Hubs and spokes in Regional Trade Agreements
European Trade Study Group, 15 september 2017
European University Institute and University of Florence : [S.n.]
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SubjectInstitute for Management Research
In the plethora of Regional Trade Agreements (RTAs) some countries are involved in much more RTAs than others. Furthermore, some countries take in a position as a hub: they have trade agreements with many other countries, while their partner countries are much less involved in RTA relations. Even ‘hub-and-spoke’ arrangements have been identified, referring to a situation where the hub-country has RTA links with many other countries, while their partners (the ‘spokes’) are not involved in trade agreements with each other. A formal measure of hubness in trade agreements is however lacking. We use the current number of RTAs in goods and services as notified to the WTO to develop a measure for ‘hubness’ in trade agreements. The measure reflects the relative importance of a country’s unique RTA-ties in its partnership with another country, using different weighing schemes to value the importance of RTA-ties. Taking (weighted) averages of a country’s bilateral hubness values, the paper then explores the extent to which being a hub is a prerogative of advanced countries, as is often (implicitly) assumed in the literature on RTAs. This is important because of the literature’s focus on the asymmetric welfare consequences for the hub (positive) and spokes (negative) of being part of a hub-and-spoke relationship
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