Estimates of military spending by foreign nations are available from a number of sources. ThisCRS report lists and compares military expenditures of the United States and foreign countries usingtwo of the most commonly cited and readily available publications: The Military Balance, publishedin October of each year by the London-based International Institute for Strategic Studies (IISS)andWorld Military Expenditures and Arms Transfers (WMEAT), published about annually by the U.S.Department of State, Bureau of Arms Control. (1) Although the IISS and U.S. State Department aim to provide figures that are as consistent and accurate as possible, cross-national comparisons of defense spending are inherently imperfect. Available sets of figures are useful for comparative purposes, but often do not correspond with oneanother for a variety of reasons. This report provides two sets of figures from widely recognizedsources in order to offer Congress a sample of the data published on this topic. In The Military Balance , military expenditures are defined as the cash outlays of a central orfederal government to meet the costs of national armed forces. The term "armed forces" includesstrategic, land, naval, air, command, administration, and support forces. It also includes paramilitaryforces such as the gendarmerie , as well as customs service and border guards if these are trained inmilitary tactics, equipped as a military force and operate under military authority in the event of awar. (2) The IISS produces the most current estimates of foreign military expenditures. The 2003-2004 edition of The Military Balance contains military expenditure figures from 2002, while the mostrecent edition of the U.S. State Department's WMEAT contains military expenditure figures from1999. The IISS obtains its figures using data from national governments, the North Atlantic TreatyOrganization (NATO), the United Nations, the Organization for Security and Cooperation in Europe(OSCE), and the International Monetary Fund (IMF). However, consistent and accurate data formany countries are not available even from these sources, as many countries neither publish theirmilitary expenditures nor report them accurately to these organizations. In these cases, the IISSestimates military expenditures "based on information from several sources." (3) Such cases aremarked with an "E" on Table 1 and Table 2 in this report. For most countries, the IISS converts budget data into dollars using current exchange rates in US Dollars. For countries where basic economic data are hard to obtain, such as former commandeconomies like China, Russia, or countries in conflict, the IISS uses purchasing power parity (PPP)estimates for its conversions. PPPs measure the relative purchasing power of different currenciesover equivalent goods and services. This method accounts for the substantial differences inestimated prices for defense goods. The U.S. State Department Bureau of Arms Control's World Military Expenditures and ArmsTransfers (WMEAT) report, most recently published on February 6, 2003, provides figures for theten-year period from 1989 to 1999. (4) WMEAT usesthe World Bank's average 1999 market exchangerates in order to calculate military expenditures for most countries. (5) In cases where no appropriateexchange rate is available, WMEAT uses PPP estimates. For NATO members, WMEAT measures military expenditures according to a common definition that includes military retired pay and military-type expenditures of defense ministries. Inthis definition, a) civilian-related expenditures of defense ministries are excluded and military-relatedexpenditures of other ministries are included; b) grant military assistance is included in theexpenditures of the donor country; c) purchases of military equipment for credit are included at thetime the debt is incurred, not at the time of payment. For most other countries, figures represent the expenditures of the ministry of defense. When these are known to include the costs of internal security, an attempt is made to remove suchexpenditures. A wide variety of data sources is used for these countries, including the publicationsand data resources of other U.S. Government agencies, standardized reporting to the United Nationsby country, and other international sources. (6) For Russia, China, and many current or former communist countries, WMEAT estimates military expenditures in different ways. Figures for China are based on U.S. Government estimatesof the yuan costs of Chinese forces, weapons, programs, and activities. WMEAT warns that figuresfor Chinese military spending should be treated as having a wide margin of error. (7) Estimates for most states comprising the former Soviet Union and Warsaw Pact are made by establishing the ratio of military expenditures to Gross National Product (GNP) in nationalcurrencies and then multiplying this ratio by the World Bank's estimate of GNP in dollars asconverted to international dollars by estimated PPPs and reported in the World Bank Atlas 1997 . (8) Using the IISS and WMEAT data, this report presents the following tables and figures: Table 1: U.S. and Foreign Defense Spending (by Rank): Data from the IISS and U.S. Department of State (countries ranked according to WMEATfigures) Table 2: U.S. and Foreign Defense Spending (by Country): Data from the IISS and U.S. Department of State Figure 1: U.S. Defense Expenditures as a Percentage of the Top 10 Defense-Spending Countries, 2002 (IISS figures) Figure 2: U.S. Defense Expenditures as a Percentage of the Top 10 Defense-Spending Countries, 1999 (WMEAT figures) Figure 3: U.S. Defense Expenditures as a Percentage of the Top 25 Defense-Spending Countries, 2002 (IISS figures) Figure 4: U.S. Defense Expenditures as a Percentage of the Top 25 Defense-Spending Countries, 1999 (WMEAT figures) Figure 5: Defense Expenditures as a Percentage of GDP: Top 25 Countries, 1999 (WMEAT figures) Figure 6: Defense Expenditures as a Percentage of GDP: Top 25 Countries, 2002 (IISS figures) Table 3: NATO Defense Expenditures: Data from the IISS and U.S. Department of State (countries ranked according to IISS figures) Figure 7: U.S. Defense Expenditures as a Percentage of NATO Defense Expenditures, 1999 (WMEAT figures) Figure 8: U.S. Defense Expenditures as a Percentage of NATO Defense Expenditures, 2002 (IISS figures) Figure 9: NATO Defense Expenditures as a Percentage of GDP, 1999 (WMEAT figures) Figure 10: NATO Defense Expenditures as a Percentage of GDP, 2002 (IISS figures) Table 1. U.S. and Foreign Defense Spending (by Rank): Data from the IISS and U.S. Department of State (current year U.S. dollars inmillions) * These figures are based on purchasing power parity (PPP) estimates. PPPs measure the relative purchasing power of different currencies over equivalent goods and services. This method betteraccounts for the substantial differences in relative prices for defense goods. E These figures were estimated by IISS and not based on reported data from the individual country. Table 2. U.S. and Foreign Defense Spending (by Country): Datafrom the IISS and U.S. Department of State (current year U.S. dollars inmillions) * These figures are based on purchasing power parity (PPP) estimates. PPPs measure the relative purchasing power of different currencies over equivalent goods and services. This method betteraccounts for the substantial differences in relative prices for defense goods. E These figures were estimated by IISS and not based on reported data from the individual country. *Countries #2 - #10: China, Russia, France, United Kingdom, Germany, Italy, India, Japan, SaudiArabia * Countries #2 - #10: China, Russia, France, United Kingdom, Germany, Italy, Japan, SaudiArabia,China-Taiwan *Countries #2 - #25: China, Russia, France, Japan, United Kingdom, Germany, Italy, Saudi Arabia,India, South Korea, Brazil, Israel, Turkey, Spain, Canada, Australia, China - Taiwan, Netherlands,Indonesia, Greece, Mexico, Iran, Ukraine, N. Korea *Countries #2 - #25: China, Japan, France, United Kingdom, Russia, Germany, Italy, Saudi Arabia, China-Taiwan, South Korea, India, Turkey, Brazil, Israel, Canada, Spain, Australia, Netherlands,Poland, Iran, Greece, Sweden, Dem. Rep. of Congo, Ukraine Note: The United States, with defense spending at 3.0% of GDP in 1999 according toWMEAT,would rank #50 on this chart. Note: The United States, with defense spending at 3.3% of GDP in 2002 according to theIISS,would rank #47 on this chart. Table 3. NATO Defense Expenditures: Data from the IISS and U.S. Dept. of State (current year U.S. dollars in millions) *Non-U.S. NATO: United Kingdom, France, Germany, Italy, Turkey, Greece, Czech Republic,Norway, Portugal, Poland, Italy, Netherlands, Hungary, Denmark, Germany, Belgium, Canada,Spain, Luxembourg, Iceland *Non-U.S. NATO: United Kingdom, France, Germany, Italy, Turkey, Greece, Czech Republic,Norway, Portugal, Poland, Italy, Netherlands, Hungary, Denmark, Germany, Belgium, Canada,Spain, Luxembourg, Iceland 

Summary: This report lists and compares military expenditures of the United States and foreign nations using two sources: the London-based International Institute for Strategic Studies' (IISS) The MilitaryBalance, and the U.S. State Department's World Military Expenditures and Arms Transfers (WMEAT). Although the IISS and the U.S. State Department aim to provide figures that are as consistent and accurate as possible, cross-national comparisons of defense spending are inherently imperfect. Available sets of figures are useful, but often do not correspond with one another for a variety ofreasons. This report provides two sets of figures from widely recognized sources in order to offerCongress a sample of the data published on this topic. This report will be updated as necessary.