More than a military alliance

What happens when a country (e.g. most recently Sweden and Finland) joins NATO? You’d think not much, except in defence matters, where a new member now enjoys the protection of its allies but also has to meet certain defence spending criteria. In truth, much more happens.

Once countries are tied via a military alliance, private businesses realise two things. First, the relationship with other NATO members has become closer and is likely to last longer (after all, it is hard to leave an alliance like NATO). Second, investing in other alliance members has just become less risky because the defence pact makes it much less likely that alliance members will attack each other or even engage in detrimental policies in general.

Put these things together, and you understand why a study by Karen Jackson and her collaborators found that after the Russian invasion of Ukraine, NATO members started to trade more with each other. Intra-NATO trade grew by 9% to 15% between 2022 and 2025. Going back to NATO’s founding in 1948, the researchers found that, on average, NATO accessions increased bilateral exports by 12% to 27%. The increase in trade was concentrated in dual-use and intermediate goods that are part of the defence supply chain or adjacent to it. In that sense, NATO isn’t just a defence pact but acts simultaneously as a mini-trade pact.

NATO membership effect on trade