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Overlapping free trade agreements and international trade: A network approach

Overlapping free trade agreements and international trade: A network approach In our work, we have analysed the effect of the hub‐and‐spoke nature of free trade agreements (FTAs) on trade. Contrary to previous analyses, we have considered the effects of the country's position in the FTA network on the bilateral trade of the hub country. We have conducted an in‐depth analysis of the global network of FTAs, focusing particularly on its evolution in the last 15 years. We have utilised a panel data set covering the period 1960–2010 to investigate the effects of the hub‐and‐spoke on trade. Our results show that the countries that are more connected to FTAs export more than those that are less involved, although not all the partner countries you can connect with are the same. An increase in the number of spokes that have no link between them has, on average, a negative effect on the trade of the hub, which indicates that signing FTAs with every country is not the optimal strategy for increasing trade. However, if we consider the way new FTAs change the relative position of a country, we can see that if new FTAs make the country more central or less constrained in the network, these new agreements have a strongly positive and significant pro‐trade effect. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The World Economy Wiley

Overlapping free trade agreements and international trade: A network approach

Sopranzetti, Silvia
The World Economy , Volume 41 (6) – Jan 1, 2018
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18 pages

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Publisher
Wiley
Copyright
Copyright © 2018 John Wiley & Sons Ltd
ISSN
0378-5920
eISSN
1467-9701
DOI
10.1111/twec.12599
Publisher site
See Article on Publisher Site

Abstract

In our work, we have analysed the effect of the hub‐and‐spoke nature of free trade agreements (FTAs) on trade. Contrary to previous analyses, we have considered the effects of the country's position in the FTA network on the bilateral trade of the hub country. We have conducted an in‐depth analysis of the global network of FTAs, focusing particularly on its evolution in the last 15 years. We have utilised a panel data set covering the period 1960–2010 to investigate the effects of the hub‐and‐spoke on trade. Our results show that the countries that are more connected to FTAs export more than those that are less involved, although not all the partner countries you can connect with are the same. An increase in the number of spokes that have no link between them has, on average, a negative effect on the trade of the hub, which indicates that signing FTAs with every country is not the optimal strategy for increasing trade. However, if we consider the way new FTAs change the relative position of a country, we can see that if new FTAs make the country more central or less constrained in the network, these new agreements have a strongly positive and significant pro‐trade effect.

Journal

The World Economy – Wiley

Published: Jan 1, 2018

Keywords: ; ;

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