Beyond security: The trade implications of joining NATO

Karen Jackson, Phillip Luck and Oleksandr Shepotylo

No 3/2026, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: Russia's full-scale invasion of Ukraine in February 2022 raised a critical question: do military alliances strengthen or fracture trade ties when war breaks out? This paper shows they strengthen them. Using monthly bilateral trade data through August 2025, we find that NATO members traded approximately 9-15% more with one another after the invasion relative to non-NATO pairs - a premium that persisted and grew through 2025. These effects are not limited to the war period: applying a disaggregated structural gravity framework over 1948-2022, we estimate that NATO accession generates 12-27% increases in bilateral exports, concentrated in dual-use, differentiated, and intermediate goods consistent with defence-industrial supply-chain. Moreover, there is synergy between security and economic cooperation as the effect of NATO is strenghened by the EU membership.

Keywords: trade; geopolitics; NATO; security (search for similar items in EconPapers)
JEL-codes: F14 F53 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:342407

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