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GTAP Resource #1546

"Hub-and-Spokes FTAs in the Presence of Technology Spillovers: An application to the Western Hemisphere "
by Das, Gouranga and Soamiely Andriamananjara

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

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.

Resource Details (Export Citation) GTAP Keywords
Category: 2004 Conference Paper
Status: Published
By/In: Presented at the 7th Annual Conference on Global Economic Analysis, Washington DC, USA
Date: 2004
Created: Das, G. (5/7/2004)
Updated: Andriamananjara, S. (6/11/2004)
Visits: 2,592
No keywords have been specified.

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