Hubs and Spokes, and Free Trade in the Americas

Carsten Kowalczyk and Ronald Wonnacott

No 4198, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper compares two possible formats for free trade in the Americas: a system of spokes surrounding a U.S. hub, and a free trade area. The paper identifies the sources of welfare change, and it argues that a country's attitude towards a system depends on whether the arrangement is a complement or a substitute trading club. The paper argues also that rent-seeking activities, and costs of administration and transportation, are likely to be higher in a hub-and-spoke system than in a free trade area.

Date: 1992-10
Note: ITI
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