Report to Congress on U.S.-Nordic Relations

June 14, 2022 8:04 AM

The following is the June 10, 2022, Congressional Research Service In Focus report, The Nordic Countries and U.S. Relations.

From the report

The five Nordic countries—Denmark, Finland, Iceland, Norway, and Sweden—share deep historical, linguistic, and cultural ties and many political and economic similarities. They are all stable democracies with parliamentary systems of government and prosperous market economies with relatively high standards of living. With a total population of roughly 27 million people, the Nordics collectively form the world’s 12th-largest economy. They have extensive social welfare systems and relatively high tax rates but are considered to be innovative, business-friendly countries. The Nordics generally rank high on global competitiveness indexes. Foreign trade plays a key role in their economies. They also enjoy substantial natural resources. Norway in particular benefits from vast North Sea oil and natural gas deposits.

Like most other countries, the Nordics were affected by the Coronavirus Disease 2019 (COVID-19) pandemic. Denmark, Finland, Iceland, and Norway responded to the onset of the pandemic in March 2020 with stringent restrictions on social and business activity. Sweden initially largely trusted its population to practice social distancing but adopted somewhat more restrictive policies in subsequent waves, following a higher death toll per capita and public and parliamentary criticism. All five Nordic countries saw a significant spike in cases in early 2022 due to the more transmissible Omicron variant, but they also have high vaccination rates (between 75% and 85% of populations are fully vaccinated). Policies throughout the Nordics have shifted to “learning to live” with the virus.

Gross domestic product (GDP) contracted in all five Nordic countries in 2020 because of the pandemic. Iceland’s heavy reliance on tourism led to a 7% decrease in GDP, while economic contraction in the other four Nordics was less severe (between 1% and 3%). All Nordic governments introduced financial support measures. Growth returned in all five countries in 2021 (between 3% and 5%) but is expected to slow in 2022, partly due to the economic impact of Russia’s war against Ukraine. The Nordics typically have relatively low rates of income inequality, but the pandemic exposed and in some cases exacerbated socioeconomic inequality, especially in low-income urban and rural areas and among some immigrant communities. Like other countries, the Nordics currently are grappling with rising energy prices and inflation. Aging populations and fertility rates below replacement rates raise questions about the long-term sustainability of the Nordics’ social welfare systems.

In recent years, migration policy has become a key political issue in the Nordics. The 2015-2016 spike in refugees and migrants in Denmark, Finland, Norway, and Sweden—mostly from the Middle East, Afghanistan, and Africa—strained education, housing, and welfare systems. Most Nordic governments introduced tighter asylum policies and curtailed some welfare benefits. These refugee and migrant waves also stirred debates about identity, integration, and security (in relation to both terrorism and crime). Refugees from Russia’s 2022 war in Ukraine, however, generally have been welcomed by Nordic governments and societies.

Download the document here.

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