Showing posts with the label free trade agreements

Free Trade Agreements and the Development of Super Hubs

Economic development is a major concern for regions and nations. Having a model to map how Free Trade Agreements work together is important for creating better policy. The authors Chong & Hur (2006) discuss how hub and spoke models can be used to see these relationships. They furthermore move into who receives the greatest economic advantage in such models under certain conditions. The information can be added into existing research on the dynamic value creation that occurs within economic hubs.  The far majority of regional trade agreements (RTA) are actually Free Trade Agreements (FTA) whereby tariffs, restrictions, quotas, and preferences on many of the products exchanged between two countries. When two countries seek to enhance their economic strength by mutually working together they may sign FTA agreements based on finding a chain of production. This may require the updating of technology to ensure that products are tracked.  The hub and spoke model (HAS) allow

Free Trade Agreements can Foster Economic Hubs

Free trade agreements are a common economic method of increasing trade. Free trade agreements work best where lower value imports are used to create higher value exports. Global hubs  often work with regional hubs in an international supply chain that continues to develop products for exportation to world markets. Effective economic hubs use intellectual capital to create value that cannot be easily copied by other countries. According to Chong and Hur (2008) each hub has access through trade agreements to the spokes but the spokes only have access to the hub. This means that the hub can sell more products and services than the spokes can themselves. This advantage gives them preferred trading and profitability standards. It also creates a value chain with the highest hub realizing the most benefits. Because hubs are central locations, they also can have an advantage in investments (Wonnacott, 1996). Those who seek to maximize their investment opportunities will invest their