Transatlantic Security Task Force Series

November 2013

Policy Brief

Summary: This paper addresses the new strategic age for the Atlantic Alliance, considering the greater assertiveness regarding the future direction of the Alliances collective force development and defense posture as well as greater uncertainty regarding the circumstances shaping the Alliances economic and resource wherewithal. Analyzing these challenges, it argues for continued political investment by political elites on both sides of the Atlantic in sustaining an ambitious transatlantic partnership and a strong NATO.

NATO and the Economy-Security Nexus: Reflections on a New Strategic Calculus

by Diego A. Ruiz Palmer

Introduction NATO is entering a new era in its further transformation. This new strategic age for the Alliance no longer simply post-Cold War or post 9/11 is characterized by greater assertiveness regarding the future direction of the Alliances collective force development and defense posture. This was the objective of the NATO Forces 2020 text agreed upon at the Chicago Summit in May 2012. At the same time, there also exists greater uncertainty regarding the circumstances shaping the Alliances economic and resource wherewithal, as well as its external environment. The Alliance is emerging from two decades of operations some 36 operations, missions, and precautionary deployments since the initiation of operation Maritime Monitor in the Adriatic Sea in July 19921 with a sense of both achievement and relief. There is a measured expectation that the next several years will see a lower operational tempo and a smaller operational footprint. Operation Unified Protector in Libya
1 Diego A. Ruiz Palmer, Two decades of NATO operations: Taking stock, looking ahead, NATO Review, May 2012.

in 2011, however, showed that new, unforeseen contingencies cannot be excluded and that NATO must remain prepared. Together with enlargement from 16 to 28 members, an expanded web of partnerships with nations across Europe and around the globe, and the enhanced expeditionary make-up of allied forces, operations on three continents have transformed the Alliance and made it more assured. The Alliances Strategic Concept approved at the 2010 Lisbon Summit conveys a stronger sense of purpose than many observers had anticipated.2 During these two decades of operations, NATO demonstrated the inherent adaptability of its structures and procedures to changed strategic conditions, including the ability of the Alliance to act as the core of wider coalitions. Its post-Cold War fate and new role as a cooperative security hub were often shaped, however, by external circumstances, rather than governed by an internal design. Now, with NATO Forces 2020 as its midterm horizon, the Allies wish to set out the path forward more deliberately in effect, the transition from
2 Active Engagement, Modern Defence, Lisbon, November 19-20, 2010.

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Policy Brief
a deployed NATO to a prepared NATO that retains its long-standing attributes of a high-level of operational competence and responsiveness, but also leverages the operational experience and enhanced interoperability associated with engagements from Bosnia to Libya. At the same time, circumstances influencing the Alliances collective capacity to meet the ambition set-out in the Strategic Concept have become less determined and their effects more difficult to calibrate since Lisbon. In particular, the enduring global economic crisis, declining U.S. defense spending, and the uncertain direction of the Arab Spring represent new dimensions in this complex strategic calculus. Economic Statecraft: The Assumed, but Neglected Partner of Strategy The economy-security nexus is, inescapably, a central element of an alliance of democratic nations. Resource concerns have also shaped the NATO agenda persistently, from the days of the 1952 Lisbon ministerial meeting, through the 3 percent defense spending annual growth target of the 1970s, to the more recent guideline of devoting 2 percent of the Gross Domestic Product to defense expenditures.3 The economic and financial crisis gripping the world since 2007-2008, however, has altered a fundamental assumption underpinning the transatlantic relationship: that while politics and strategy the hard power statecraft might be, on occasion, sources of intra-Alliance disagreement and even conflicting policies, the underlying strength and resilience of the North American and European economies ensured that nothing of consequence would affect adversely that relationship. While politics and strategy might be, at times, a source of friction, economics, characterized by steady growth and low inflation since the end of the Great Inflation era of the 1970s and 1980s, could be counted upon to exercise a virtuous influence in virtually all circumstances. No two continents depend more on each other economically than Europe and North America. Together, they account for about half of the worlds economic output and almost 40 percent of global trade. Every single day, more than 2 billion in goods and services are traded across the Atlantic, with millions of jobs on both sides of the ocean depending on that trade. The United States and the Euro3 The 3 percent guideline was approved by heads of state and government at the NATO Summit meeting in London in May 1977. The 2 percent guideline was approved by Allies in 2006.

pean Union are also each others primary source and destination for foreign direct investment. For example, in Europe, more than 60 percent of all foreign investment in research and development is by U.S. affiliates. And European entities are responsible for some three-quarters of foreign investment in research and development in the United States. Regrettably, there is increasing concern that the evolving circumstances, as much as the original causes, of the current economic crisis have depleted to some extent that essential reservoir of mutual confidence, while adding a further source of strain to a relationship already laboring under an unresolved military burden-sharing debate. At the same time, a new sense of urgency regarding the resolve and capacity of Allies on both sides of the Atlantic to put their economic house in order, as well as the opportunities that might arise to trigger renewed economic activity, have prompted new efforts. These efforts have taken the form of the Transatlantic Trade and Investment Partnership, as well as less visible measures in the regulation of banking practices,4 to place the transatlantic economic relationship on a new, well-anchored footing. Whether these steps, while welcome and necessary, will be enough to steady the transatlantic economy remains uncertain. Allied Defense Cooperation in an Age of Austerity: Retrenchment or Opportunity? Declining defense spending among many Allies since 2008 and the resultant adverse impact of such a trend on a fair sharing of the risks, roles and responsibilities associated with the common defense have been a deepening source of concern for several years. Former Secretary of Defense Robert Gates speeches in Washington, D.C. and in Brussels, in February 2010 and June 2011, respectively, illustrated U.S. worries.5 NATO Secretary General Anders Fogh Rasmussen has repeatedly warned against any complacency regarding the adverse influence that insufficient investment in defense, as well as an unbalanced sharing of the burdens and benefits of NATO membership, would have on both the military
4 Kate MacKenzie, European Bank Deleveraging: Basel III edition, Financial Times, October 24, 2012; Darryl E. Getter, U.S. Implementation of the Basel Capital Regulatory Framework, Report R42744 (Washington, D.C.: Congressional Research Service), November 14, 2012. 5 Remarks by Secretary of Defense Robert M. Gates as delivered at the National Defense University on February 23, 2010, and at the Security and Defense Agenda on June 10, 2011, U.S. Department of Defense.

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Policy Brief
capacity of individual Allies and the public perception of the Alliance.6 In 2012, the United States alone bore 72 percent of all Alliance defense spending.7 Admittedly, a fixed allocation of a nations GDP to defense cannot be the only indicator of defense performance, and burden- sharing is expressed in NATO in several, complementary ways. No single ally should be expected, however, to shoulder a disproportionate share of the collective burden alone, much less to fill gaps in capability areas where other Allies have military assets available in their inventories, or, if not, should. This burden-sharing situation becomes increasingly unsatisfactory when the Alliances largest and most militarily capable ally is confronted with the necessity to significantly reduce the scale of its investment in defense, possibly, up to $1 trillion over a decade and this is a second source of increased uncertainty but has assumed such a salient position in the provision of standing capabilities to the Alliance, as well as in the contribution of specialized assets to individual NATO operations. The longer-term implications for the overall U.S. defense posture and for NATO of the recalibration of the U.S. defense spending effort should become a growing source of attention rather than the so-called pivot to Asia. This is because the rebalancing of U.S. forces toward the Pacific (USPACOM Area of Responsibility) is dwarfed in scale by the global repatriation of U.S. forces to the United States, initiated in the aftermath of the end of the Cold War, following their gradual draw-down in the Middle East (USCENTCOM Area of Responsibility). At the same time, too often, gloom and doom dominate assessments as well as forecasts of the Alliances collective military capacity. These assessments neglect the formidable military capabilities possessed by European Allies and Canada, collectively only second in the world to those of the United States. These include, but are not limited to, rapid reaction headquarters,8 deployable fighters, smaller-size aircraft and helicopter carriers as well as large amphibious ships, modern frigates and destroyers, attack submarines and increasingly strategic airlift, in the form
6 Speech by NATO Secretary General Anders Fogh Rasmussen at the annual session of the NATO Parliamentary Assembly in Dubrovnik, Croatia, October 11, 2013. 7 NATO Secretary Generals 2012 Annual Report (Brussels: North Atlantic Treaty Organisation, January 30, 2013). 8 European Allies provide 17 multinational, land, air, and maritime rapid reaction deployable headquarters at different levels of readiness, often equipped with stateof-the art communications and shelters suited to exercise command and control in an expeditionary operations environment.

of C-17s, extended-range versions of the C-130 and, soon, A-400M transport aircraft. These assessments often also measure European capabilities against those possessed by the United States, instead of calibrating them against an optimized European capability target that does not need to mirror that of the United States to make an essential contribution to the Alliance and meet national requirements and other international commitments. The opportunity, as well as the challenge, is to consolidate and package the capabilities of European allies into pools of coherent forces that are balanced, self-sustainable, and complementary across the range of mission sets associated with the Alliances three core tasks. Building blocks of such a consolidated set of capabilities exist already in many cases in the form of standing or on-call, deployable, and usable force packages of variable scale. These include, but are not limited to, the British-French Combined Joint Expeditionary Force, Allied Rapid Reaction Corps, Eurocorps, 1st German-Netherlands Corps, Standing NATO Maritime Groups, European Maritime Force, United Kingdom-Netherlands and Spanish-Italian Amphibious Forces, German-Netherlands Extended Air Defence Task Force, Belgium-DenmarkNetherlands-Norway-Portugal Expeditionary Air Wing, European Air Transport Command and the multinational C-17 Heavy Airlift Wing. Many of these multilateral arrangements provide capabilities to rotations of the NATO Response Force in the form of component command headquarters or forces or both. The ambition should be to aim for greater overall coherence and gradual convergence between these various complementary, but currently excessively fragmented and dispersed, arrangements. Using NATOs Smart Defense initiative, greater convergence could be pursued through new collaborative endeavors among interested allies aimed at achieving greater efficiency in development and procurement practices, larger economies of scale, and expanded standardization. The Alliances Connected Forces Initiative also provides a path for enhanced connectivity and interoperability among allied nations and between multinational formations. Efforts within NATO and the European Union should be mutually coherent, complementary, and transparent and should rely, where advisable, on collective and multilateral arrangements, such as NATOs Conference of National Armaments Directors and Agencies, as well as the European Defence Agency and OCCAR.
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The rebalancing of the United States defense posture in Europe with the deployment of new kinds of assets and capabilities also offers novel opportunities to seek new forms of transatlantic military cooperation and extend the quest for more coherent forces to United States and Canadian forces stationed in Europe, as well as in North America. These new U.S. deployments include Special Operations Forces aviation assets in the United Kingdom, Arleigh Burke-class, ballistic missile defense-capable AEGIS destroyers at the Rota naval base in Spain, and unmanned airborne Broad Area Maritime Surveillance systems at Sigonella Naval Air Station, Sicily, Italy. Aiming for a More Collaborative Alliance In another era, but in a comparable context of unsatisfactory NATO burden-sharing, former United States ambassador to NATO, David Abshire, proposed in the 1980s that the Alliance consider and develop a concerted resources strategy.9 While not fully realized at the time, components of his vision were implemented in the form of a Conventional Defense Improvement (CDI) program and a more ambitious approach to transatlantic armaments cooperation. Circumstances today are vastly different from those prevailing 30 years ago. Yet, the challenge to secure a fairer sharing of the defense burden in NATO, the opportunity to optimize the contribution of European allies, and the desirability of achieving new forms of transatlantic economic cooperation, including in the defense trade area, all militate in favor of developing a more ambitious approach to Alliance defense planning and cooperation, a grander and more compelling vision of a more collaborative Alliance. Each in its own way, NATO Forces 2020, as an extension of the Alliances Strategic Concept, and the TTIP are building blocks toward this vision. Its successful completion will rest, however, on continued investment of political resolve and resources by political elites on both sides of the Atlantic in sustaining a vibrant transatlantic relationship and a strong NATO, as well as enduring public opinion awareness and support.
About the Author
Since September 2012, Diego Ruiz Palmer has been the special advisor to the NATO secretary general for economics and security, as well as head of the Economics and Security Assessments Unit, NATO International Staff. Ruiz Palmer was the first head of the Strategic Analysis Capability (SAC) in NATOs new Emerging Security Challenges Division. The views expressed in this paper are the authors own and do not necessarily reflect those of NATO or NATO member nations.

About GMF
The German Marshall Fund of the United States (GMF) strengthens transatlantic cooperation on regional, national, and global challenges and opportunities in the spirit of the Marshall Plan. GMF does this by supporting individuals and institutions working in the transatlantic sphere, by convening leaders and members of the policy and business communities, by contributing research and analysis on transatlantic topics, and by providing exchange opportunities to foster renewed commitment to the transatlantic relationship. In addition, GMF supports a number of initiatives to strengthen democracies. Founded in 1972 as a non-partisan, non-profit organization through a gift from Germany as a permanent memorial to Marshall Plan assistance, GMF maintains a strong presence on both sides of the Atlantic. In addition to its headquarters in Washington, DC, GMF has offices in Berlin, Paris, Brussels, Belgrade, Ankara, Bucharest, Warsaw, and Tunis. GMF also has smaller representations in Bratislava, Turin, and Stockholm.

Contact
Dr. Alexandra de Hoop Scheffer Director, Paris Office German Marshall Fund of the United States Tel: +33 1 47 23 47 18 Email: adehoopscheffer@gmfus.org

9 David M. Abshire, Preventing World War III: A Realistic Grand Strategy (New York: Harper & Row, 1988), pp. 220-233.