JPRS ID: 10512 WEST EUROPE REPORT SPAIN AND NATO: THE PRICE OF AN ALLIANCE BY A.G. GARCIA

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JPRS L/ 10512
12 May 1982
West Europe Report
(FOUO 30/82)
SPAIN AND NATO: THE PRICE OF AN ALLIANCE
by
A.G. Garcia ~
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JPRS L/10512
12 May 1982
WEST EI;ROPE REPORT
(FOUO 30/82)
SPAIN AND NATO; THE PRICE OF AN RLLIANCE
Madrid in Spanish May 1981 pp 1-184
[Second edition (September 1981) of the book "OTAN y Espana: E1 Precio
de una alianza" by Angel Lobo Garcia, a career officer in the Calvary,
a Command and Staff graduate from the United States Army, a Ph.D. in
economic sciences and a professor of econometrics at the Autonomous
University of Madrid; it is based on his doctoral thesis ("Economic
Consequences of NATO Membership," July 1980), which was deemed
"outstanding cum laude"]
[Text] Table of Contents
Introduction
2
Purpose of This Study
2
Chapter I: Direct Impact of Membership in NATO on Defense Spending
12
l. Uperating Expenditures of the NATO Structure
12
1.1 Description of the NATO S�ructure
12
1.2 Financing of the NATO Structure
14
1.2.1 ~he Civil Budget
15
- 1.2.2 The Nilitary Budget
17
,
1.3 Spain's Potential Share in the Event It Joins NATO
22
2. Financing of the Ccr.ur:on Inirastructure
25
2.1 Cost-Sharing. Criteria for the Determination of Perce.ltages
28
2.2 Total Cost of the Common Infrastructure
31
2.3 Process of Developing and Building the Common Infrastructure
33
2.4 Spain's Potential Contribution
35
Chapter II: Poter,tial Indirect Impact on Defense Spending
43
3. Possible Influence oi NATO Membership on National Lefense Budgets
43
3.1 NATO Planning of the "Force Goal"
43 .
3.2 5-Year Planning
46
3.3 1'he Long-Term Defense Program
51
3.4 NATO Data Base
52
3.5 Consequences of Joint Planning
56
4. Analysis of Spain's Defer.se Eff.ort Within the Context�of NATO
-60
4.1 Defense Spending. Problems of Quantification and Comparison with .
Other Countries
61
4.2 Anzlysis of Uefense Spending
62
4.2.1 A Sampling
63
4.2.2 Econometric Analysis o� 31-Coisntry Sampling
64
-1-
F(1R (1FF1('i s T T iCF ANT V
,(III - WE - 150 FOUO)
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4.2.3 Econometric Analysis Based on NATO Countries 70
--Defet.le Spending According to NATO's Def inition 73 71
--Other Variables Included in the Analysis 78
--Data for Spain �
--Estimate of Spain's Defense Spending According to the 79
NATO Definition � 85
--Principal Components Analysis 90
4.2.4 Regression of Defense Spending on GDP 96
4.2.5 Time Series Analysis of Defense Spending 99
5. Military Aid and Assistance Obtainable in NATO 99
5.1 What We Can Expect from NATO 102
5.2 Possibility of Spain's Obtaining Military Aid in NATO
Chapter III: Economic Consequences of NATO Logistics 107
107
6. Extent and Significance of NATO Logistics 110
7. NATO's Logistics System 115
7.1 Current Institutional Situation 122
7.2 U.S. Policy Towards the Alliance in the Area of Armaments ~6
7.3 The European Sphere of Cooperation 126
--Eurogroup ~ 8
--The European Independent Programs Group (EIPG) 132
--The Western European Union 136
_ --FINABEL 137
--European Economic Community 139
8. Consequences of NATO membership in the Area of Logistic Cooperation
Chapter IV: Final Conclusions 151
Direct Repercussions� 151
154
Indirect Economic*Impact 157
Possibility of Receiving Aid ' 159
Consequences in the Area of Logistic Cooperation 162
Overall Conclusion
[The nine annexes included in the original have not been translated]
Introduction: Purpose of This Study
"The gauging of force is determined by the government, and military action
begins with this determination, because it is an essential and completely
strategic matter." (Von Clausewitz, "On War," 1831)
Spain finds itself at a crucial juncture in the determination of its future
. security system, a system that must be commensurate with the direct and
~\indirect threats to national security, with its geostrategic location in
the context of international security and with the interests of a foreign
policy that is in keeping with the political role that Spain would like
to play in the world. In light of this situation, the various security
models that we could consider can be summarized in three distinct options:
Spain could choose to continue its bilateral security relations with the
United States, based on the 19 July 1974 Hispano-American Declaration of
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Principles and on the 24 January 1976 Friendship and Comperation Treaty
_ between the United States and Spain; or it could decline to renew this treaty
and pursue a policy of neutrality, or finally, it cou'd decide to join a
_ oultilateral collective security alliance.
The appropriate national authorities must analyze the advantages and disadvanta&es
of each option and choose the one that insures the highest level of security
compatible with national sovereignty and the country's economic potential.
Therefore,-economic considerations are a.dditional factors to be analyzed
in the decision-making process.
The European security balance, or perhaps more accurately the security balance
between the United States and the Soviet Union, in an alliance with certain
European nations that benefit from ir, rests on the existence of two blocs,
the Atlantic Alliance and the Warsaw Pact. Inserted physically between
the two blocs is a belt of neutral nations, which running irom north to
south are Finland and Swedan, Austria and Switzerland and Yugoslavia and
Albania. This does not mean, however, that there is no border contact between
theblocs: Russia with Norway in the north, East Germany and Czechoslovakia
with West Germany in the central zone and Russia and Bulgaria with Turkey
and Greece in the south.
Spain lies to the west of this belt or hinge and, therefore, on the side
of the Western bloc znd in the rear guard of the zone that this bloc forms
in Europe. Therefore, both because of its geographic location and its political
and economic system, it stands to reason that in looking at the option of
joining a;nultilateral collective security alliance, Spain should consider
~he possibility, among others, of becoming part of the Atlantic Alliance.
By keeping Spain within the framework of the West, this would enable it
to maintain security relations in a much broader and more heterogeneous
context than the current exclusive bilateral relations with the United States,
which are imbalanced because of Spain's clear-cut n:ilitary inferiority to
the American superpower.
The Democcatic Center Union (UCD), the party now in power, has advocated
joining the Atlantic Alliance as the best option for nation'al security.
It has stated this offici:lly at its two national congresses, in October
1978 and February 1981, and in its government program submitted to the Congress
of Deputies by its presidential candidate, Adolfo Suarez, before he took
officc. "
We feel, IIierefore, that it is of interest to analyze the economic component
that this option would entail.
Sanchez-Gijon, a Spanish specialist in secu~ity matters, refers to this
economic factor in his book "Spain in NATO" and states: "An alliance ought
to be joined, above all, to serve the inr_erests of the State. What this
entails is defining Spain's membership in terms of enhancing national security
at the lowest possible cost, albeit as a contribution to enhancing stability,
which Spairn is also interested in."
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' Gen Mansel Diez-Alegria, who is today the president of the Institute of
- International Issues, has also referred to the economic component involved
in joining the Atlantic Alliance. In statements to DIARIO 16 in connection
with Spain's potential entry into NATO, he said, among other things: t
"
_ has an economic facet, inasmuch as membership is going to cost money.
how much would it cost to join the Atlantic Alliance? The issue is worth
considering, and we hear widely diverging opinions on it. According to
newsman Felix Ortega, "authorized spokesmen, such as the minister of foreign
affairs in 1970, Gregorio Lopez Bravo, have pointed out that joining NATO
would mean doubling Spain's budget,"3 and the same journalist, after a brief
analysis, reaches the conclusion that joining NATO would require "more-
- than a doubling of military spending." In his analysis he notes that Ruth
- Leger Silvard pointed out in "World Military and Social Expenditures'." in
1974 that NATO military spending averaged about three times higher than
Spain's military expenditures.
Moreover, in his book "Spain in NATO?" Alvarez de Castro4 asserts: "If Spain
were to join NATO, in addition to having to double its general budgeting
for defense, it would be forced to make an initial and immediate outlay
of $600 million in order to place its status on a comparable footing with
the rest of the allies. I do not have to stress how burdensome it would
be in the current economic crisis to make investments that would not enhance
our defensive system, not be channeled at all towards our real national
defense needs and represent fur.ther overseas borrow:ing and indebtedness
to add to our existing dependency."
The magazine LA CALLE, whose ideology is well-known, has written that "Spain
would have to spend 750 billion pesetas to get its5defense spending up to
the level of the,other organization member states, adding later that
"contributing to the NATO infrastructure and to maintaining Spanish units
stationed in northern and central Europe would be a terribly onerous burden
for the national economy."6
Two well-known Spanish Socialists have gone on record as follows: Felipe
Gonzalez asserts that Spain's membership in NATO would entail 11t3o onerous
an economic burden,"7 and Mugica Herzog has written that membership "would
entail an increase in spending that, given the current economic crisis and 8
the many needs to be met with scant resources, we would be unable to manage."
GRIP, a Belgian group of mainly Socialist students and newsmen, contends
that if Spain were to join NATO, it would have to modify its Armed Forces
organiationally and technically and spend some $800 million9to transform
its infrastruc[ure, plus $40 million a year on maintenance.
Nevertheless, Sanchez-Gijon says: "Contrary to what is being said and believed,
Spain's incorporation into NATO does not necessarily entail any increase
in defense spending,"10 and former Foreign Affairs Minister Marcelino Oreja,
in a speech on the administration's foreign policy, told the Senate on
9 March 1978: "A country does not necessarily have to make an economic contribution
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~
to the (Atlantic) Alliance; in the event that Spain should join NATO, it
would not necessarily have to make an economic contribution nor, in general,
any expenditure not for its own national defense system. There is a great
deal of talk about how much it would cost Spain to join the Atlantic Alliance.
This is something that we would 1?ave to take an accurate look at, because
there has been some degree of flippancy in comments, statements and approaches."
These examples clearly illustrate the differences of opinion on the issue,
reaffirming why it is important to delve carefully into it and analyze in
depth the economic component actually entailed in jaining the Atlantic Alliance.
This economic component is usually approached from the standpoint of the
economic obligations that Spain would contract, in other words, the rise
in spending that would result from membership in the Atlantic Alliance.
Hocv much does NATO "cost"? often seems to be the sole economic concern related
to menbership. But the economic factor involved in membership does not
necessarily have to be considered solely and a priori from the standpoint
of increased spending, because there could be economic implications of a
different kind. The title of this book could thus be "Economic Consequences
of Joining NATO," because it seeks to analyze, in addition to the expenditures
that joining the alliance would entail, the other economic consequences,
both advantageous and disadvantageous, although we will try to circumscribe
them mainly to the defense sector, which is preponderant in NATO.
There are consequences in other fields, and in theory they could be major
ones, if we are to go by Article 2 of the North Atlantic Treaty, which says:
"(The parties) will see k to eliminate conflict in their international
economic policies and wi.ll encourage economic collaboration between any or
all of them." The reality has been quite a bit different, however, as
wa,s made obvious at the outset of the oil crisis in the 1970's, when the
attempts at coordination in developing a joint policy failed, and each country
pursued a policy towards the OPEC countries that was to its own individual
advaneage and that it felt best safeguarded its own economic interests.
There is a desire to settle economic differences that might have political
or strategic! repercussions that are damaging to the alliance. A clear example
of this was the outcome of the dispute between Great Britain and Iceland,
the so-called "Cod War," in which the Atlantic Council exerted pressur.es
in favor of Iceland, the weaker party. Participation in the various NATO
forums undoubted.ly f.acilitates an understanding in all spheres of diplomacy
and, therefore, in economic matters, as can be seen in the desire of Greece,
Portugal and Spain to join the EEC, all of whose member states belong to
NATO, except Ireland. Greece has already joined the EEC, and Portugal could
get i.n 'nefore Spain, according to the forecasts of the European Commission
as outlined in the puhlication EUROPE (February 1981). Moreover, the Atlantic Alliance is definitely interested in seeing its economi-
cally backward members progress, although attempts are not made, accordingly,
to organize economic deveiopment assistance programs within NATO. Rather,
the Alliance's interest is reflected in a desire for information on the
5
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development programs that each country is pursuing, programs that NATO analyzes
from the standpoint of their compatibility with the Alliance's common interests.
There are also economic consequences from the scientific and technical cooperation
organized within the Alliance. NATO has a scientific committee whose function
is to promoke programs of cooperation in the areas of high scientific priority.
To this end it makes use of fellowships for research cooperation, meetings
and conferences of experts, visits, etc. We can get an idea of the extent
of these activities from the estimate that some 100,000 persons have taken
part in the so-called NATO Scie nce Program, which has an approximate
= annual budget of $9 million, broken down into science fellowships, research
gra nts and programs at institutes of advanced studies. But despite the
general interst of these activities, their economic consequences for each
individual country are of very limited scope, and we consider them insignificant
in comparison to the consequences of the defense sector, the main facet
of NATO.
This book does not, furthermore, seek to address the most remote consequences
for the country's general economy. Such consequences, which are predominantly
political, can hardly be treated in a study that is primarily economic in
its approach. General Haig has stated in connection with the possibility
of Spain's joining NATO that there is a correlation between military security
and economic development, and therefore Spain's membership in the Atlantic
Alliance would have a favorable impact on Spanish stability and be an incentive
tor foreign investors. This judgment involves a different sphere, outside
the aims of the present work.
We will try to analyze here the economic obligations that Spain could contract
by joining NATO and the consequences that membership could entail in terms
of defense spending and military logistics.
We are now going to analyze the available Atlantic Alliance membership "statuses"
so that we can thus employ one of them as a working hypothesis for Spain.
The North Atlantic Treaty or the Treaty of Washington, which established
the Atlantic Alliance, was signed in 1949 by Belgium, Canada, Denmark,
France, Great Britain, Holland, Iceland, Luxembourg, Norway, Portugal and
the United States of America. Greece and Turkey joined in 1952, and West
Germany in 1955. The 15 nations have signed the same treaty, the essence
of which can be summarized as their pledge to consult each other if the
security of one of the parties is threatened and to consider an armed attack
against one of the member countries as an attack on them all, in which case
each one would u.ndertake the action that "it deems necessary, including
the use of armed force, to restore and maintain the security of the North
Atlantic area," according to Article 5 of the treaty.
Not all of the countries are members of the Alliance under the same conditions,
however. There are different situations within the framework of the joint
pledge, because certain countries maintain a peculiar status that differentiates
them from the others. In principle, the economic commitments that would
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stem from signing the North Atlantic Treaty depend on the manner in which
membership is proposed.
France is the most unusual case, ever since it decided in 1964 that its
Armed Forces would withdraw from the Alliance's integrated military command.
We often hear that France belongs to the Atlantic Alliance today but not
to NATO, which is not true, though even authorized spokesmen are heard to
say it. Nevertheless, this is at times merely a simplified, imprecise way
of referring to France's peculiar "status."
It bears clarifying that tre 15 member countries belong to the Atlantic
Alliance and to NATO. The "Atlantic Alliance," or more precisely the North
Atlantic Alliance, is an "alliance" or "entente" among 15 countries that
Y:ave set forth their commitment to an alliance in a written pact called
the North Atlantic Treaty. Article 9 of this treaty provided for the creation
of a council and the subsidiary bodies needed to establish and develop the
agreed upon alliance. The group of bodies that were set up make up the
"North Atlantic Treaty Organization" (OTAN and NATO being the French and
English acronyms). Hence, NATO is merely the organizational structure of
the alliance. The 15 countries have ambassadors and permanent missions
to the organization and are full-fledged members of NATO at its highest
level, the Atlantic Council.
France's peculiar status is that it participates only as an observer within
the organization of the integrated military command, which is subordinate
to NATO's highest body, the Atlantic Council, which is civilian.
Therefore, France"s Armed Forces do not in any way come under the NATO military
command in peacetime, nor are any of its units scheduled to take orders
from this command in the event of an emergency, as is the case with other
nations. P4oreover, French territory is excluded from any permanent assignment
of areas of responsibility in NATO preparations and planning. But France
is present in almost all civilian bodies (though conspicuously absent from the
Defense Planning Committee), is subject to all of the provisions of the
North Atlantic Treaty, continues to take part in numerous agencies financed
undeY the so-called NATO Military Budget and maintains observers and liaisons
in the organizations of the joint military command.
In the wake of its armed combat with Turkey on the island of Cyprus, Greece
withdrew also from the Defense PlanningCommittee in 1974 and rescinded its
Armed Furces commitments to NATO in peacetime, although it kept its representative
to the military command organization and still contributed to the so-called
"rtilitary BudgeE." After heavy pressure, mainly from the United States,
it- has fully rejoined NATO. Because it has no Armed Forces, Iceland is
not part of the military organization.
Germany differs from the other countries in that all its maneuvers troops
are forces "assigned">> to NATO, while other countries merely place a given
number of units at the disposal of the Alliance command. Norway and Denmark
have a special arrangement whereby they do not allow the permanent stationing
of foreign troops or the deployment of nuclear weapons on their territory.
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of foreign troops or the deployment of nuclear weapons on their territories.
Great Britain, the United States and Canada have placed the responsibility
for planning the def.ense of their territories outside NATO.
ThuS, each country individually and sovereignly determines its status of
membership in the Alliance, a status that can be reviewed depending on the
circumstances, as was the case with France and Greece. Logically, NATO
can in theory decide whether or not to accept the status that each country
wants, but in practice the general principle of an alliance against a common
threat prevails, and therefore this is great flexibility and pragmatism
in accepting a wide rangeof approaches.
Hence, one of NATO's hallmarks is complexity, a complexity that stems from
a joint effort to bring together 15 sovereign and independent nations without
a supranational authority to impose general rules. This complexity translates
into a wide range of agencies and exceptions that are 2 source of frequent
ambiguities and that lend themselves to all sorts of variations and nuances
that are hardly suited to simplification. Therefore, signing the North
Atlantic Treaty will always be compatible with certain special arrangements
for participation in its various bodies.
As far as the economic thrust of this book is concerned, if we leave aside
the atypical case of Iceland, only France's status, in fact, entails economic
consequences that are to an extent different from the ones that apply to
the other countries that belong to NATO. In this study, therefore, we will build on the hypothesis that Spain would
join NATO with a status similar to the general arrangement and we will analyze
its economic consequences without delving into the potential nuances~that
could arise if certain special membership arrangements were agreed upon.
Such arrangemenes would, in any case, entail an in-depth familiarity of
the general arrangement, based on which we would deduce the pot:ential differences
that couid result from the special arrangements, which would be of no great
economic consequence.

We wi?1 systematize this study by grouping the economic consequences of
NATO niembership into three major categories, which are:
--Direct repercussioits on defense spending;
--Indirect repercussions on defer.se spending;
--Economic consequences of NATO logistics.
Based on these three distinguishable categories, we will reach certain overall
conclusions.
With regard to direct repercussions we will look into the obligations that
Spain would contract in the form of a two-pronged annual contribution. The
first contribution is to the annual NATO budget for the operations of the
Alliance's agencies. The other is the financing of the so-called common
NATO infrastructure, which consists of installations for use in the event
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of war, that are of joint interest to the member countries and whose construction
and financing are mutually agreed upon by the potential users as part of
the general planning of NATO infrastructure.
With regard to indirect impact on defense spending, we will analyze the
joint planning system for overall Alliance force levels, whi:.h could give
rise to commitmgnts relating to the structure of our national forces, and
the repercussion`s that this would have ort military spending. This will
lead us to compare the economic cost of Spain's defense efforts with other
Alliance countries', inasmuch as a significant gap could lead to pressures
from other countries to put our defense effort on a comparable footing with
theirs. This chapter will also take up the possibility of receiving military
assistance or aid to meet the force goals agreed upon in joint NATO
planning.
Finally, a separate chapter will be devoted to an a:lalysis of the Atlantic
Alliance's logistics and of its consequences for the economies of the member
countries, focusing examination of this important aspect on PIATO's attempts
to rationalize the military hardware of the member country forces and the
potential impact of this on their national military industries.
The sought-after quantification is not always possible in an economic study
like this. In some cases it is hindered by the confidentiality accorded
these kinds of numbers in NATO circles, which precludes access to all of
the data we need to conduct a thorough analysis of the magnitudes under
stLdy. In other instances, a priori quantification is impossible because
it deFends on the specific commitments that a nation would contract and
ori the projects and programs that it would take part in. Nevertheless,
there is enough of a data base in some spheres to deduce figures that can
serve as reference points for ascertaining the approximate amount of the
nation's funds that might have to be allocated. In other areas in which
quantification is not possible, we can describe and analyze the characteristics
and pecularities of the issue at hand and thus get an idea of its economic
significance or at least forestall potential unsound interpretations that
at times lead to distortions in assessing more or less well-founded economic
consequences. In any case, we have sought out all of the available figures
in these various matters, which will be set forth herein, even if just to
indicate the arnount of money involved.
In surmounting these difficulties, which at times seem to invalidate the
purposes of this book, we have been encouraged by our own perception of
the usefulness of delving into this controversial and superficially addressed
topic and by the existence of an extensive team of Spanisti experts who are
well-versed and well-trained in European Community issuFs, in stark contrast
to the lack of economists who are experts in the complexities and problems
of NATO and in the consequences of inembersnip in it. This is the time to
mention the facilities that Spain's ambassador in Brussels, Aguirre de Carcer,
provided the author of this study, thus enabling him to conduct interviews
and work sessions at the headquarters of the NATO International Secretariat
with Organization officials who are experts in the various topics that will
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be broached herein. It is to these experts' credit that they honored our
requests for information and were at all times cooperative and understanding
in light of the difficulties involved in providing access to the inner
warkings of NATO to .1 person who does not belong to the Organization and
is a citizei of a country that is not a member country of the Alliance.
In conclusion, before delving into the study proper, we would like to briefly
clarify certain questions of language. NATO documents often refer to the
European member countries of the Alliance under the generic term Western
Europe or simply Europe, even though this leaves out countries that are
not members of the Alliance, such as Sweden or Spain, but that are European
and that have economic and political systems which are characteristic of
the Western world. For the sake of brevity, this book will use the same
generic term whenever the context offers no doubts as to the countries referred
to in this abbreviated, incomplete description.
We would also like. to note in advance that we will often, for simplicity's
sake, use the expression "Allianco" to mean the Atlantic Alliance and the
- acronym NATO to refer to the North Atlantic Treaty Organization, which we
also at times simply call the "Organization," as it is officially referred
to in the Alliance, as set forth in the provisions of the "Accord on the
Status of the North Atlantic Treaty Organization, National Representations
and International Secretariat," dated 20 September 1951, which states in
Article i, Section "a": "The Organization means the North Atlantic Treaty
Organization, composed of the Council and its subsidiary bodies."
As far as the terms Atlantic Alliance and NATO are concerned, they will
be used as synonymous because they are. Some people at times wish to make
the stibtle distinction that the AClantic Alliance could be regarded as the
political side or the politieal act, the signing of the North Atlantic Treaty,
whereby a country takes on the commitment of an alliance with the rest of
the member countries within the context of adherence to common ideals as
set forth in the preamble to the treaty, whereas NATO is the military side
or the embodiment of the alliance's defensive aim. This misconception has

caused Giscard d'Estaing himself to say: We are not part of the joint peacetime
organization, in other words, NATO," when France is a full-fledged member
of P1AT0, as has been previously explained.
We are stressing this because, as has been stated, the North Atlantic Treaty
= Organization is merely the organizational structure of the Atlantic Alliance
and as such encompasses all of the Alliance's civilian and military bodies,
including the Atlantic Council, the number one political organ and the supreme
embodiment of the political commitment that the member countries have made.
Therefore, the preponderantly defensive purpose of the Atlantic Pact is
applicable both to the Atlantic Alliance and to NATO. They are, hence,
synonymous expressions and will be used as such in this text.
With respect to the quantitative facets of the study, we have attempted
to work with confirmed data, not with estimates, and t'ierefore we will employ
primarily statistics from the latter half of the 1970's. Whenever possible,
we have expressed numerical conclusions in percentages, so that they can
be compared to the present.
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FOOTNOTES
1. "Spain in NAT0," Antonio Sanchez-Gijon, 1978, Ediciones Defensa.
2. DIARIO 16, 30 May 1979.
3. ARRIBA (daily paper), 3 May 1978.
4. "Spain in NATO?" written by a group from the Spanish Labor Party under
the pseudonym Alvarez de Castro, 1978, Manifiesto Editorial.
5. LA CALLE, Issue 118, 24 June 1980.
6. LA CALLE, Issue 132, 30 September 1980
7. EL SOCIALISTA, Issue 183, December 1980.
8. SISTEMA 38-39, REVISTA DE CIENCIAS SOCIALES, October 1980.
9. L'Espagne face a 1'OTAN," Cesar Garcia, Dossier No 28, 27 November 1980.
10. EL PAIS, 12 May 1976.
11. A concept expanded upon in Chapter II.
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Chapter I: Direct Impact of Membership in NATO on Defense Spending
Cooperation within NATO, which involves mainly security and to a lesser
extent covers the political, econonic and scientific fields, as well as
others oE minor importance, necessitates an administrative organization
to prepare for and subsequently implement the decisions made by NATO's policy-
- making body, the Atlantic Council, which is a multinational, collective
entity. This, in turn, requires subordinate bodies with thousands of officials,
who are civilian or military depending on their missions. There are, in
addition, other kinds of joint installations that NATO regards as necessary
to accomplish its defense goals, such as airports, oil pipelines, means
of communication, etc, as well as a group of agencies that handle specific,
specialized tasks.
This conglomeration of human and material resources requires financing,
and the funds come from contributions of varying percentages from the various
countries that belong to the Alliance. There is nc "membership fee," nor
is any initial contribution required to balance the outlays made previously
by other member nations. Neither was required of any of the three countries,
Greece, Turkey and Germany, that joined the Alliance after it was formed.
_ NATO member countries pledge to make economic contributions that can be
classified as follows:
--Operating expenditures for the NATO structure
--Funds to finance NATO's common infrastructure
Let us now look in detail at how the needs stemming from each of these categories
are financed.
1. Operating Expenditures of the NATO Structure
1.1 Description of the NATO Structure
The Alliance's supreme body is the Council of the North Atlantic, which
is composed of ministers from all member countries, usually the foreign
affairs and defense ministers, although ministers from other branches of
the administration can sit on it also. It normally meets twice a year.
The Council has its permanent headquarters in Evere (Brussels), where the
15 allied nations keep permanent representative ambassadors, who meet two
or three times a week.
Each ambassador has at his disposal a mission from his country as an auxiliary
working group.
Ever since France withdrew from the joint military organization in 1966,
the Council has not normally dealt with specifically defense-related matters.
As a result, the DefensePlanningCommittee (DPC is the English acronym) was
formed; it is made up of the defense ministers of the remaining nations
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The Defense Review Committee then enters the picture; it is chaired by the
assistant secretary general of Defense Planning and Policy and comprises
representatives of each member country and of the various NATO supreme commanders.
The studies to be conducted are based on the assessment of the military
situation done by the Military Committee, plus the economic and political
factors that could affect the capacity of each country to contribute to
the defense effort. A wide range of indicators are taken into account,
such as GNP, per capita income, the balance of payments, demographic factors
(especially available manpower), the percentage of industrial capacity use,
investmen[ needs, the,tax burden and any other economic indicators that
might serve as terms of reference for an equitable apportionment,of the
defense effort burden and for the best utilization of the funds available
for defense.
Taking all these elements into account, the Defense Review Committee drafts
the proposed "Ministerial Guidance" on the force levels to be achieved.
The "Ministerial Guidance " is submitted to the Defense Planning Committee
(DPC) for its consideration; the committee promulgates it at its spring
session of ministers and sends it to NATO's highest military authorities.
The supreme military commanders submit the Ministerial Guidance to the
various countries, along with the "Force Proposal" stating the level of
forces that they feel each country ought to contribute during the period
under consideration.
_ In the event that the force levels advocated by NATO are at odds with the
defense plans of a country, the international civil and military authorities,
the representatives of the supreme military commanders and the authorities
of the countries involved hold trilateral talks in a bid to coordinate their
plans. The conclusions of these talks are again sent to the Defense Review
Committee, which proceeds to assess them along with the representatives
of all countries and of the supreme commanders. At the same time; the Military
Committee examines whether the new approach to force planning can continue
to meet military needs in accordance with NATO's strategy.
The results of these reviews and further coordination are submitted as definitive
proposals to the Defense Planning Committee. The ministers of each country
analyze these proposals and determine whether they are consistent with the
military needs determined by the Military Committee, with the overall balance
being sought and with the feasibility of their being carried out by each
couritry. The 5-year plan is approved at the ministerial session in the
spring after the one in which the first Ministerial Guidance was issued.
This 5-year force plan becomes the "Force,Goal" to be achieved during
the ensuing 5 years. The "Force Goal" is broken down and submitted
as "recommendations" to the ministers of the countries represented on the
Defense Planning Committee. It must be adopted as the basis for national
defense planning for the ensuing 5 years and as firm commitments by each
country for the first of those 5 years.
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The Systems Analysis Section (SAS), a branch of the NATO International�Secretariat,
took charge of ineeting this need. The section has organized the NATO Force
Planning Data Base (NFPDB),which is in the final testing stage and could
soon be fully operationa1.14
The Systems Analysis Section began its work in the early 1970's with the
objective of preparing accurate information for NATO talks with the Warsaw
Pact on the possible reduction of forces by both blocs (Mutual and Balanced
Force Reductions or MBFR, in NATO terminology). The Defense Review Committee
found this computerized information file very useful and asked the SAS to
develop the system further. Thus, in 1975 the Task Force for the Processing
of Eorce Data (FDMA) was set up; it is made up of representatives from the
International Secretariat, the International Military Staff, the nATO supreme
commanders and the member countries.
1'he FDMA's goal is to set up "the main automated storehouse of data on IJATO
`crces" in order to:
--Develop mathematical models to analyze armed forces
--Conduct comparative studies on military capabilities
--Compare weapgnry systems to facilitate their standardization and inter-
operability~
--Support the drafting of documents for NATO planning.
To this end, the FDMA coordinates the definitions used by various countries,
thus avoiding different interpretations of the same word (which, like head-
quarters, combat unit, support unit, etc, can vary according to the nation
and branch [army, navy or air force]), and catalogues and updates the data
on NATO and Warsaw Pact troops and unit status. The FDMA Task Force's organi-
zational links are shown in Figure 6. It meets twice a year for 1 week.
Data are updated at least annually and in some cases up to four times a
year. The NFPDB's key file is the catalogue of military units according
to their "primary function," independently of the branch to which they belong.
Contained here is the available information on the name, nationality, status
and garrison location of each unit, its troops, weaponry, equipment and
hierarchy, as well as all sorts of technical specifications as to the performance
and cost of its weaponry and equipment, all of this in accordance with the
following outline:
Unit:
Identification
Name
Number
Nationality
--Organizational linkage:
Army, navy or air force
Degree of coordination
Subordination
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~ --Status:
~ NATO Subordination
' Force level
Level of preparedness
--Location:
Name
Nation
Geographic coordinates
~ --Troops:
Class
Number
Weaponry:
--Equipment stores
Class
Number
--Characteristics:
Technical data
Performance parameters
--Programs:
Research and development
Production
--Costs:
Research and development
Procurement
Maintenance
The following could be users of this data bank:
--The Defense Review Committee
--The Military Committee
--The NATO supreme commanders
--The Conference of NationalArmaments Directors
--The Defense Ministries of the member countries
To obtain access to the information, the users go to the NFPDB through the
"data bank administrator," who belongs to the Systems Analysis Section and
is responsible for safeguarding the security of the stored data, in accordance
with previously stipulated criteria. Respect for national sovereignty is
guaranteed because each country has control over the information concerning
it and over the use that can be made of it. The approval of the Defense
Review Committee is required to obtain combined information on several countries.
We should stress that the NFPDB is an automatic intelligence processing
system, not an information system for the tactical command. Its purpose
is to systematize data that might be of interest for planning, not to process
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operational data for command purposes. The various NATO commands have more
or less complex systems of technical and command information, but none is
as sophisticated or automated as the NFPDB,
3.5 Consequences of Joint Planning
There is obviously no relationship between the number of units committed
to the NATO command and a country's economic and military capabilities. The
fact is that each nation has a different commitment, for quite different
reasons. Germany has all of the land units of its maneuvers army "assigned"
. to the NATO command, with only its territorial defense units under national
command. At the other extreme, during Salazar's regime Portugal had only
one brigade "assigned" to NATO, and this was more theoretical than real,
inasmuch as it ignored its commitment to NATO when colonial wars required
the bulk of its Armed Forces. Portugal has now again agreed to assign one
brigade. The remaining European countries have committed varying levels
of forces, Sut not in relation to their total respective capabilities.
The Task Force at the Georgetown University Transatlantic Policy Center
has published a study called "Allied Interdependence" in which it emphasizes
that: "Europe provides most (of the forces available to NATO) contributing
90 percent of the land forces, 80 percent of the naval forces and 75 percent
of the tactical air forces," even though the United States has an overall
military machine that is much larger than all of Europe's.
If there were any explanation for the level of forces that a country assigns
to NATO, it would be the greater or lesser extent to which it is in the
forefront of the European theater, plus its economic and military strength.
In any case, each nation is a case apart, and a wide range of economic and
political considerations, as well as location in a potential theater of
operations, influence these commitments. Ultimately, however, this is a
national decision.
Something similar could be said about the overall makeup of a nation's Armed
Forces. The organization of the Armed Forces into three branches (land,
sea and air) and a further breakdown into the various specialties (sections
and services) are the exclusive jurisdiction of each nation. Economics
are the main conditioning factor, though tradition and inherited situations,
which take time to adapt to the needs of the moment, also carry great weight.
Plow then, if the organization, equipment and makeup of a nation's Armed
Forces are dep.endent on domestic defense policy, when a nation decides to
resolve its security problem not through isolation or neutrality but by
joining an alliance, the structure of its Armed Forces will unquestionably
tend to accomodate itself to the missions that are assigned to them within
the alliance, and they will thus be able to devote less attention to tasks
that other members of the alliance handle for the group as a whole.
NATO has advocated and pushed for the specialization of defense efforts
in accordance with the tasks that are assigned to each nation in the joint
planning, and although there has been little progress in this regard, the
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fact is that the Alliance, by its very existence, influences the security
decisions of each country. For example, the nuclear and naval arsenal of
the United States enables Germany to focus its defense resources on its
land army and"on"air support for these land forces, which does not mean
that each nation does not have to be concerned about potential threats to
national security other than a collective threat to the Alliance. A clear-cut
example of thi~s was the fighting between Greece and Turkey, when the two
countries earmaiked their defense efforts to respond to the threat posed
by each other, though they are neighbors and allies.
With regard to the economic consequences of joint planning on the total
expenditures that each country allocates to defense, since national governments
and parliaments are ultimately the ones that decide on defense spending,
there is no reason to think that NATO tries to impose specific criteria
for defense spending percentages on the various member countries.
Let's take a look at the following list, which shows defense spending as
a percentage of the GNP. This percentage can be taken as.a simple and valid
indicator of a nation's defense effort, although we will later see that
when considered in isolation this indicator has major limitations:
Country(1)
l
United States
Germany
Erance
Great Britain
Canada
Italy
Holland
Bf lgium
Turkey
Denmark
Norway
Greece
Portugal
Luxembourg
Iceland
Defense Spending as a Percentage of GNP(2)
6.0
3.4
3.6
5.0
1.8
2.4
3.6
3.4
5.7
2.5
3.1
5.0
3.5
0.0
_ (1) In order of largest to smallest GNP
~ (2) According to 1978-79 Military Balance Sheet of the London Institute
of Strategic Studies
The above figures clearly show the differences in defense spending among NATO
nations, due to each allied nation's independence in determining its own
defense effort. Nevertheless, although NATO cannot try to impose criteria
for this effort, membership does require some degree of accomodation or at
least attention to NATO criteria in determining national.defense budgets.
Thus, the countries that have tended to reduce their defense spending as
a percentage of the GNP have been pressured by NATO authorities not to.
In its "Defense White Book" of 1977 Great Britain announced a 200 million
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cut because of its economic situation. This prompted a letter from the
NATO secretary general, Luns, to the British defense minister, in which
he stated that the latest indicators pointed to a recovery of the British
economy, adding: "Therefore, it is essential not only to bring the defense
sector up to the levels set for Great Britain in the (NATO-conducted) defense
review, but also to reallocate the funds of which it has been deprived,
excessively in our judgment, for economic purposes. The United Kingdom,
which has cut its defense spending in real terms year after year, should
again undertake the positive policy that it pursued in the past to take
part in the effort required by the allies, in view of the activities of
the Warsaw Pact."
Although the British Defense Ministry's response argued that the country still
earmarked almost five percent of its GNP to defense, which was "clearly
higher than the average of the European members of the Alliance," in 1978
the British Government announced that defense budgets for the 1979-80 and
1980-81 fiscal years would be increased three percent in real terms. Mr Luns

then stated that this move was regarde~' by the allies as a positive reaction
to the appeal issued in the 1977 NATO Ministerial Directive calling for
such increases."
As of 1975 Italy also informed NATO of its plans to reduce its tL,,~op strength
for economic reasons, albeit under a modernization program in which the
cut in troops would make possible better equipment �or Che units. This
prompted the Organization to express its concern over the Italian plan,
inasmuch as its 2.6 percent of the GNP earmarked for defense was already
one of the lowest in the Alliance. Italy later stated that in order to
meet its commitments to NATO, it had requested special credits totaling
more than 3 billion liras and that, in addition, starting with the 1976
budget, the benefits paid to veterans, which were being raised by an average
- of 500 million liras, had been transferred to the Treasury, which would
make extra funds available for the national defense budget.
Denmark, which by law has a 4-year budget planning system, set its defense
budget at the equivalent of 2.4 percent of its GNP for the 1976-1980 period.
Three days af[er the budget had been passed, Mr Luns wrote to Denmark's
defense minister that the budget was not what NATO had hoped for nor what
it judged necessary." He also referred to the goals set forth in the NATO
deCense review, according to which "in order for Denmark to achieve these
goals, it had to boost its defense spending by about three percent a year
in real terms."
In addition, Canada has begun an ambitious program to reoutfit and modernize
its forces, and according to the defense director in the Foreign Affairs
Department, this initiative is in response to the pressures by the European
members of NATO, although he concedes that at the same time it is an attempt
to ease the mounting discontent in Canadian military circles.
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Therefore, we can state that in spite of the wide range of percentage defense
spending and the autonomy of each country to determine it, the environment
in NATO is one in which nations justify their spending and respond to criticism
by NATO authorities when their defense effort is not in keeping with the
goals set forth in the NATO review.
NATO countries recently agreed for the first time to boost annual defense
budgets by about three percent in real terms during the 1979-1986 period.
This kind of agreement was proposed in 1977 and adopted in 1978, although
there is an additional provision that states that "economic circumstances
will influence the chances of reaching the agreed upon three percent." We
should emphasize that the various members were not being asked to boost
their defense spending in a bid to achieve equilibrium in their respective
defense burdens; they were simply being asked to approve a percentage increase
in the spending level that they had freely decided on. According to official
NATO sources, the defense budgets submitted in early 1979 for analysis by
NATO showed that six countries were meeting the three percent goal; they
were West Germany, Belgium, Norway, Luxembourg, Great Britain and ths United
States.
In 1980, only two countries kept up the agreed upon three percent boost.
Germany, which was planning an increase of just 1.5 percent, had to listen
to the complaints not of NATO authorities but of the U.S. Government, given
Germany's leading role in the Alliance. This prompted a trip to Washington
by the German defense minister, Hans Apel, to explain to his American counter-
part, Harold Brown, Germany's reasons for not meeting the goal. The Reagan
Administration has been quick to point out that in view of the prevailing
economic crisis, it would not be a good idea to pressure countries into
agreed upon three percent boost, but at the May 1981 meeting of the Defense
Planning Committee it managed to have the commitment mair_tained.
Based on statistics from the U.S. Arms Control and Disarmament Agency (ACDA),
the aforementioned study by the University of Georgetown, entitled "Allied
Interdependence," has analyzed the NATO defense effort. The following paragraphs
from the study are of interest to us: "The ratio of the GNP's of the two
regions, North America (United States and Canada) on the one hand, and Europe
on the other, is 56 to 44 percent." With this ratio in mind, the study
goes on to say: "The ACDA data also show the proportion of European and
North American defense spending in 1976, in constant 1975 dollars:
North America, $89 billion (61 percent of NATO)
Etirope, $56.5 billion (39 percent of NATO)
"Although it has been thought that Europe does not contribute its share
in allied defensz spending, the fact is that it has increased its share
considerably over the past decade, from 71/29 in 1968-69 to 61/39 in 1976.
Today, military spending in Europe is just 5 percentage points below the
56/44 ratio that reflects the respective GNP's."
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We have cited these paragraphs because they clearly show how, even though
the contributions to the common defense are nationally determined and vary
widely among the member countries, the United States is moving more and
more towards economic grounds in the search for an equitable apportionment
of the burdens, at least in the above regional aspect. Also, although the
principle of national sovereignty that prevails in commitments to the Alliance
prevents it from imposing common criteria or a specific proportionality
in contributions, there is increasing talk in the Alliance of an equitable .
apportionment of cost burdens, and in justifying the apportioninent, economic
arguments are advanced.
In conclusion, the complex procedure for joint NATO planning, which is designed
to determine the forces needed to assurE the defense of the Alliance and
to channel national defense efforts towards the interests of common defense,
manages at least to closely coordinate the Alliance's military authorities
and International Secretariat with the representatives of the countries
involved. As we mentioned previously, this gives rise to frequent exchanges
and multilateral consultation, in which the defense efforts of the various
member countries are compared, taking into consideration their different
characteristics and economic situations and any other political and structural
factors that would be pertinent in seeking an equitable apportionment of
contributions. One of the main accomplishments of common defense planning
has been to make it obvious over the years what is desirable and what is
feasible. Moreover, it has promoted the systematic exchange of specific,
detailed information on the military programs of the various countries,
thus clarifying their economic potential and facilitating an understanding
of common problems and difficulties and a critical examination of their
respective programs.
There is no lack of those who criticize the system for not having achieved
actual results commensurate with its complexity. We must recognize, however,
that for the first time in history a group of free and sovereign nations
have agreed to submit their defense programs to a critical examination by
their allies. This mult.inational review at the very least brings sGrong
moral pressure on them to cooperate in the common defense effort, even though
the ultimate decision to follow the recommendationsthat stem from the joint
planning is up to the appropriate authorities (governments and parliaments)
in the countries that have chosen on their own to participate in the Alliance.
4. Analysis of Spain's Defense Effort Within the Context of NATO
There are many valid indicators in assessing a cdlintry's military might,
such as statistics on troop strength, available ordnance (number of guns,
tanks, aircraft, warships, nuclear weapons and their delivery vehicles,
etc), facilities and military bases, active and reserve troops, the industrial
capacity to produce combat materiel, etc. To these can be added other,
nonquantifiable factors, such as the quality of the ordnance, geographic
and strategic factors,.the level of unit training and even the moral values
and motivations of a combatant, which a military command values so highly
in assessing a unit's capacity.
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.
. ,
~ But if we wish to analyze a nation's defense effort so as to compare it
with that of others or to determine the combined defense effort of allied
countries so a~&`to compare it with the offensive might of another bloc,
then we have tofind sufficiently representative numbers that can lucidly
summarize an overall defense capability.
How car, a country's financial effort towards defense be gauged? Defense
spending is unquestionably the basic macroeconomic magnitude in analyzing
; such an effort. We will therefore devote special attention to this magnitude.
' 4.1 Defense Spending. Problems of Quantification and Comparison with Other
i
, Countries
A country's level of defense spending is reflected mainly in its defense
budget, but because different criteria are used in drafting defense budgets,
the numbers for different nations are hard to compare. The amount of defense
spending varies depending on whether or not certain categories are included
in it. Among the categories that are apt to be interpreted in various ways,
we will mention the cost of paramilitary forces, the pensions of Armed Forces
retirees and of civilian employees of the Armed Forces, military research
and development costs, military aid and assistance to other countries, civil
defense budget, etc.
In addition, an international comparison of defense expenditures quoted
in different currencies requires coversion to a common currency, which introduces
further difficulties, especially when dealing with countries with very different
economic systems.
A clear-cut example of the wide range in estimates of defense spending are
the marked differences in calculations of SovieC defense spending by various
sources. In 1975, for example, they included:
Institution Billions of dollars
Stockholcn International Peace
Research Institute 16 61
"Soviet Defense Spending" 97 to 133
ACDA 119
CIA 120
International Institute of Strategic
Studies, London 124
In the case of the USSR and of the other countries of the Warsaw Pact, which
have centrally planned economies, an assessment is, of course, complicated
by its being based on prices and wages that are not determined freely in
the marketplace and because the official exchange rate of the ruble is not
valid for comparison purposes. Thus, for example, the CIA has estimated
Soviet defense spending at U.S. market prices, in order to obtain a basis
Eor comparison to American spending for defense.
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In studying the NATO countries and, in general, most of the OECD nations,
the problem is less complex because they have free market economies, and
most of them belong to the Western World, which means that the statistics
and estimates are more readily comparable.
4.2 Econometric Analysis of Defense Spending
As we mentioned previously, defense spending is usually accepted as the
main indicator of a country's defense effort, but the trend is not to consider
this figure as an absolute value but rather in relation to other economic
magnitudes. If we take the Gross National Product (or the Gross Domestic
Product) as the number that best represents a country's economic strength,
defense spending as a percentage of the GNP (or GDP) will be the relative
indicator we use. If we take the national budget as an indicator of the_
public sector's economic strength, then we use defense spending as a percentage
of this budget. Per capita defense spending is also used to indicate a
country's relative defense effort.
None of these indicators can be regarded as more representative than the
others, and looking at one in isolation can lead to different conclusions.
The following examples of the relative figures for Great Britain and Germany
- in 1976 should suffice:
Indicator Great Britain German
Defense spending as a percentage of
GNP 5.1 4.2
Defense spending as a percentage of
government spending 11.0 . 20.6
Per capita defense spending (in U.S.
dollars) 190.0 242.0
Which of these figures is the best gauge of a defense effort? Each undoubtedly
reflects one facet of this effort. If the GNP is the best reflection of
a country's economic strength, then the percentage of it earmarked for defense
will be an accurate measure of the defense effort. But isn't the percentage
of its spending that a government allocates to defense a good indicator
too, and what about the average contribution to defense by each citizen?
The ratio of defense spending to the government's budget entails an addiitonal
difficulty that we must point out. As we know, a government's budget does
not include all public sector spending, and thus the conclusions that can
be drawn from this ratio might be of little meaning since the content of
a government's budget varies from one country to another. Spain is a good
example. Social Security funds are not part of the General State Budgets.
Nevertheless, these funds now exceed iZ trillion pesetas, approaching the
amount of the overall State Budget. There are, moreover, autonomous agencies
that work with figures much higher than in the State Budget. For example,
the Spanish Agriculture Ministry had a budget in 1978 of 63 billion pesetas,
whereas the autonomous agencies in the field of agriculture worked with
356.8 billion. Hence, the General State Budget for 1978, which totaled
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1.433 trillion pesetas, amounted to just 49.3 percent of the consolidated
budget of the Public Administrations, which came to 2.906 trillion pesetas.
This is the reason why experts come up with widely varying conclusions when
they use one or another relative figure as an indicator of a country's defense
effort. Econometric techniques enable us to analyze defense spending in
terms of several magnitudes simultaneously. This further enables us to
get around the limitations to which the above indicators are subject, in
that they merely state the relationship between defense spending and one
of the macroeconomic magnitudes.
The attempt to do a regression analysis of defense spending as a function
of the main magnitudes that indicate a nation's economic strength and public
sector spending suffers from the major drawback that the variables in general
are closely correlated. This clear-cut problem of multicollinearity has
led some people who have tried to create a defense spending model based
on regression techniques to reduce the model to simple relations between
spending and a single potential variable. � Thus, they do not succeed in
comparing the defense effort of various countries by taking into consideration
different macroeconomic magnitudes simultaneously as variables in the defense
spending level. Moreover, if we wish to analyze quite a few variables together,
the size of the sample can be relatively small, which leaves few degrees of freedom
for econometric treatment.
One way to avoid the drawbacks of multicollinearity among variables and few de-
grees of freedomisto resort to a factor analysis of principal components.18
We will employ this technique in our initial comparative study of various
countries because without prior consideration of the linear dependence of
the variables, it enables us to move on to orthogonal factors and at the
same time reduces the dimensionality of the reference space, thus increasing
the degrees of freedom.
4.2.1 A Sampling
Although this study concerns Spain'sprospective membership in NATO, our
attempts to compare Spain with the Organization's member countries have
indicated that very few of these countries offer macroeconomic cha:aci:eristics
comparable, on the whole, to Spain's. It was thus advisable to initially
broaden the sample so that by bringing together a larger number of countries
with certain characteristics, we can, through factor analysis, determine
subgroups of related countries. We will thus be able to place Spain in
the proper group within a broader context than the NATO members.
Our initial analysis, therefore, is of all the OECD countries and the Warsaw
Pact nations, 31 in all. Once we have placed Spain within this grouping
of 31 countries, we will focus our econometric study on a limited sampling
of NATO member countries so as to compare Spain's defense effort with theirs
exclusively.
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4.2.2 Econometric Analysis of 31-Country Sampling
The 31-country sample of OECD and Warsaw Pact nations is as follows, in
alphabetical order:
1. Australia
2. Austria 3. Belgium
4. Bulgaria
5. Canada
6. Czechoslovakia
7. Denmark
8. Finland
9. France
10. German Democratic Republic
11. Federal Republic of Germany
12. Greece
13. Hungary
14. Ireland
15. Italy
16. Japan
17. Luxembourg
18. Holland
19. New Zealand
20. Norway
21. Poland
22. Portugal
23. Romania
24. Soviet Union
25. Spain
26. Sweden
27. Switzerland
28. Turkey
29. United Kingdom
30. United States of America
31. Yugoslavia
We have selected the following variables for our comparative study of these
countries:
X1= Per capita defense spending (PCDS)
X2= Per capita GNP (PCGNP)
X3= Per capita government spending (PCGS)
X4= Trade balance/population (TB/P)
X5= Labor force/population (LF/P)
X6= Armed Forces strength/population (AF/P)
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As we can see, in addition to the variable of defense spending as a measure
of the defense effort, we have included the GNP, which reflects a country's
economic strerigeh and potential, as well as government spending, because
since the funds for defense come from the coffers of the Treasury, government
spending is another major variable in determining the capacity for a defense
effort. We have added "trade balance/population" because it illustrates
economic activity in a country and its strength in competition with others.
With regard to human factors, we will consider the labor force, which represents
a nation's potentially productive human resources (this being of unquestionable
economic significance), and overall Armed Forces strength as a complementary
indicator of the defense effort. All of these magnitudes are expressed
in relation to the total population, which is thus also included as a relative
factor in our econometric analysis.
As sources of data for this initial sample of 31 countries, we have used
the statistics from "World Military Expenditures and Arms Transfers 1967-1976"
(a publication we have already mentioned by the U.S. ACDA, dated July 1978),
the OECD's "Labor Force Statistics 1965-1976" (dated 1978) and the 1978
"Yearbook of Labor Statistics" from the International Office of the International
Labor Organization. All of these statistics are recognized as reliable.
The year 1976 has been taken as the period under study because all of our
data pertaining to it have been confirmed; the figures for the monetary
magnitudes are "current" for that year.
The figures for the aforementioned categories of statistics are from the
Eollowing sources. The defense spending of Atlantic Alliance countries is
based on the NATO definition; the estimates of the Soviet Union's military
spending are based on the studies by the U.S. Congress and the CIA, which
calculate the detailed cost of Soviet forces, weapons programs and mil-itary
activities in U.S. market prices, which, as we mentioned before, can give
rise to not insignificant but hard to avoid errors; for the other members
of the Warsaw Pact we have used the studies of Thad P. Alton in "Defense
Expenditures in Eastern Europe 1965-1976" as our main source, and for the
remaining countries what each has stated as its official defense budget
has been taken as its military spending.
The GIVP represents what citizens of the country have produced, regardless
of the country in which it is produced, and the value of the output of goods
and services is stated in the market price paid by the ultimate consumer.
The GNP's of thecountries that do not belong to the Warsaw Pact come from
the IBRD. The GNP's of the Warsaw Pact nations come from the estimates in
the CIA publication "1-:andbook of Economic Statistics" and from the aforementioned
study by Thad P. Alton.
Government spending consists of the expenditures of the central government
of each country, including both overall capital and current expenditures
and net borrowing. Our main source in this regard is the Agency for International
Dt:velopment (AID), complemented by data from the "UN Statistical Yearbook,
1976" and from the "Economic Reports of the OECD," in addition to Thad P.
ALton's study on the Warsaw Pact countries.
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The t:ade balance represents the difference between exports and imports
of goods and services. For the noncommunist countries we have used the
statistics of the National Accounting System of the United Nations, as
published by the International Monetary Fund in "International Financial
Statistics." The numbers for communist countries come from the "Handbook
of Economic Statistics," published by the CIA, which broaches the problem
of evaluating these balances in dollars.
Armed Forces strength comprises military personnel in active service
and the personnel of paramilitary forces whose organization, equipment,
training or mission are similar to those of military forces. Reservists
are not included.
The figures on total population and the labor force have been taken
from the aforementioned "Labor Force Statistics 1965-1976" (OECD) for
its member cauntries and from the ILO's "Yearbook of Labor Statistics"
for the Warsaw Pact nations. The labor force does not include, in
general, students, women engaged solely in homemaking activities, pensioners,
those who live on income from investments and persons who are completely
dependent on others. It does, however, include persons who are unemployed
but seeking gainful employment.
Based on these statistics, but without initially introducing variable X4
we have analyzed the main components of the sample and come up with
the results contained in Annex VI (first part), results that enable
us to draw the following conclusions:
Eigure 7, from Annex VI, is a graph of axes F-1 and F-2, which represent two
so-called "synthetic" variables, because each of them is a combination
of several of the variables that represent the various macroeconomic
magnitudes and the military strength under consideration (these magnitudes
are placed within Yectangles in Figure 7 to differentiate them more
easily from the symbols of the countries). We can deduce from this figure that the projections of the variables
X2=PCGNP and X3=PCGS are grouped very close to the extreme right of
the F-1 axis near the circle drawn on Figure 7 with a radius equal ,
to unity. This enables us to say that the F-1 axis represents the
synthetic variable "Gross National Product-Per Capita Government Spending."
Hence, this factor can be regarded as representative of the "economic
strength" of a nation because it simultaneously reflects the influences
of national productivity and of the economic resources utilized by
the government.
In addition, straddling the F-2 axis and in its upper portion, though
not as close to the axis but near the circle with radius equal to unity, are
the projections of the variables X,=PCDS and XS=LF/P. We can thus assume
that this factor represents the synthetic variable "per capita defense
effort," inasmuch as it reflects the influence of a country's defense
spending and troop strength.
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l1~ pI �~0/[Cili~ 0[7 )6 IOI~I! fY~ llt .2I1 1(I !

. . .
Att t 081114.1at ~I! F /~t~tit~l
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ely
larger than certain NATO countries with stronger economies, such as
Italy and Denmark.
m) When we analyzed the trends in per capita defense effort from 1972
to 1979, we found that Spain recorded a higher percentage increase
than the 12 European NATO countries.
~ n) We can conclude, hence, that if Spain were to join NATO and if pursuant
. to its joint planning the A1liance were to recommend that Spain boost
its defense spending in relation to the other members, and if such
; an increase ran counter to national political interests and exceeded
? our financial capabilities, Spain would have sufficient countering
' arguments.
Therefore, there are no grounds for the somewhat widespread opinion
among certain groups in this country that if Spain joined NATO, it
would have to substantially boost its defense spending (we often see
the baseless calculation that it would have to double the current level).
Possibility of Receiving Aid
o) As far as obtaining military aid within NATO is concerned, The Atlantic
Treaty sets forth the general principle of mutual assistance to maintain
, and develop the "individual and collective capacity to resist an armed
attack." However, this principle gave rise to substantial military
aid anly during the initial years of the Alliance, when the United
States tried to hasten the economic recovery and strengthen the defense
capacity of its European allies.
;
I
i
;
i .
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Aid programs are limited nowadays, and naturally the common planning
of Force Objectives does entail obligatory aid for the countries that
are having problems fulfilling their commitments.
Now then, the common planning process is an appropriate vehicle for
pointing out the needs of a given country, as well as the mutual benefits
that derive from tre Alliance's major economic powers helping the weaker
members to boost their defense capabilities. Prospective sid must
be negotiated bilaterally between governments and, of course, entails
compensation for the country granting it. Greece, Portugal and Turkey
have received economic and military assistance in recent times, but
in general the amounts have been far smaller than at NATO's outset.
Only Turkey, which is in dire straits, is receiving sizable amounts
of aid.
Our conclusion, hence, is that if Spain decides to join NATO, it should
not do so because of the prospect of obtaining appreciable amounts
of military aid.
In this connection, we have analyzed the aid Spain has received under
the existing Spanish-American Treaty and concluded that it can only
be described as scant and inconsequential. Therefore, faced with the
choice of renegotiating a pact with the United States (which is in
the midst of an economic crisis) or joining the Atlantic, Alliance,
Spain should not conclude that the economic compensation'it receives
justifies the continuation of its exclusive bilateral security pact
with the United States. The fact is that membership in the Alliance
is compatible with a new agreement with the United States.
Although there is no reason to believe that Spain would secure substantially
more aid in NATO, we can assert that Spain could negotiate with the
United States and the other members of the Alliance to receive aid
at least comparable to, if not greater than what it would under just
a bilateral trEaty with the United States. NATO membership offers
the basic advantage of participation in the Alliance's political, diplomatic
and military forums and, therefore, in the planning for the use of
the military bases and other facilities that Spain would be transferring
to NATO for the common defense. This would enable Spain to negotiate
prospective aid with more facts and arguments at its disposal.
p) As a member of NATO Spain could also derive economic benefits from
the contributions that the other members would make to the infrastructure
construction and improvement projects in Spain, as long as what Spain
received in this connection exceeded what it would have to contribute
to the common infrastructure as a whole. This could be considered
indirect economic aid stemming from NATO membership, as has been the
case for Greece and Turkey.
q) In short, if we weigh the potential aid from NATO countries and
the economic obligations arising from membership in the Alliance, the
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bottom line for Spain could turn out to be positive, although under
the current circumstances any aid that it might receive from NATO is
not likely to.be appreciable.
Consequences in the Area of Logistic Cooperation
r) The principle that applies in the Atlantic Alliance is that "logistics
is a national responsibility," in other words, each country takes care
of its own needs. However, the NATO military command is concerned
about the lack of a centralized logistic system, mainly in connection
with the outfitting of its Armed Forces and the subsequent maintenance
of this equipment. Furthermore, the increasing cost of weapons systems
poses serious financial problems for individual nations wishing to
acquire them.
NATO has attempted to mitigate these difficulties by:
--Creating bodies for logistic coordination and standardization in
t which all member countries are represented.
' --Pursuing a policy of materiel standardization and interoperability,
made possible by the joint production of principal weapons systems.
~ --Making multinational logistic support available through an international
; logistic agency for maintenance and spare parts supply (NAMSO).
The long and difficult process involved in NATO's defense logistics
rationalization policy has gradually given rise to a network of links
and exchanges in the defense industry that, while not yet as extensive
as it would like, must nevertheless be judged as a positive, albeit
limited, achievement.
A Western country that does not,belong to NATO does not have access
to the potential industrial cooperation stemming from this web of defense
relations among NATO nations.
s) As American expert Thomas A. Callaghan said at the Hans Rissen Conference
in Hamburg in February 1978: "In the years preceding the First World
War, the nations with more than 25 million inhabitants were in a position
to provide'what was essential for their own defense. During the Second
World War and in the immediate postwar period, only the nations with
50 million inhabitants had the necessary resources to develop and produce
their own materiel. But in the 1960's, nations like Great Britain,
France, Germany and Italy were unable to assume the burden of developing
and producing their own weapons systems...A national policy cannot
aim at independence (or more precisely, nondependence) unless the country
in question is willing to pay the price." And this price must either
be overall economic development, as has been the case with the Warsaw
Pact countries, or international cooperation.
The research and development of today's complex weapons systems require
advanced technology and huge investments, and this combination outstrips the
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technological and economic capabilities of even the most advanced European
countries if they act alone. Collaboration in this field enables countries
to pool the necessary human and financial resources, to share the
risks and to disseminate technology among themselves.
An isolated country's problems in the research and development process
are compounded by the need to "produce" a sufficiently large number
of units. It must seek these economies of scale in prototype production'
either by aiming for a sizable export market or by undertaking joint
production with several other countries, thus cutting supply costs
by upping the production run.
Moreover, a policy of cooperation permits no less important savings
through subsequent joi.nt logistic support in maintenance and replacement
parts. _
Statistics show that even in the most highly developed Western countries
the development of prototype weapons systems through multinational
cooperation is the most inexpensive solution, unless a single country's
demand is heavy enough.
In contrast, if modern weapons systems are purchased from the producer,
as Spain often does, the high price tag is compounded by the cost of
a maintenance contract for the system's scheduled life, which is
often 1l or ? times the purchase price, with the additional drawback
of the restrictions that it generally entails on the freedom to use
these weapons systems.
Production under license, which entails sizable royalities, normally
limits output to domestic market demand and leaves national industry
at the mercy of another country's research and development capacity.
Under the present circumstances of tight budgets and simultaneous inflation
and recession, countries much stronger than Spain are in danger of "being
disarmed by inflation" and are fighting back by seeking the necessary
savings through cooperation, both in research and development
and in the production and maintenance phase.
t) We find, thus, that as far as the manufacture of high-technology
military equipment is concerned, Spain's industry is almost entirely
dependent on the main production centers in the NATO countries, while
Spain itself remains outside the complex system of Alliance agencies
that promote cooperation and, therefore, does not enjoy the major advantages
that accrue to the allied nations from joint production planning.
Among the benefits that Spain would reap from joining NATO, the Ditchley
Park seminar specifically mentioned that "it would be entitled to the
statutory acquisition of military technology."
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;
,
i Spain is sufficiently industrialized to reap greater benefits from
~ participation than from noninvolvement. Joining the Atlantic Alliance
! would give it access to all of the NATO technical bodies that we have
' been discussing throughout this work.
, .
u) Current conditions are propitioua to the further development of
logistic cooperation, within Europe, on the one hand, and within NATO,
on the other.
! Special mention should be made of the Independent European Program
Group, which first got organized in.1976 and began in 1979 to pursue
specific preparatory measures for joint production projects. Concurrently,
the new European Parliament, elected by universal suffrage in May 1979,
began debate on European arms cooperation, because of its impact on
the Community's industrial development.
The IEGP is nowdrawing up lists of each member country's materiel
and of their respective replacement requirements, so that they can
j then jointly plan cooperation in future arms supply programs (short
~ and long term) and the exchange of advanced (including confidential)
technology.
If Spain does not join NATO, it will remain outside this process.
A delay in joining would mean being excluded from the joint programming
that is now under way. ,
We do not feel that membership in NATO is essential to begin efforts
towards collaboration with the IEPG. The IEPG does not have a charter
or an institutionalized buresucracy and enjoys great flexibility in
its makeup. There is no clause officially linking the IEPG with either
NATO or the EEC, though it does maintain close relations with the two
while at the same time underscoring its "independent" and "European"
character. �
In our study of the IEPG, we found no obstacle to Spain's membership
in it. However, every IEPG country is also a member of NATO, and we
could thus assume that prospective membership would be ruled out by
a Spanish decision not to join NATO or a declaration of neutrality.
We feel, therefore, that Spain should join the IEPG with an eye towards
the ultimate goal of inembership in NATO and the EEC.
i The major advantage of taking the first steps towards IEPG membership
would be that it would open the doors for Spain to joint European arms
collaboration and programming, which is still in its infancy. Precisely
. because this is its initial phase, results cannot be guaranteed, but
iE they turn out to be favorable, losing the opportunity to join at
this early stage could have major consequences for domestic industry,
assuming that the IEPG does not fall short of the expectations it has
created.
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Joining the Western European Union would be a complementary, albeit
much less important move.
To summarize, we feel that Spain does not have to join NATO first but
that this should not be ruled out as a prospective goal. In the meantime,
by joining these two European forums, the IEPG and the WEU, Spain could
get something of an indirect head start on coordination with the policy
of Western cooperation in armaments supply, which is developing slowly
and laboriously with the general context of the Atlantic Alliance and
which could give rise to a major framework for common military logistics
in the 1980's,
Overall Conclusion
We will summarize the conclusions of this study as follows:
The only unavoidable economic obligations entailed in normal-status
membership in the Atlantic Alliance are the periodic contributions
to the financing of its organizational structure and common infrastructure.
These contributions are negotiable, and in any case Spain's shaia could
be described as inconsequential in relation to its total defense budget.
The remaining economic obligations, stemming from NATO's joint planning
of Force Goals, take the form of "recommendations" and will under no
~ circumstances cause a substantial rise in the level of national defense
spending, neither above what is necessary for our own securi[y nor
in excess of what the nation can afford.
Certain economic benefits could be derived from the construction of
NATO infrastructure installations on Spanish soil and from the enhancement
of existing facilities. Some military and economic assistance is also
obtainable in NATO; under the current circumstances, such compensation
is not likely to be of much consequence, though neither would it be
smaller than in an exclusiVely bilateral relationship with the United
States.
The main economic advantages of NATO membership are in the field of
defense logistics. Economic advantages could be forthcoming in the
defense industry sector in particular, because of the chance to take
part in multinational joint production projects. This would give Spain
- access to advanced technology and have a favorable impact on the development
of its defense industry, both in terms of prototype research and development,
profitable production runs and logistic maintenance support.
In this connection, Spain does not have to wait until it becomes a
formal member of the Atlantic Alliance, which would be the ultimate
goal. It could gain the advantagea of arms cooperation by first joining
the European organizations (IEPG, WEU and the EEC) that are also working
in this area. .
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Our overall conclusion is that while the economic consequences of NATO
membership could be positive for the nation's economy, they are not
important enough to be considered a conditioning factor in Ehe political
decision of whether or not to join. In any event, such a decision
involves value judgments, strategic and political ones in particular,
which go beyond the stated purposes of this work.
Furthermore,_ih'is study, which is merely one individual's effort, high-
lights the many complex peculiarities and facets of NATO's-intricate
structure and workings. Thus, a group of trained economists should
be formed to focus on this issue. They should gather together and
analyze the necessary background information for a subsequent decisio.n
by the appropriate authorities. If the decision is to join the Atlantic
Alliance, then this group would be able to provide well-documented
economic advice on what status Spain ought to adopt and could later
negotiate the economic commitments arising from this status on the
most advantageous terms possible.
COPYRIGHT: Angel Lobo Garcia, Sabado Grafico, S.A., Madrid, May 1981
8743
CSO: 3110/103 END
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