In the Trump era, how much should countries really be spending on defense?

What percentage of gross domestic product should a country be spending on its defense?

That question has continued to be at the center of debates on defense, with NATO allies recently committing to increase the target from 2% to 5%. The White House has since stated that 5% should be the standard for all of America’s allies. Voices around the globe are arguing the pros and cons of such a target.

In truth, the “percentage of GDP” approach is a political one, not a practical one. The actual debate is far more complex and includes alliance management issues that have existed for as long as there have been military alliances.

The percentage of GDP standard stems from a core issue in alliance management: How do you ensure that everyone is contributing their fair share to the security relationship? Certainly, no country wants to do all the heavy lifting in fulfilling commitments, so there must be some quantifiable measure for contributions to ensure fairness.

But the reality is that no two alliances are the same. This may seem obvious for alliances defined by different treaties such as the U.S. alliances with Japan and South Korea, but it also applies within multinational alliances like NATO. Poland and the Baltic states have vastly different circumstances with the Russia-Ukraine war raging next door than say, Luxembourg, which is nestled comfortably between the much larger and militarily robust nations of France and Germany. So, how does one measure contributions between countries like Luxembourg and Poland?

Is it the number of military operations in which their soldiers participate? Is it the number of bases provided for allied use or the amount of money provided to alliance institutions and initiatives?

These are questions with complicated answers and it is impossible to apply a universal rubric for every ally, so years ago, it became popular to use the percentage of GDP standard.

In other words, a universal measure for alliance contributions would be how much a country is spending on its own defense proportional to its economy. This became a formal standard for NATO in 2014 during the Wales summit in which they declared that all NATO allies would aspire to 2% of GDP for defense spending. With the most recent summit in the Netherlands, the standard is now 5%.

In principle, this seems like a fair approach. But as useful as it is as a political benchmark, this method has its flaws.

First of all, what qualifies as “defense spending” that would count on the stat sheet? Is this everything that touches the military in some way, including retirement pay, veterans administration and military recreation facilities? Is there a distinction between research and development for new capabilities and maintenance of older weapon systems? Does infrastructure construction count if it may support allied operations? Would it be fair if one country included certain items on the cost sheet that the other did not?

With the new 5% standard, NATO allies are creating at least some distinction in this debate. In practice, the allies are to spend 3.5% on conventional defense spending, while 1.5% can be on defense-related expenditures. These are still broad categories that will raise some questions.

For example, Italy, which only reports 1.49% of GDP spending on defense, has a long way to reach NATO’s new 5% standard. Italian lawmakers have proposed solving the problem by reclassifying a new €13.5 billion ($15.9 billion) bridge between the mainland and Sicily as a defense-related expenditure because it could potentially be used for NATO operations. This is just one example of many that will surely emerge as the allies contemplate implementation of the new standard.

The second issue is that the percentage of GDP approach assumes that all security alliances are predicated on the same types of tradeoffs. They are not and the utility of those tradeoffs differ based on geography and threats. Even the U.S. recognizes this, with its publication on multinational operations listing seven areas of partner-nation contributions.

One is the provision of combat forces and the rest are noncombat in nature, including diplomatic support; financial support; basing, access and overflight support; logistics, lift and sustainment; stabilization and reconstruction support; and governance and ministerial support. Several of these noncombat contributions have no direct tie-ins with an ally’s defense spending or even defense-related spending, but it still represents a contribution to the security relationship.

So, as an observer trying to make sense of the current debate, it is important to dive deeper than simply looking at percentages. We need to understand the specific tradeoffs within each alliance and the utility that different partners bring.

Where does Japan fit into this debate?

In 1976, then-Prime Minister Takeo Miki institutionalized the percentage of GDP standard by declaring that he would cap defense spending at 1%. This ceiling remained in place for decades, but while Japan has since eclipsed the 1% figure, there is renewed criticism from some American policy circles.

This is nothing new, as Japan has received criticism for free riding in its relationship with the United States long before the current administration. One of the core arguments is that Japan relied on America to deal with its tough security issues so that it could focus primarily on the meteoric economic rise the country enjoyed in the postwar decades. As the logic goes: Less money spent on defense meant more money for growing the economy.

There are a couple of flaws in that argument. It ignores the fact that there were plenty of policy actors in the United States in the postwar years who were wary of a rearmed Japan, meaning the notion of an equal military partner in the Self-Defense Forces would have been antithetical to their preferences.

Another flaw is that Japanese military contributions to the alliance was a core expectation in the security relationship. When the two countries signed their alliance treaties in 1951 and 1960, the central tradeoff was that the United States would provide for the security of Japan and, in return, Japan would provide basing and access for U.S. forces. This served both governments well.

Naturally, the alliance evolved over time and with that evolution came to the realization that there needed to be newly defined roles, missions and capabilities between the two allies. Those were codified in the Japan-U.S. Guidelines on Defense Cooperation, the most recent version of which was published in April 2015.

The guidelines clearly lay out the expectations that each ally has for the other, meaning that any substantive debate over defense spending really starts from there. In this case, the question is less about what percentage of GDP either ally is spending on its defense, but rather if they are resourced, trained and equipped to meet the expectations established in their negotiated guidelines.

Of course, politics being politics, the percentage of GDP figure will continue to garner headlines and drive public debates. Prime Minister Shigeru Ishiba has expressed his intent to focus those debates on meaningful issues related to readiness and capabilities. But with an ally urging Japan to do more for security and a domestic populace demanding the Ishiba administration do more for a lagging economy, success in the defense spending debate is far from guaranteed.