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Overlapping free trade agreements and international trade: A network approach

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  • Silvia Sopranzetti

Abstract

In our work, we have analysed the effect of the hub†and†spoke nature of free trade agreements (FTAs) on trade. Contrary to previous analyses, we have considered the effects of the country's position in the FTA network on the bilateral trade of the hub country. We have conducted an in†depth analysis of the global network of FTAs, focusing particularly on its evolution in the last 15 years. We have utilised a panel data set covering the period 1960–2010 to investigate the effects of the hub†and†spoke on trade. Our results show that the countries that are more connected to FTAs export more than those that are less involved, although not all the partner countries you can connect with are the same. An increase in the number of spokes that have no link between them has, on average, a negative effect on the trade of the hub, which indicates that signing FTAs with every country is not the optimal strategy for increasing trade. However, if we consider the way new FTAs change the relative position of a country, we can see that if new FTAs make the country more central or less constrained in the network, these new agreements have a strongly positive and significant pro†trade effect.

Suggested Citation

  • Silvia Sopranzetti, 2018. "Overlapping free trade agreements and international trade: A network approach," The World Economy, Wiley Blackwell, vol. 41(6), pages 1549-1566, June.
    • Handle: RePEc:bla:worlde:v:41:y:2018:i:6:p:1549-1566
    DOI: 10.1111/twec.12599
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    Cited by:

    1. Chessa, Michela & Persenda, Arnaud & Torre, Dominique, 2023. "Brexit and Canadadvent: An application of graphs and hypergraphs to recent international trade agreements," International Economics, Elsevier, vol. 175(C), pages 1-12.
    2. P. Commendatore & I. Kubin & I. Sushko, 2021. "Obtaining a hub position: A New Economic Geography analysis of industry location and trade network structures," Metroeconomica, Wiley Blackwell, vol. 72(1), pages 148-172, February.
    3. Julia Grübler & Oliver Reiter, 2020. "Greater than the sum of its parts? Does Austria profit from a widening network of EU free trade agreements?," FIW Research Reports series VII-004, FIW.
    4. Julia Grübler & Oliver Reiter, 2020. "Greater than the Sum of its Parts? How does Austria Profit from a Widening Network of EU Free Trade Agreements?," wiiw Working Papers 186, The Vienna Institute for International Economic Studies, wiiw.
    5. John Nkwoma Inekwe, 2021. "Global financial networks and entrepreneurship," The World Economy, Wiley Blackwell, vol. 44(5), pages 1261-1280, May.
    6. Steven Yamarik & Mariya Mileva, 2023. "Cultural institutes: Networks and determinants," The World Economy, Wiley Blackwell, vol. 46(4), pages 1119-1143, April.
    7. Felipe Chávez-Bustamante & Elliott Mardones-Arias & Julio Rojas-Mora & Jaime Tijmes-Ihl, 2023. "A Forgotten Effects Approach to the Analysis of Complex Economic Systems: Identifying Indirect Effects on Trade Networks," Mathematics, MDPI, vol. 11(3), pages 1-20, January.
    8. Matthew Smith & Yasaman Sarabi, 2021. "UK trading patterns within and between regions in the automotive sector—A network analysis," The World Economy, Wiley Blackwell, vol. 44(2), pages 510-529, February.
    9. Julia Grübler & Oliver Reiter, 2020. "Greater than the sum of its parts? Does Austria profit from a widening network of EU free trade agreements?," FIW Research Reports series VII-004, FIW.
    10. Ovielt Baltodano L'opez & Roberto Casarin, 2022. "A Dynamic Stochastic Block Model for Multi-Layer Networks," Papers 2209.09354, arXiv.org.

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