Commentary / Japan

Bad assumptions behind 'Cost Plus 50' plan

by Michael Macarthur Bosack

Contributing Writer

Last week, Bloomberg broke a story that U.S. President Donald Trump was seeking an unbelievable increase in cost-sharing from allies that hosted U.S. forces (bit.ly/troopcost). The “Cost Plus 50” formula means the White House is aiming for allies to pay 100 percent of U.S. stationing costs plus a premium of 50 percent on top of that. While there are arguments to be made about whether such a goal is even achievable (spoiler alert: it is not), it is important to highlight some of the bad assumptions that underwrite the belief that “allies don’t pay enough.”

Bad assumption 1: U.S. forces are in other countries to “protect” the host nation.

Reality: Sure, the United States extends security guarantees to many (not all) host nations, but U.S. forces are not mercenaries — they are there for interests that extend well beyond posturing for collective self-defense of allies.

Bad assumption 2: Cost-sharing is a crucial part of alliance designs.

Reality: Cost-sharing is but one small subset of broader alliance designs that include many obligations and contributions. Other partner-nation contributions include provision of combat forces in coalition operations, logistics and sustainment, and diplomatic support, to name a few.

It is also important to remember that cost-sharing agreements were not part of original alliance designs with the U.S. They came later as real costs associated with overseas basing increased because of changes in economic conditions (exchange rates, wage standards, GDP growth, etc.) and necessity for refurbishment or construction of facilities given the longevity of the alliance. As a result, the governments implemented agreements that covered things like utilities, labor and facilities (i.e., construction projects).

Bad assumption 3: America’s allies have not been paying enough already.

Reality: Every cost-sharing deal that has existed up to now was an agreement made with U.S. negotiators and ratifiers. It is disingenuous to argue that the previously negotiated amounts were inadequate without commensurate justification.

Let us use what I call the “Netflix analogy.” Imagine you subscribe to Netflix and the company announces a 10 percent increase in monthly fees (about $1 a month) so it can add new, high-quality content. Most subscribers would not object.

Now imagine Netflix announces it will more than double its fees, not because it is adding any new benefits, but simply because the company suddenly decided subscribers were not paying enough before.

There would be massive blowback to such a move by Netflix, just as there will be blowback from allies on the receiving end of exorbitant demands from the U.S. government.

Bad assumption 4: It is easy to tally up the cost of stationing forces overseas.

Reality: For the administration to demand Cost Plus 50, it must first assess how much it actually costs to station forces overseas. Take it from a former alliance manager who has run the “cost drill,” there are simply too many inputs to produce a figure without arbitrarily making decisions on what to include or exclude.

Do you include the salaries of overseas service members? What about costs for moving personnel and their families? How about rotational units who are only in a host nation for a few months out of the year? Do you add the cost of running overseas schools for dependent family members? Commissaries? Recreation areas? Uniform clothing sales stores?

How about research and development for the equipment that is stationed there? Should a country pay more if it has F-35s instead of F-16s or ballistic missile defense-capable destroyers instead of non-BMD capable ones?

The list goes on and on, and even then, the list ignores things like sunk costs and the fact those forces are overseas for U.S. interests.

Several organizations like Rand have taken a shot at identifying stationing costs, but even they had to establish cut lines unilaterally. Without having a bi-/multi-laterally agreed-upon figure from which to negotiate, it opens the door to the next bad assumption.

Bad assumption 5: U.S. allies will not respond in kind with counter-demands.

Reality: America’s allies will not accept exorbitant cost-sharing demands without a fight. First of all, there are many host-nation support costs not included in existing cost-sharing agreements.

For example, the U.S.-Japan agreement only covers utilities cost-sharing, labor cost-sharing, training relocation and facilities improvement. However, Japan also pays rent for U.S. military-use land, covers the cost for U.S. forces realignment (construction of new bases, etc.), pays taxes and tolls for U.S. forces moving in and around Japan, and provides National Police Agency resources to protect U.S. bases, along with many other line items not included in the current cost-sharing deal. The Japanese and other allies who pay similar costs could come back and argue that all of those other things should factor into “cost-sharing.”

Broadening the scope of the cost-sharing debate also opens the door to protest of things that the allied governments had previously settled, such as whether non-military entities, recreation facilities or support services should be allowable under existing host-nation agreements, let alone cost-sharing deals. That issue applies to all of America’s allies hosting U.S. forces.

The bottom line is that the logic underwriting the “allies don’t pay enough” and the Cost Plus 50 positions is deeply flawed. This will not stop the Trump administration from pursuing a flawed policy though, especially considering negotiations will coincide with the campaign for the 2020 presidential election, and the impetus to extract more from what Trump has labeled “free-riding” allies will only increase.

Unfortunately, while the White House assumes the hard line is in America’s interest, the current posture toward allies will only lead to costs that could have been mitigated and damage to crucial relationships that could have been avoided.

South Korea will be the first test bed to see how hard the administration pushes this agenda, and Japan is next after that. The cost-sharing agreements with those two countries will expire and renegotiations will need to be done within the next 12 to 21 months. It will be a challenging time for alliance managers, and a time when the benefits of America’s security relationships must be highlighted over and over again to counter the bad assumptions fueling anti-alliance sentiments.

Michael MacArthur Bosack is the special adviser for government relations at the Yokosuka Council on Asia-Pacific Studies and a Ph.D. candidate at the International University of Japan. Previously, he was the deputy chief of government relations at Headquarters, U.S. Forces, Japan.

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