Hubs and Spokes, and Free Trade in the Americas
Carsten Kowalczyk, Ronald J. Wonnacott
NBER Working Paper No. 4198
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.
Document Object Identifier (DOI): 10.3386/w4198
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