Hub-and-Spokes FTAs in the Presence of Technology Spillovers: An application to the Western Hemisphere

Gouranga Gopal Das and Soamiely Andriamananjara

No 331267, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: The recent proliferation of bilateral agreements has created a number of “hub-and-spokes” types of trade relationship: i.e., one economy becomes a “hub” by establishing bilateral agreements with a number of nations (the “spokes”). This paper compares and contrast the economic implications of hub-and-spokes (HAS) configuration vis-à-vis FTA of the Americas (FTAA) from the viewpoints of both the hub (Chile) and the spokes (US and Mercosur) in the Western Hemisphere using an augmented version of a nine-region, seven-traded-commodity comparativestatic GTAP model. To the extent that HAS affects the international flows of goods and services and that some technological spillovers are associated with international trade flows, it is shown that the existence of HAS affects trans-border technology flows from developed spoke to developing hub and/or, spoke regions either directly or indirectly through open regional trade. 4% Hicks-Neutral technical progress in high-technology products in developed spoke (USA) has differential impacts on productivity elsewhere. Destination regions’ ability to utilize new technology hinges on their extent of technology capture contingent on their absorptive capacity, proximity and institutional-structural congruence. Together with trade flows, these factors determine the recipient’s success in assimilating foreign technology. Differential rates of technology transmission via intermediates are also ascribed to trade policy under sequential comparative static trade liberalization scenarios. With sequencing, the benefits accrue more to Chile as first mover and relatively less to Mercosur. But, with technology flows under fullfledged FTAA the gains are more pronounced compared to bilateral FTA between Chile and Mercosur under HAS. Without sequencing, the gain to Chile is not so prominent. Diminution of welfare under FTAA scheme is attributed to preference dilution impact. Also, sectors intensive in high tech products register higher productivity growth.

Keywords: Research and Development/Tech Change/Emerging Technologies; International Relations/Trade (search for similar items in EconPapers)
Pages: 26
Date: 2004
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/331267/files/1732.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:331267

Access Statistics for this paper

More papers in Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().