Do Hub-and-Spoke Free Trade Agreements Increase Trade? A Panel Data Analysis

We use panel data consisting of 96 countries and covering the period 1960–2000 to investigate the effects of free trade agreements (FTAs) and hub-and-spoke systems of FTAs on exports. Our empirical results imply an annual growth rate of 5.57% in exports, leading to a doubling of exports after 12.4 years, between FTA partners. Non-overlapping FTAs account for 4.12%, while hub-and-spoke FTAs account for 1.45% of the estimated export growth rate. This indicates that in addition to the direct trade liberalizing effect of FTAs, the hub-and-spoke nature of FTAs has an additional positive effect on trade.