will be prefinanced   by West Germany.


JZquipment Procurement                    The cost for equipment procurement is divided into three areas: (1) per-
                                          sonal equipment for the reservists (for example, uniforms), to be pro-
                                          vided by West Germany; (2) material and services to be obtained upon
                                          mobilization from German civilian sources, such as transportation
                                          assets, which entail no peacetime costs to either government for pro-
                                          curement, storage, or maintenance; and (3) unique military equipment,
                                          such as arms, that cannot be obtained from civilian sources. The United
                                          States is responsible for the cost of this equipment.

                                          According to DOD officials, the decline in the strength of the dollar
                                          against the mark, coupled with an overall increase in the quantity and
                                          costs of German-procured equipment, has increased the U.S. cost of the
                                          procurement program. When the program’s funding was estimated in
                                          1986, the dollar value was about 3.25 marks; recent contract payouts in


                                          Page 41                                                GAO/NSIAD-91-22U.S.-NATOBurden Sharing
                             chapter a
                             WeatGemuu\ and British Hoat Nation
                             Support i’or U.8, Forces




                             West Germany are near 1.75 marks per dollar. Equipment acquisition is
                             not scheduled to be completed until the end of fiscal year 1992, and DOD
                             officials now estimate that, once completed, the program will have cost
                             the United States $838.2 million and West Germany $542 million.

Infrastructure Funding       According to US. Army officials, West Germany estimated in 1987 that
                             providing sites for headquarters, training, ammunition, and equipment
                             would cost about 430 million marks, or approximately $175 million.
                             Because most of the facilities needed to support the reservists normally
                             qualify for NATO funding, it was anticipated that NA?IO would reimburse
                             80 percent of the total costs, or about $140 million. The United States
                             and West Germany would share the difference equally-$17.5           million
                             each. Further, both countries agreed that West Germany would
                             prefinance the infrastructure costs and that the scope and quality of the
                             construction would meet the standards for the German Armed Forces.
                             Since then, however, the cost of the facilities has increased-primarily
                             due to the decline of the dollar and an increased number of sites, but
                             also because of NATO’S refusal to fund 80 percent of the construction
                             costs as originally planned. Currently, the total cost of the facilities is
                             being estimated at $255.0 million; NATO is expected to pay $102 million,
                             or 40 percent; the United States and West Germany are to pay $76.5
                             million each. Most infrastructure projects are now expected to be com-
                             pleted by 1995.


Additional Wartime           In addition to the 1982 Wartime Host Nation Support Agreement, the
Support Provided Under       United States and West Germany have concluded agreements on collo-
                             cated operating bases. These bases are active allied airfields which
Collocated Operating Bases   would support U.S. Air Force aircraft during contingencies that require
                             the United States to deploy to Europe. At each base, the United States
                             prepositions war reserve material and has facilities in which to store
                             this material.


Peacetime Host Nation        The NATO Status of Forces Agreement and the Supplementary Agree-
support                      ment2 cover three areas of West German contributions to U.S. forces:
                             (1) land and housing, (2) maneuver damage claims, and (3) taxes and

                             2The Status of Forces Agreement, signed by the NATD members in 1961, is the principal document
                             governing the rights, obligations, privileges, and immunities arising from the presence of US. forces
                             stationed in other NATO countries. It allows for bilateral agreements relating to the provision of and
                             payment for specific forms of support for U.S. forces. The Supplementary Agreement, signed in 1959,
                             concerns the status of NAlD forces stationed in West Germany; therefore, it applies only in West
                             Gi?rIWllly.



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/




                                 customs fees. West Germany also contributes substantially to the sta-
                                 tioning of US. forces in Berlin, though the two agreements do not cover
                                 these costs. On several occasions, the United States has sought increased
                                 support in a number of other areas related to troop relocations and
                                 facility improvements, the welfare and morale of U.S. service members,
                                 labor cost sharing, and plans for and fielding of the Pershing II and
                                 ground-launched cruise missiles. The support received on these requests
                                 has varied, depending upon the issue and associated costs.

        Land and Housing         Under article 63 of the Supplementary Agreement, West Germany pro-
                                 vides U.S. forces rent-free use of federal and state-owned land and facil-
                                 ities. West Germany provides U.S. forces approximately 292,000 acres
                                 for their use, as well as access to various training areas operated by NATO
                                 and German forces. In its 1989 Report on Allied Contribution to the
                                 Common Defense, DOD estimated that the replacement value of real
                                 property made available to U.S. forces was approximately $28 billion,
                                 with an annual user value of $800 million.

                                 The German government also provides U.S. forces with 67,000 housing
                                 units, of which 56,195 are free of charge. The estimated annual utility
                                 value of the housing units provided to U.S. forces is about $80.0 million.
                                 Until Congress, in fiscal year 1981, prohibited the use of military con-
                                 struction or family housing funds to pay real property taxes, the United
                                 States paid land taxes on family housing in West Germany.3 Although
                                 West Germany has paid these taxes to local governments on behalf of
                                 the United States since then, it takes the position that the United States
                                 is liable. DOD estimates that the total unpaid land tax bill is about
                                 $60 million.

        Maneuver Damage Claims   Claims procedures for damages caused by troops during exercise maneu-
                                 vers are outlined in article VIII of the NATO Status of Forces Agreement.
                                 If the United States alone is legally responsible for the damage, the host
                                 nation-in this case, West Germany-pays         25 percent of the claim. The
                                 United States pays for the remaining 75 percent. If more than one vis-
                                 iting country is responsible, the amount is distributed equally among the
                                 visiting countries and the host country. If the host nation is not one of
                                 the countries responsible, its share is half that of the other countries.
                                 Over the last 8 years, annual payments for the U.S. share of damages in
                                 West Germany have averaged about $29.0 million; West Germany’s

                                 3Although West Germany provides land and facilities free of charge for use by U.S. forces, article 63
                                 of the Supplementary Agreement obligates the United States to reimburse West Germany for land
                                 taxes on accommodations made available by West Germany. While defense-related facilities are
                                 exempt from land taxes, family housing units are not.



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                                  WeetGerman and Brltimh Host Nation
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                                  share was approximately $10.0 million. The U.S. Army estimates it con-
                                  ducts about 1,000 training maneuvers annually on public and private
                                  land in West Germanys4

Taxes and Custims Fees            US. forces are generally exempt from West German taxes and customs
                                  fees related to official purposes, In addition, individual service members
                                  are also exempt from some taxes, customs fees, and value-added taxes
                                  on items purchased on the local economy. While exemption from these
                                  taxes and fees does not represent a budgetary outlay to West Germany,
                                  it does result in cost avoidance to the United States and to the individual
                                  service members.

                                  On defense-related facilities, West Germany also provides free services
                                  such as police, public health, and fire protection. DOD estimates that
                                  West German states pay more than 136 million marks, or about
                                  $75.1 million, annually (using the 1987 exchange rate of 1.79 marks per
                                  dollar) to support communities where U.S. forces personnel and their
                                  dependents live. U.S. forces are exempt from paying taxes on items pro-
                                  cured for official purposes on the local economy, such as fuel and con-
                                  struction supplies, and customs duties on provisions, supplies, and other
                                  goods imported for U.S. forces’ use. DOD was not able to quantify the
                                  savings to U.S. forces from these exemptions.

                                  West Germany exempts individual service members from some taxes,
                                  custom fees, and value-added taxes on items purchased on the local
                                  economy. These exemptions, like those extended to U.S. forces, result in
                                  cost avoidance to the individual service members. For example, DOD esti-
                                  mates that exemptions from value-added taxes save individuals sta-
                                  tioned in West Germany about $20.0 million annually.

Berlin Stationing Costs           West Germany is responsible for paying most costs related to stationing
                                  U.S. forces in Berlin, including all operations and maintenance, procure-
                                  ment of administrative vehicles, and local national and U.S. civilian pay-
                                  rolls. West Germany also pays the costs of stationing French and British
                                  troops in Berlin. DOD estimates that of the approximately $500 million
                                  West Germany pays for Berlin occupation costs, 45.8 percent, or
                                  $229 million, was for direct support of U.S. forces.

Troop Relocation and Facilities   A major program in U.S. Army, Europe, during the 1980s resulted from
Improvements     ”                studies conducted in the mid-1970s to resolve stationing problems. This

                                  41n 1988, we issued a report on DOD’s maneuver damages in West Germany: Maneuver Damage: DOD
                                  Needs to Strengthen U.S. Verification of Claims in Germany (GAO/NSIAD-88-191, Aug. 9, 1988).



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program, subsequently titled the Master Restationing Plan, envisioned
correcting the malpositioning of U.S. troops in West Germany to
(1) achieve a more effective forward defense and (2) remove these
forces from inadequate facilities and urban areas where they could not
maintain military preparedness without significantly inconveniencing
the German people. The plan ultimately envisioned divesting U.S. Army,
Europe, commanders of all except mission-related responsibilities for
training and combat readiness.

Under the plan, the United States sought German funding for the con-
struction of facilities for 28 battalions on three U.S.-controlled locations.
The plan stalled, however, primarily because of congressional expres-
sions that West Germany share the estimated construction costs in
excess of $1.2 billion. West Germany was willing to provide real estate
and pay for some infrastructure but insisted that construction of mili-
tary facilities be a U.S. responsibility.

According to the State Department, although the Germans were positive
about the plan’s concept, overall they viewed repositioning as a massive
and politically sensitive issue whose implementation would present
financial and environmental difficulties. According to DOD officials, the
United States was able to correct some of the original malpositioning
concerns by funding limited Master Restationing Plan-related station
changes and constructing some facilities itself.

The United States also sought to obtain base operation and maintenance
support through contracts with a German government agency or com-
mercial organization on a completely reimbursable basis. By relieving
U.S. forces of base support obligations in peacetime, U.S. Army, Europe,
could concentrate solely on its primary mission of combat readiness.
Although in the 1970s U.S. forces had been successful in obtaining con-
tracts for base support at two U.S. facilities, West Germany showed no
further interest in expanding the concept. In addition, the German gov-
ernment expressed concern that the provision of base support by a
German agency would considerably increase the size of its bureaucracy.

In addition, U.S. forces have sought German government financing for
modifications to U.S.-controlled facilities so that they would conform to
German environmental pollution abatement standards. Although the
United States recognizes its responsibility to ensure that it complies
with these standards, it considers pollution abatement at host nation-
owned, U.S.-operated facilities to be a host nation responsibility. More-
over, most West German pollution abatement standards have resulted


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                             West German and Britieh Host Nation
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                             from legislation enacted after these facilities were originally placed at
                             U.S. forces’ disposal. Although West Germany has not provided funds to
                             help U.S. forces meet these standards, U.S. forces have attempted to
                             comply to the extent possible by, for example, designing all new con-
                             struction to meet German environmental standards.

Welfare and Morale of U.S.   The welfare and morale of U.S. service members stationed in West Ger-
Service Members              many has been an issue of long-standing concern. U.S. requests in this
                             area have focused on (1) obtaining additional housing for service mem-
                             bers and their dependents, (2) modernizing and upgrading existing
                             housing and work areas, and (3) relieving the social isolation and finan-
                             cial problems of U.S. service members.

                             The inadequate supply of family housing for US. service members
                             stemmed primarily from the increases in the number of married soldiers
                             stationed in West Germany. As a result of these shortages, many U.S.
                             military personnel were forced to rent substandard living quarters on
                             the German economy and live in depressing conditions, thus affecting
                             their morale and effectiveness. The physical conditions of many of these
                             substandard facilities raised concerns. Typical problems included faulty
                             plumbing, antiquated utility systems, and lack of modern repair
                             facilities.

                             The United States requested financial assistance to obtain about 55,000
                             additional housing units (estimated at about 10 billion marks, or
                             $4.4 billion, using the 1980 exchange rate of 2.24 marks per dollar) and
                             assistance with the maintenance and repair work at some facilities (esti-
                             mated at about 2.3 billion marks, or $1.0 billion). Due to the German
                             government’s lack of responsiveness, the United States had to fund its
                             own construction and rehabilitation programs.

                             Some progress, however, was achieved on the social isolation of US. ser-
                             vice members. For example, according to U.S. Army, Europe, officials,
                             the German government undertook a major effort to improve U.S.-
                             German relations. At local levels, for example, entrance prices to
                             museums and sports events were reduced and special campaigns to
                             reduce off-post discrimination were initiated. These actions, though, did
                             not require large expenditures on the part of West Germany.

                             In January 1989, U.S. embassy officials in Bonn presented to the
                             German government a series of low-cost measures intended to improve
                             the quality of life of U.S. service members. These measures ranged from
                             simplification of existing value-added tax relief procedures to expanded


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                     West Germanand Brltleh Ho& N&m
                     Support for U.S.Forces




                     educational programs. U.S. Army, Europe, officials estimated that the
                     annual cost of most of these proposals would not exceed $2 million to $3
                     million per year. Although Germany’s reaction to this initiative has been
                     slow, State Department officials believe that its minimal cost and non-
                     controversial nature should make it attractive to the German
                     government.

Labor Cost Sharing   Over the years, the United States has sought relief from the high costs
                     of employing local nationals in West Germany, particularly since cur-
                     rency fluctuations have considerably increased payroll costs. Although
                     some progress has been achieved in this area, the United States con-
                     tinues to pay for all expenses incurred in the employment of local
                     nationals. US. forces in West Germany employ about 56,838 local
                     nationals, and although the German government sets wages and condi-
                     tions of employment, the United States is responsible for paying all costs
                     associated with local national employment. These costs, which
                     amounted to $1.3 billion in 1988, include wages and salaries, pay supple-
                     ments, bonuses, various benefits, and an administrative service fee
                     levied to cover the German government’s cost to process the payroll.
                     The United States pays local nationals in marks at the prevailing
                     exchange rate.

                     At various times, the United States has sought reimbursement of local
                     nationals’ payroll costs, assumption of certain categories of cost compo-
                     nents, assumption of the administrative fee, and guarantee of a min-
                     imum exchange rate. Because West Germany has adamantly opposed
                     any sort of real labor cost sharing, US. Army, Europe, has concentrated
                     its efforts on decreasing the administrative fee. The rate, initially set at
                      1.25 percent of total payroll costs, was reduced to 1.16 percent in 1986
                     and 1.08 percent in 1987, where it stands today. U.S. Army, Europe,
                     estimates that these reductions saved the United States 3.67 million
                     marks (or $1.7 million, using a 1986 exchange rate of 2.17 marks per
                     dollar) in calendar year 1986 and 2 million marks (or $1.1 million, using
                     a 1987 exchange rate of 1.79 marks per dollar) in calendar year 1987.

                     In addition, West Germany agreed to fund a training program in U.S.
                     installations for young Germans. The trainees work for a period of 6 to
                     9 months, hoping that by the end of the training period, U.S. Army,
                     Europe, will be able to place the trainees within the local national work
                     force. The training program includes both white and blue collar workers
                     in areas such as clerical support and mechanics. The German govern-
                     ment pays all costs associated with the training program. U.S. Army,
                     Europe, officials estimated that this arrangement has saved the United


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                                 Support for U.S.Forcea




                                 States about $26 million in training costs since the beginning of the pro-
                                 gram in 1983. According to these officials, this program was attractive
                                 to German officials because it helped reduce unemployment.

Deployment of Nuclear Missiles   Under the recently concluded Intermediate-Range Nuclear Forces
                                 Treaty, the Pershing II and intermediate-range and short-range ground-
                                 launched cruise missiles located in West Germany are to be eliminated.
                                 When these were deployed, the German government provided real
                                 estate, space on West German military installations, and civil and mili-
                                 tary police protection. The estimated yearly cost to West Germany for
                                 providing base security from September 1983 through September 1988
                                 was about $9.6 million.


                                 As in West Germany, the United States has sought to negotiate increased
United Kingdom                   wartime and peacetime host nation support from the United Kingdom.
Responses:Limited                Because of the lower number of U.S. forces, these initiatives have been
Overall Progress                 much more limited in scope and have covered fewer areas than in West
                                 Germany. Most of the assistance the United States has received resulted
                                 from long-standing agreements reached between both countries prior to
                                 1980.

                                 The general wartime host nation support agreement, reached in 1973
                                 between the United States and the United Kingdom, provides for lines of
                                 communication services to U.S. reinforcements deploying to and through
                                 the United Kingdom in times of crisis or war. In peacetime, the United
                                 Kingdom contributes to U.S. forces primarily by providing rent-free land
                                 and housing units. Although these contributions relieve some U.S. sta-
                                 tioning costs, the United States has to pay certain related fees and
                                 charges. U.S. efforts to obtain greater peacetime host nation support
                                 have concentrated on the elimination or reduction of these charges.


Wartime Host Nation              From the 1973 lines of communication agreement, numerous joint logis-
support                          tics plans have resulted that, according to DOD, would provide substan-
                                 tial savings to the United States in manpower and material. In addition,
                                 under collocated operating base agreements, the U.S. Air Force units
                                 would share air bases with the Royal Air Force in crisis or wartime.
                                 These agreements include a wide variety of host nation support ser-
                                 vices. Both the lines of communication and collocated operating base
                                 agreements have resulted in the commitment of British military and
                                 civilian facilities and equipment for use by U.S. forces.



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Lines of Corrununication   In 1973, the United Kingdom formally agreed to provide lines of commu-
Agreement                  nication support to U.S. reinforcements during crisis or war.” Since then,
                           negotiations for wartime host nation support have mainly concerned the
                           logistics plans to enhance the 1973 lines of communication agreement.
                           Currently, 21 joint logistics plans are in force between the United States
                           and the United Kingdom, and an additional 27 plans are in various
                           stages of draft, development, and staffing. According to DOD officials, all
                           types of combat support and combat service support have been included
                           in the U.S. requests. These joint plans cover support for (1) port of
                           debarkation reception and departure, (2) in-theater movement of rein-
                           forcements, (3) supply and services support, (4) facilities, (5) telecom-
                           munications, and (6) medical care.

                           Some of the most important joint logistics plans are those which call for
                           the establishment of contingency hospitals and the provision of medical
                           support by the United Kingdom. According to DOD officials, the United
                           Kingdom is the NA?D country that will provide the most contingency hos-
                           pitals to support U.S. forces during a crisis or war. The United Kingdom
                           has fully met U.S. Air Force and Navy requirements for hospital beds
                           and about one-third of the Army’s requirements. DOD officials expect the
                           United Kingdom to fully meet the remainder of the Army’s requirements
                           in the near future.

                           The United States and the United Kingdom have reached agreement on
                           the definition of types and categories of casualties and daily casualty
                           flow for which the United Kingdom would provide medical support.
                           According to DOD officials, the daily casualty flow number that British
                           medical planners have agreed to support closely resembles U.S. casualty
                           planning figures.

                           According to DOD officials, the lines of communication agreements
                           between the United States and the United Kingdom are the most mature
                           and fully developed of all those in NATO. The United States is pleased
                           with the level of support the United Kingdom provides and with the
                           efforts British defense officials are making to meet U.S. wartime
                           requirements. According to one DOD official, the United Kingdom’s expe-
                           rience in planning and implementing lines of communication agreements
                           is extensive, having negotiated and concluded similar arrangements
                           with other NATO countries prior to 1973. These officials added that the

                           %nder lines of communication agreements, the host nation permits the United States to use seaports,
                           airports, roads, and inland waterways to deploy U.S. reinforcing units. Services such as medical care
                           and communications, use of civilian equipment, and supplies may be provided.



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                             United States has pioneered a number of wartime support efforts in the
                             United Kingdom that have served the United States well in negotiating
                             lines of communication agreements with other NATY)countries.

                             DOD  acknowledges that although these agreements allow for early rein-
                             forcement of NATD and considerably improve U.S. combat sustainability,
                             they generally do not represent a U.S. cost savings, but rather a cost
                             avoidance. For example, plans to move U.S. material from storage to
                             user bases and to use host nation transportation assets benefit U.S.
                             forces in peacetime by avoiding the costs of purchasing and manning
                             these assets. Similarly, the majority of logistics plans do not require the
                             host nation to make major financial outlays in peacetime, except for
                             administrative costs related to implementing the plans. Although the
                             United Kingdom has made some financial investments,       DOD  was not able
                             to quantify British expenditures to support joint logistics plans.

Collocated Operating Bases   The United States and the United Kingdom have also concluded wartime
                             host nation support agreements related to collocated operating bases.
                             These are active Royal Air Force bases which would support U.S. Air
                             Force aircraft during contingencies that require the United States to
                             deploy to Europe. At these bases, the United States has prepositioned
                             war reserve material such as fuel, munitions, and vehicles and has facili-
                             ties in which to store this material. The United Kingdom has also agreed
                             to provide wartime operation support of U.S. naval aviation. Under the
                             base agreements, the United Kingdom would provide a wide range of
                             support services such as air base security, airfield battle damage repair,
                             transportation, fuel, medical, fire, and utility services.

                             Like lines of communication agreements, however, collocated operating
                             base agreements entail little or no peacetime cost to the host nation. For
                             example, the host nation normally does not have to provide additional
                             land, since collocated operating bases are already existing bases. The
                             host nation bears few direct costs to upgrade a base for collocated oper-
                             ations, since the  NATDinfrastructure fund and U.S. military construction
                             programs pay for the facilities. Likewise, the United States is respon-
                             sible for procuring the equipment and prepositioned war materials.      DOD,
                             however, could not quantify British expenditures to support U.S. collo-
                             cated operating bases requirements.


PeacetimeHost Nation         The  NATOStatus of Forces Agreement and several bilateral agreements
support                      cover the United Kingdom’s major contribution to U.S. forces in peace-
                             time-the provision of rent-free land, housing units, and exemptions


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                   from certain taxes and fees. At the same time, some of these agreements
                   obligate the United States to pay fees and charges related to the provi-
                   sion of the land and housing -most notably real estate taxes and accom-
                   modation charges.

Land and Housing   Under the      NATO
                                     Status of Forces Agreement, the United Kingdom pro-
                   vides surplus federal land for bases and facilities at no cost to U.S.
                   forces. The specific categories of land are covered under a 1973 agree-
                   ment, which primarily concerns the use and financing of facilities,
                   utility services, rights-of-way and other easements. Under this agree-
                   ment, the United Kingdom provides up to 100,000 pounds sterling per
                   British fiscal year (or $163,000, using a 1987 exchange rate of
                    1.63 pounds per dollar) to purchase land on behalf of U.S. forces (that
                   is, for land that is not surplus to the government) and to pay for inci-
                   dental expenses related to making the land available. In its 1989 Report
                   on Allied Contributions to the Common Defense,                      DOD
                                                                           estimated that the
                   total value of U.S.-occupied land and facilities in the United Kingdom
                   was approximately $3 billion, The revenue foregone by the United
                   Kingdom government in the form of rental value was estimated at about
                   $20 million per year.

                   The United States pays direct and indirect taxes, called rates,” to the
                   United Kingdom. Currently, for U.S. military facilities, the United States
                   reimburses the British treasury an amount equal to 14 percent of the
                   total bill to cover the value of public services received by U.S. forces.
                   These U.S. payments are called contributions in lieu of rates. The United
                   States also pays rates directly to British local governments for off-base
                   leased housing. In fiscal year 1989, these payments amounted to about
                   $700,000.
                   The British government also provides about 4,806 housing units, most of
                   which are surplus Royal Air Force housing uruts, to U.S. Air Force per-
                   sonnel. The United States pays a British charge, known as an accommo-
                   dation charge, on surplus housing. This charge, which includes rent,
                   rates, and maintenance fees, totaled $2 million in fiscal year 1989. Obli-
                   gation to pay this charge stems from a 1955 agreement governing the
                   use of Royal Air Force housing by U.S. forces.


                   6Rates are levied by British local governments and are assessedon the annual rental value of prop-
                   erty, Although British officials do not consider rates to be taxes, but rather charges for municipal
                   services, rates are assessedand collected in the form of a tax, and the services provided are those
                   typically connected to property taxes in the United States. Revenues collected from rates are used to
                   support a wide variety of local expenses, such as education, refuse collection, and fire services.



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                                              Forces




Taxes and Custom Fees            Like West Germany, the United Kingdom exempts U.S. forces from
                                 British taxes and customs fees related to official purposes. For example,
                                 U.S. forces are exempt from paying the value-added tax and customs
                                 duties on goods imported for their use. Individual service members are
                                 not exempt from paying the value-added tax, however, and also must
                                 pay other charges, such as vehicle registration taxes, that are normally
                                 levied on the British population,

Other Peacetime Agreements and   The United Kingdom and the United States have concluded agreements
Services                         under which the United Kingdom provides other forms of host nation
                                 support. In 1986, both countries agreed to modernize a U.S. ballistic mis-
                                 sile early warning station in the United Kingdom. According to    DOD, the
                                 United Kingdom will pay for the site’s construction at an estimated cost
                                 of $66 million and for the salaries of British nationals hired to maintain
                                 the facility.

                                 The United Kingdom provides U.S. forces certain services free of charge.
                                 For example, the Royal Air Force provides the U.S. Air Force with
                                 various air traffic control services free of charge, and U.S. forces also
                                 use British small arms training ranges and other training areas without
                                 charge.   DODcould not quantify the cost of these services to the British
                                 government,


Peacetime Initiatives Have       Because of the much smaller U.S. presence, the United States has not
Focusedon Reducing Fees          undertaken peacetime host nation support initiatives in the United
                                 Kingdom similar in scope and range to those negotiated with West Ger-
and Obtaining Housing            many. The United States has attempted to identify areas in which US.
                                 military support costs could be reduced, primarily by eliminating the
                                 contribution in lieu of rates and accommodations charges, and by
                                 securing additional housing.

Reduction of Fees                In October 1979, the United States and the United Kingdom established
                                 a Joint Task Force-composed of U.S. Air Force, U.S. Embassy, and
                                 British Ministry of Defense officials-primarily    to identify those areas
                                 that U.S. forces believed would enable them to reduce stationing costs.
                                 U.S. representatives to the Joint Task Force proposed that the United
                                 Kingdom eliminate the contributions in lieu of rates because other U.S.
                                 payments, specifically the rates paid for privately rented housing, more
                                 than compensate local governments for services received. Further, US.
                                 officials have pointed out that most U.S. personnel do not use the ser-
                                 vices for which the revenues are collected. For example, much of the



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                                revenues collected are for education; however, most U.S. military per-
                                sonnel and their dependents attend U.S.-provided schools. British gov-
                                ernment officials, nevertheless, have been unwilling to completely
                                eliminate these payments because they believe the rates reflect services
                                received by U.S. forces. Since the agreement governing contribution in
                                lieu of rates was signed, the assessed rate has been reduced by 60 per-
                                cent-from 35 percent in 1955 to its current rate of 14 percent.

                                The British government has enacted legislation to replace rate payments
                                with a per capita tax. Under this legislation, the United States will make
                                its last rate payment in April 1990; however, the British government has
                                asked for an alternative US. contribution. According to    DOD officials, the
                                Air Force is studying how these payments will affect U.S. forces.

                                The Joint Task Force also considered reducing accommodation charges
                                on the surplus housing provided to U.S. Air Force personnel. U.S. efforts
                                to eliminate accommodation charges date back to 1954, when the Air
                                Force argued that charging these fees was counter to the terms of the
                                1953 agreement, which at that time provided free use of British-owned
                                land. The United States sought relief from these charges primarily on
                                the grounds that U.S. forces were being double-charged for maintenance;
                                that is, they were paying for maintaining the facilities at their own
                                expense and being billed for maintenance as part of the accommodation
                                charge. Although British defense officials agreed that the United States
                                was being double-billed and offered to cut the charges by 40 percent, it
                                refused to eliminate them completely. In October 1982, the U.S. Air
                                Force stopped paying these charges- because of a congressional prohi-
                                bition-and    did not resume payment until October 1983 when, as part
                                of the plans to station ground-launched cruise missiles, the charges were
                                reduced by half. Accommodation charges have never been eliminated,
                                however, as the United States requested. These payments amounted to
                                $2 million in fiscal year 1989.

Additional Housing Secured as   Although the United States has not succeeded in obtaining full relief
Part of Missile Stationing      from paying rates and accommodation charges, it has concluded a one-
Agreement                       time housing agreement securing additional surplus Royal Air Force
                                housing units. These concessions were agreed to in connection with the
                                plans to station ground-launched cruise missiles in the United Kingdom.
                                As part of the missile stationing agreement, the United Kingdom (1) pro-
                                vided US. forces with an additional 1,019 housing units, (2) allowed the
                                United States to share in the residual value of any of the properties
                                renovated by U.S. forces and subsequently sold by the Royal Air Force,
                                and (3) cut the accommodation charges in half.


                                Page 63                                 GAO/NSIAD-9152 U.S.-NATOBurden Sharing
chapter 8
We& German and Brltbh Hoet Nation                                            ,
Support for U.S.Forcm




The United Kingdom also agreed to provide 4 million pounds, or about
$6.6 million (using 1987 exchange rates), in offset funds to help defray
the cost of its preference for building two of the missile bases on its soil
instead of the one envisioned by the United States. However, this money
had to be committed for renovation and construction of dormitories at
one of the missile bases, following British insistence that the United
States pay for these costs. In addition to the housing and reduction in
accommodation charges, the United Kingdom also agreed to provide
220 security personnel for a joint security force to protect U.S. missile
base sites. The British government estimated that it spends about $1.6
million per year to provide missile base protection. Currently, the
British government is cooperating with the United States in imple-
menting the Intermediate-Range Nuclear Forces Treaty-including          mis-
sile drawdowns and inspections by Soviet teams-and in discussing the
future use of the missile base that is still in operation.




Page 64                                 GAO/NSlAD91-32 U.S.-Bald Burden Sharing
    II




.




         Page 66   GAO/NSIAD-91-32U.S.-NA’lDBurden Sharing
Appendix   I

Factors Used to Reflect Each Country’s Shareof
the Burden

                                A cornerstone of the NATD alliance is that the burden of defending
                                Europe and the North Atlantic should be shared equitably among its
                                members. Beyond agreeing to this general principle, however, accept-
                                ance of what should be included in measuring the burden, and therefore
                                the degree of equity involved, has been a source of considerable debate
                                and disagreement within the alliance. As noted by DOD, “alliances will
                                endure only if the burdens and benefits of the enterprise are equitably
                                shared-and perceived to be so-by the participants.“’

                                The dilemma and source of controversy over how the burden should be
                                measured were discussed in a report by the Defense Budget Project, a
                                research organization that analyzes defense budget issues and national
                                security policy.2 In that report, it was noted that

                                the burdens of the alliance-funding,    personnel and equipment for the alliance’s
                                forces-are easy to identify, but exceedingly complex to define, measure and dis-
                                tribute. The NATO members have never negotiated a comprehensive, clear or
                                detailed definition of what constitutes each member’s “fair share” of that burden.

                                This appendix addresses the factors most often referred to by the Con-
                                gress, DOD, and other NATO nations as indicators of NATO members’ contri-
                                butions to the alliance-namely    (1) the percentage of and per capita
                                gross domestic product spent on defense and (2) measures of military
                                forces such as numbers of tanks, aircraft, and naval vessels. In addition,
                                we also discuss adjustments to defense expenditures often made by NATO
                                countries to help account for burdens not reflected in actual defense
                                outlays.


Percentageof and Per The   most commonly used measure of a country’s defense burden sharing
                      is the percentage of the gross domestic product allocated to defense.
Capita Gross Domestic 7%’ 1smeaSure generally shows that the United States outspends the
Product and Defense broadlyNATOdefines
                      other       allies in terms of providing for the common defense. NATO
                                        defense spending as expenditures each national govern-
Spending              ment makes specifically to meet the needs of its armed forces. Only
                                actual outlays are included. Indirect subsidies, such as the loss of reve-
                                nues resulting from waiving import duties or port fees for NATO partners,
                                are not included in the NATO definition.


                                ‘Report on Allied Contributions to the Common Defense (Washington, D.C.: Department of Defense,
                                Apr. 1987), p. i.

                                ‘Gordon Adams and Eric Munz, Fair Shares: Bearing the Burden of the NATO Alliance (Washington,
                                DC.: Defense Budget Project, Mar. 1988).



                                Page 66                                            GAO/NSIAD-91-32U.S.-NATOBurden Sharing
               .
                                                      Appendtx I
                                                      Factim Used to Reflect Each Country’s Share
                                                      of the Burden




                                                      From 1980 through 1988, the United States devoted an average of
                                                      6.2 percent of its gross domestic product to defense, compared to an
                                                      average of 3.6 percent that the remaining alliance members spent. Only
                                                      Greece exceeded the United States in terms of relative defense expendi-
                                                      tures. Some      NATO
                                                                         allies point out that restricting this measure to the
                                                      1980s is inherently biased in that it does not include the pattern of
                                                      decreasing U.S. defense expenditures in the 1970s. They add that,
                                                      during this time, their percentages of gross domestic product spent on
                                                      defense actually increased. As figure I.1 shows, however, while the
                                                      United States decreased its defense expenditures as a percentage of
                                                      gross domestic product in the 197Os, it spent significantly more than its
                                                      NAm   allies.



Figure 1.1: NATO Defense Spending as a Percentage of the Gross Domestic Product (1971-88)
8      Porconlago      of Oroaa DommtiaProduot




0
          .
1971          1972        1972     1974   lW5    mu   1m        1978    1979     lseo     lgel     we2      lg82     1984     1989     lses      1987   1988
Yura

       -             UnItedStates
       9.19          Small States al
       m             Large States b/

                                                      ‘Small States are Belgium, Canada, Denmark, Greece, Luxembourg, the Netherlands, Norway, Portugal,
                                                      and Turkey.

                                                      bLarge states are the Federal Republic of Germany, France, Italy, and the United Kingdom

                                                      Source: Adapted from Fair Shares: Bearing the Burden of the NATO Alliance. Based on 1986 exchange
                                                      rates except for 1987 and 1988.




                                                      Page 67                                               GAO/NSIAD-9192 U.S.-NAlOBurden Sharing
                                                    Appendix I
                                                    Factora Ueedto Reflect Each Camtry’s Share
                                                    of the Burden




                                                    Another measure often used to indicate allied defense burdens is
                                                    defense spending on a per capita basis. Per capita gross domestic
                                                    product is, according to          DOD,
                                                                                 a widely accepted measure of economic
                                                    development and standard of living. Two countries, for example, may
                                                    have identical gross domestic products, but one may have twice the pop-
                                                    ulation. The average standard of living for the more populated country
                                                    is lower, and the burden of defense expenditures is, therefore, greater.

                                                    Per capita measures reinforce the conclusion that the United States
                                                    bears a greater burden for defense. Figure I.2 illustrates the 1988 per
                                                    capita gross domestic product (the solid bar) and per capita defense
                                                    spending (the hatched bar), using the United States as the base (at
                                                    100 percent).



Figure 1.2: Relationship of Per Capita Gross Domestic Product and Per Capita Defense Spending (1988)
120   Porcont

110

100

 90

 80

 70

 60

 50

 40

 20

 20

 10

  0




      I         Per Capita Gross Domestic Product
                Per Cqita Qefense Spending

                                                    Source: Derived from figures presented in DOD’s 1990 Report on Allied Contributions   to the Common
                                                    Defense.




                                                    Page 58
.   Appendix I
    Factom Ud to Reflect Each Country’s Share
    of the Burden




    While no NATO country matches the United States in per capita defense
    expenditures, some spend notably more than others. For example,
    although France is seventh in terms of per capita gross domestic
    product, it has the third largest per capita defense expenditures. The
    United Kingdom, which ranks eleventh in terms of per capita gross
    domestic product, is the fourth largest per capita defense spender. Also,
    although the per capita defense expenditures of poorer countries such
    as Turkey are low when compared to most countries, their defense
    expenditures appear more commensurate with their per capita gross
    domestic product than do those of other allies. That is, as shown in
    figure I.2 (using the United States as the basis for comparison), as a
    country’s per capita defense spending bar approaches the height of its
    per capita gross domestic product bar, the country comes closer to
    spending at a level commensurate with its wealth.

    According to DOD,

    although “fairness” is often assumed to imply an equal or proportional sharing of
    the common defense burden (e.g., equal percentages of GDP [gross domestic product]
    devoted to NATO’s defense), it could be considered fair for those countries with a
    higher standard of living to contribute a greater share of their national income to
    defense, in much the same way that a progressive income tax collects a greater than
    proportional share of revenues from individuals in the upper income brackets.

    DOD also noted that what constitutes a “fair”  distribution of the burden
    is fundamentally a subjective judgment. However, using DOD’S logic,
    countries with per capita wealth approaching that of the United States
    should spend a progressively higher percentage of that wealth on
    defense. As shown in figure 1.2, however, this is not the case. For
    example, Canada, Luxembourg, and West Germany spend substantially
    less on defense than the United States when compared to their relatively
    high per capita gross domestic products (in 1988, Germany’s per capita
    gross domestic product slightly exceeded that of the United States).
    Also, although Denmark and Norway have higher per capita gross
    domestic products than the United States, they spend only 38 and
    68 percent, respectively, of what the United States spends on defense on
    a per capita basis. Conversely, the per capita defense contributions of
    other countries such as the United Kingdom and the NATO aid recipient
    nations appear substantially better, given their respective levels of per
    capita gross domestic product.




    Page 69                                     GAO/NSIAD-91-32U.S.-NATOBurden Sharing
                         Appendix I
                         FactoroUeedtoR.efktEachcoUntry'sShare
                         oftheBurden




                         Certain European allies argue that several adjustments to defense
Adjustments to           expenditures are necessary which, when taken into consideration, help
Defense Expenditures     account for burdens not reflected in defense outlays. These adjustments
                         include defense spending in non-NATDareas, the use of conscripts versus
                         all-volunteer forces, economic assistance, and other costs, Including
                         these adjustments, however, does not alter the conclusion that the
                         United States has borne a larger defense burden.


U.S. Spending for Non-   Some NATO allies argue that not all U.S. defense expenditures should be
NATOCommitments          used to measure the U.S. contribution to NATO, since the United States
                         makes substantial expenditures for defense commitments outside the
                         NATO area. DOD estimated that about 60 percent of its budget is spent on
                         the US. commitment to NATO.~ Therefore, instead of using the total U.S.
                         defense expenditures, which amounted to 6.1 percent of the gross
                         domestic product in 1988, it is argued that only 60 percent of that
                         amount, or 3.7 percent, should be used in comparisons with other NATO
                         allies’ defense expenditures. At 3.7 percent, the U.S. expenditure for
                         NATO’S defense is more in line with (but still exceeds) the average spent
                         by other alliance members.

                         DOD   has disagreed with the validity of the congressional requirement to
                         determine the costs of U.S. forces for NA?D. DOD has stated that if the
                         nature of the conflict so required, all of its forces could be used for the
                         defense of NATO. The U.S. position is that it will not necessarily restrict
                         itself to the theater in which an attack by Soviet forces is initiated;
                         rather, the United States plans to strike the enemy in areas it believes
                         are the most advantageous. Therefore, U.S. forces, although located in
                         other theaters, could play a key role in the defense of NATO by striking
                         the enemy in other vulnerable spots. Finally, U.S. defense commitments
                         in areas outside of NATO’S boundaries generally protect interests of the
                         allies as well. For example, U.S. activities in the Persian Gulf have been
                         a key factor in keeping vital sea lanes open during regional conflicts.
                         These U.S. actions protected both U.S. and the allies’ interests, since
                         Europe is highly dependent on Persian Gulf oil resources.




                         3The Department of Defense Authorization Act for 1986 (P.L. 98-626) required DOD to submit, begin-
                         ning in fiscal year 1986 and each year thereafter, a report on the status and cost of the U.S. commit-
                         ment to NA’ID.



                         Page60                                                GAO/NSIAD9132U.S.-NAIDBurdenSharing
                           ALU=*      1
                           Fact.mUsedtol?.efleetEmhCountry'e8hare
                           of   the Burden




Use of Conscripts Versus   All of the NATO allies except the United States, Canada, Luxembourg, and
All Volunteer Forces       the United Kingdom use a system of conscription, or draft, to fill their
                           military forces. The use of conscription enables them to pay less than
                           market wages. Countries using conscription maintain that, by holding
                           down defense personnel costs, they are able to spend more in other
                           defense areas. They point out that at least part of the higher U.S.
                           defense expenditures goes to pay the increased personnel costs required
                           by an all volunteer force. In their opinion, such costs distort valid com-
                           parisons of defense spending.

                           In March 1988, we reported on the potential impact of returning to
                           peacetime conscription as a staffing alternative of U.S. military forces4
                           In that report, we noted that by instituting a draft system, as much as
                           $1.4 billion could be saved in the first year and $7.8 billion annually (in
                           1987 dollars) in the long run. If such long-run savings could be realized,
                           however, the percentage of U.S. gross domestic product devoted to
                           defense would be reduced by only about .2 percent, not nearly enough to
                           bring the U.S. share down to the average spent by the rest of the allies.
                           Also, the savings would be offset by a much less effective force because
                           there would be fewer careerists.

                           The force size could be increased to counteract the loss of force effec-
                           tiveness, but such measures would increase costs. In addition, if it is
                           assumed that 12 months of experience are required to train new service
                           members, estimated annual budgetary savings would drop to about
                           $4 billion. Further, if 24 months of experience are required for full occu-
                           pational effectiveness, budgetary costs might even increase by as much
                           as $2.6 billion per year. The costs to the U.S. civilian economy of reinsti-
                           tuting the draft are estimated to range from $3 billion to as high as
                           $9 billion annually.

                           The study also showed that countries such as West Germany and France
                           tend to have proportionately more manpower in their armies but with
                           terms of service of only 12 to 16 months. While their larger armies
                           reflect their significant combat role, they may also reflect the need for a
                           larger force to compensate for a loss in force effectiveness.

                           As discussed, the allies may not be accurate in contending that increased
                           U.S. personnel costs are due to the use of an all volunteer force. In com-
                           menting on our previous report, DOD noted that a draft system would not
                           necessarily cost less, would require more manpower (the population of

                           4Militaty Draft: Potential Impacts and Other Issues (GAO/NSIAD-88-102, Mar. 1988).



                           Page 61                                           GAO/NSIA&91-32 U.S.-NATOBurden Sharing
                     Appendix I
                     Factmn Used to Reflect Each Country’e Share
                     of the Burden




                     trainees and trainers would swell), and would reduce force
                     effectiveness.


Adding Development   Some allies argue that the exclusion of economic or development assis-
Assistance           tance as a form of burden sharing understates non-US. allies’ contribu-
                     tions to the common defense. Economic assistance helps recipient
                     countries increase their fiscal capital, improve the quality of their labor
                     force, and free up resources for the recipients to spend on their own
                     defenses. In this area, some U.S. allies spend several times more than the
                     United States, when measured as a percentage of gross domestic
                     product. However, as figure I.3 shows, in most cases, the amount spent
                     on development assistance is small relative to the donor country’s
                     defense spending and does not alter the basic conclusion that the United
                     States devotes relatively more to security than its allies.




                     Page 62                                       GAO/NSIAD91-92 U.S.-NA!l0Burden Sharing
                                                    Appendix I
                                                    Factom Uoedto FWkct Each Country% Share
                                                    of the Burden




Figure 1.3: Percent of Gross Domestic Product Spent on Defense and Development Assistance (1988)
10    Porcant

 9



 7

 6

 6

 4


 3                                         r-
 2                                                                           '..

 1                               --_--_-                __-   _______._-__
                                                                    - _._____...
                                                                            A ._____
 0              ,            ,             ,    ,   ,         ,        i.          ;:




NATO Countriee

                    Development Aaeistanm
                    Defense Expenditures
                                                    aAid recipient.
                                                    Source: Derived from figures presented in DOD’s 1990 Report on Allied Contributions   to the Common
                                                    Defense.




Other Costs                                         Some allies absorb military-related costs that are not included within the
                                                    definition of defense expenditures. These expenses may require an
                                                    outlay of funds or represent a loss of potential revenue. In addition,
                                                    some allied nations point out that their agreement to provide the United
                                                    States with transportation assets during wartime has enabled the United
                                                    States to avoid significant expenditures.

                                                    With the concentration of allied forces on its soil and with Berlin occu-
                                                    pation costs, West Germany probably incurs more of these expenses
                                                    than any other NATO ally (see ch. 3). As shown in table I. 1, West Ger-
                                                    many incurred roughly $1.5 billion in military costs in 1988 that are
                                                    excluded from defense spending by NATO'S definition.


                                                    Page 63                                               GAO/NSLAD91-32U.S.-NA’IOBurden Sharing
                                            Appendix I
                                            Factors Used to Reflect Each Country’e Sham
                                            of the Burden




Table 1.1: Military-Related Expendlturecl
Absorbed by West Germany (1988)             Dollars in millions
                                            Cateaorv                                                                                           Cost
                                            Police protection of Intermediate-Range Nuclear Facilities
                                            -_                                                                                                 $9.0
                                            Berlin occupation costs (exclude aid)                                                             500.0
                                            Payments for communities where U.S. personnel live
                                            ~I                                                                                                 71.4
                                            Germanv’s share of U.S. maneuver damaaes                                                           10.0
                                            User value of real property available to US. forces                                               800.0
                                            Utility value of housing units provided to U.S. forces at no cost                                  80.0
                                            Exemptions from value added tax
                                            --_____                                                                                            20.0
                                            Contributions to Armed Forces recreation facilities and services                                   20.0
                                                                                                                                           $1,510.4
                                            Source: DOD’s 1990 Report on Allied Contributions to the Common Defense.

                                            Adding the costs in table I. 1 to defense expenditures included within the
                                            NATO definition would raise West Germany’s 1988 percentage of gross
                                            domestic product devoted to defense from 2.9 percent to a little over
                                            3 percent. These other costs and the development aid discussed in the
                                            previous section raise Germany’s contribution to 3.4 percent of gross
                                            domestic product, still far below the 1988 U.S. contribution of 6.1 per-
                                            cent for defense only.

                                            Also, it appears that US. expenditures in the host country would, at
                                            least to some extent, tend to offset some of the costs associated with the
                                            U.S. presence. During fiscal year 1987, for example, DOD spent about
                                            $9 billion outside the United States for such things as equipment,
                                            repairs, petroleum, construction, supplies, and local labor.” Almost one-
                                            fourth was spent in West Germany, not including expenditures by mili-
                                            tary personnel. Therefore, it appears appropriate that, when consid-
                                            ering the costs of hosting U.S. forces by an ally, the U.S. expenditures
                                            should be included as well.

                                            In some discussions, it is pointed out that significant allied civilian
                                            assets that are designated for U.S. use during wartime should be recog-
                                            nized as defense contributions. For example, during a crisis or war,
                                            many NATO countries are committed to mobilizing transportation assets
                                            such as cargo planes, trucks, and vessels to support incoming U.S. rein-
                                            forcements. These assets would no doubt add significantly to the U.S.


                                            “DOD which collects these statistics, notes that its data in some cases reflects obligations rather than
                                            the adtual transfer of articles between the United States and other countries. In the future, DOD
                                            intends to rename its summaries from “defense trade balance” to “defense procurement activity” to
                                            more accurately reflect the nature of the information collected.



                                            Page 64                                                GAO/NSW91-32 U.S.-NATOBurden Sharing
                         Appendix I
                         FactmwUsedto Reflect Each Country’s Share
                         of the Burden




                         burden if it had to procure them in peacetime for potential wartime use.
                         However, countries’ expenditures on such assets are an integral part of
                         their productive economies during peacetime and would exist with or
                         without a potential US. need. Moreover, while some allied transporta-
                         tion assets-such as commercial sea and air transport-will      be avail-
                         able for U.S. forces’ use during a    NATO
                                                                conflict, the countries providing
                         the vessels do not absorb the associated costs. The U.S. government is
                         obliged to lease them and pay applicable wartime insurance rates as it
                         must do in the United States.


                         Critics assert that using defense spending relative to the gross domestic
Use of “Output”          product is overly simplistic and results in an incomplete assessment of
Measures, or             the facts. They suggest that an examination of “output” factors mea-
Contributions of         sured in terms of military equipment numbers and personnel reveals
                         that member nations’ contributions to    NATO'Sconventional capability far
Military Forces          exceed those indicated by the use of economic measures of defense
                         spending (that is, their “inputs”).    NATO
                                                                  nations’ contributions in terms of
                         military capabilities can be compared by such measurements as the fire
                         power of the combat division ground-based equipment, numbers of tac-
                         tical aircraft, and naval tonnage.


Ground Forces Division   To compare ground forces,      NATODOD
                                                             and       use a measurement of division
Equivalent Firepower     equivalent firepower, a measure of a weapon’s capability. These adjust-
                         ments make it possible to compare dissimilar units. Based on this
                         approach,    DOD  reported in its 1990 burden sharing report that non-U.S.
                         NATO  allies’ land forces accounted for slightly over half of the division
                         equivalent firepower, while the United States provided the remainder
                         (including equipment in the United States). For two major categories of
                         ground forces equipment-main         battle tanks and artillery--r>oD
                         reported that U.S. allies have a significantly higher inventory than does
                         the United States.


Tactical Aircraft and    According to   DOD'S 1990 Report on Allied Contributions to the Common
Naval Tonnage            Defense, non-U.S.NATO    allies contributed their fair share of air force tac-
                         tical aircraft compared to their collective gross domestic product share.
                                          NATO
                         While the non-U.S.        allies supplied 54 percent of the tactical aircraft
             *           with a 53-percent share of the collective gross domestic product, the
                         United States provided 46 percent of the tactical aircraft compared to
                         its 47 percent of the collective gross domestic product.



                         Page 65                                     GAO/NSlAD-91-32U.S.-NA” Burden Sharing
                 Appendix I
                 Factors Used to Reflect Each Country’s Share
                 of the Burden




                 In its 1987 report on allied contributions, DOD included each country’s
                 air force capability but excluded data on tactical fighters or attack air-
                 craft in naval squadrons. According to the Congressional Budget Office’s
                 analysis of the report, if these assets had been included, the U.S. share
                 would have been 60 percent, an increase of 15 percent over that
                 reported by DOD, which would have shifted the balance in favor of the
                 United States. Also, like the division equivalent firepower measure, the
                 tactical air forces comparison does not include differences in training,
                 readiness, and sustainability. Moreover, according to DOD, only 37 per-
                 cent of the non-U.S. NATO allies’ aircraft is considered new generation
                 compared to 60 percent for the United States.

                 Although the 1988,1989, and 1990 DOD reports on allied contributions
                 have been revised to include a comparison of naval tactical air forces,
                 the data is provided separately from the comparison of such aircraft in
                 each country’s air forces. The reports show that the United States pro-
                 vides about 90 percent of the naval tactical air forces. Although an
                 improvement over previous reports, tactical air comparisons in non’s
                 summary reports still exclude those assets provided by the U.S. Navy.

                 ‘A U.S.-allied comparison of conventional surface combatants and attack
                  submarines resulted in a more favorable picture of the U.S. contribution
                  to the common defense than other output comparisons. In terms of ton-
                  nage,Bthe United States contributes over half of the total.


Output Measure   The use of the output measures provides a much more favorable view of
Limitations      the allied contribution than input measures such as the percent of gross
                 domestic product spent on defense. There are a number of reasons why
                 output measures, as they now exist, are poor indicators of burden
                 sharing. For example, although land force comparisons, as measured by
                 division equivalent firepower, make non-US. NATO allies look better as a
                 whole, they do not adequately reflect countries’ capabilities in this area.

                 For example, in its analysis DOD acknowledges that division equivalent
                 firepower does not include important aspects like training, readiness,
                 and sustainability. A Congressional Budget Office study concluded that
                 if such factors were incorporated, U.S. land forces might rank higher,




                 “Tonnage is a static measure of aggregate fleet size.



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Appendix I
Factors Usedto Reflect Each Country’s Share
of the Burden




especially in the area of sustainability.’ While all NA’ID nations have defi-
ciencies in stocks of munitions, for example, the United States is gener-
ally conceded to be better supplied than the others.

Also, a comparison of output measures is questionable because of the
way that equipment is accounted for and major output categories are
defined. For example, while DOD reported in 1989 that U.S. allies have
much greater artillery holdings than the United States, the Defense
Budget Project reported in 1988 that the U.S. artillery inventory
accounted for over half of NATO’S stocks.8 Differences in how major
weapons categories are defined may also have a major impact on output
comparisons. In the artillery example noted above, the Defense Budget
Project includes mortars larger than 105 millimeters and coastal defense
guns. DOD, on the other hand, excludes these. In the Conventional Armed
Forces, Europe talks, mortars are included in the definition of artillery
beginning with 100 millimeters rather than 105 millimeters. According
to a DOD official, such discrepancies may also occur because older
weapons that have been replaced by newer ones have not yet been
retired, resulting in a higher than normal inventory count in some coun-
tries. DOD noted that such factors may account for the major differences
in individual allies’ equipment holdings.

A major U.S. defense category is strategic mobility assets to transport
vast numbers of U.S. reinforcement personnel, equipment, and supplies
to Europe during a crisis. This category is vitally important to the
United States in addressing its commitments but is excluded from
output measure discussions. European countries do not have such
requirements due to their geographic location, but these assets are no
less important contributions to NATO’S defense than are the other output
measures often used to compare capability.

Another major drawback in the use of output measures is that they are
not additive; that is, such weapon comparisons have no common denom-
inator. Thus, there is no way to combine the contribution of tanks to
aircraft to naval vessels, and so on, to arrive at a total contribution by
each NA’ID member. These individual measures do not provide adequate
information on which to base comparisons of relative contributions.



7Alliance Burden Sharing: A Review of the Data (Washington, DC.: Congressional Budget Office, June
1987), p. 11.
*Adams and Mum, Fair Shares: Bearing the Burden of Defense.



Page 67                                            GAO/NSIAD9l32 U.S.-NA’IDBurden Sharing
                    Appendix I                                                                        c
                    Flletola Usedto Reflect Each Country’s Share
                    of the Burden




                    DODofficials stated that it is important to recognize that the percentage
Comments by DOD     of gross domestic product devoted to defense is not a perfect measure of
Officials and Our   burden sharing and that no single measure can fully depict burden
Evaluation          sharing efforts. The officials added that the obvious discrepancy
                    between the U.S. share of the gross domestic product devoted to defense
                    and the shares of many U.S. allies can be attributed in part to the U.S.
                    historic role as a nuclear superpower (a role that DOD points out the
                    United States would not wish its allies to take on), U.S. worldwide inter-
                    ests and responsibilities, and the “subpar” burden sharing of some
                    allies. DOD officials also objected to the extent to which we used gross
                    domestic spending and defense spending on a per capita basis as mea-
                    sures of burden sharing.

                    We agree that no single measure can fully capture the burden sharing
                    efforts of any ally, including the United States. It is for this reason that
                    we discuss many other indicators of burden sharing, such as spending
                    for non-NA1o commitments, development assistance, and the provision of
                    host nation support to allied forces. However, in terms of making com-
                    parisons of the extent to which defense consumes economic resources,
                    defense spending as a percentage of the gross domestic product remains
                    the most comprehensive and most widely used indicator of burden
                    sharing.

                    Regarding the U.S. role as a nuclear superpower and its worldwide inter-
                    ests, it is sometimes argued that the discrepancy between U.S. defense
                    expenditures and those of its allies is the result of allied decisions to
                    spend less for defense because of the security provided to them by the
                    US. nuclear umbrella. Also, as we point out in our report, although the
                    United States has worldwide defense commitments, that defense pro-
                    tects not only U.S. interests but also those of its allies.

                    DOD  officials objected to our use of per capita measures of gross domestic
                    product and defense spending, especially in figure 1.2. This figure
                    depicts the relationship of these two measures for each NATO country
                    using the United States as the basis for comparison. In the opinion of
                    these officials, the information could be misleading because it might
                    imply that U.S. allies should be spending what the United States spends
                    on defense relative to its per capita gross domestic product. DOD officials
                    also noted that, by definition, per capita measures are too sensitive to
                    changes in population. In terms of our overall discussion of economic
                    measures, these officials stated that since we had addressed total
                    national gross domestic product and defense spending, use of this same



                    Page 68                                        GAO/NSIAD-91-22U.S.-NAIOBurden Sharing
Appendix I
FamOnrUmedto Reflect Each &dry’s   &are
of   the Burden




data expressed on a per capita basis does not provide any new
information.

Our comparison of US. per capita gross domestic product and defense
spending with that of other NATO nations is not intended to imply that
what the United States spends is the “correct” amount. However, the
information provides an indication that many nations failed to ade-
quately address their force goals during the 1980s because they spent
their resources in other areas, not because they lacked a sufficient eco-
nomic base.

We also disagree that per capita measures provide no new information
that is not already provided by the use of national data. Lost in any
table showing countries’ total gross domestic product and total defense
spending is any indication of individual economic well-being or produc-
tivity and defense sacrifice. For example, the gross domestic product of
Norway is not significantly larger than that of Turkey, and both coun-
tries’ levels of defense spending are similar. However, because of
Norway’s much smaller population size, it has the highest per capita
gross domestic product of any alliance member, including the United
States. As noted in our discussion of per capita defense spending, the
Norwegian citizen spends only a little over 60 percent of what the U.S.
citizen spends relative to the strength of their economies, Turkey, on the
other hand, has such a large population that its per capita gross
domestic product is the lowest in the alliance. However, only two
nations-the United States and Greece-spend more for defense rela-
tive to their respective gross domestic products.

In responding to our discussion on output measures, DOD officials stated
that, in their view, output measures have greater utility than they are
given credit for in our report. While we agree that current output mea-
sures enable comparisons in selected areas, therr limitations severely
restrict their utility in discussions of burden sharing when the ultimate
objective is to reach decisions on relative economic sacrifice.




Page 69                                           GAO/NSMD-9132 U.S.-NATOBurden Sharing


                                          ,:&      I “‘a
                        ,’                   ,*         ,,’ ‘.


                                     /
Appendix II

Major Contributors to This Report


                        Albert H. Huntington, III, Assistant Director
National Security and   H. C. Young, Assignment Manager
International Affairs   Elena L. Boshier, Evaluator
Division, Washington,
DC.
                   II
                        Dave Brack, Evaluator-in-Charge
European Office         Peter Berry, Evaluator




(487398)                Page 70                                 GAO/NSIAD-9132 U.S.-NATOBurden Sharing
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