Technology Transaction Efficiency, Export Controls, and Shifting Trade Patterns: A General Equilibrium Perspective

ABSTRACT Why do first‐mover countries that once championed open trade now impose strict export controls on advanced technologies? And how can developing economies build R&D capacity when cut off from frontier innovations? This paper addresses these questions by developing a general equilibrium model featuring endogenous specialization in intermediate goods and the international division of labour. Allowing institutions and policies to adjust contingently in pursuit of welfare maximization, the model captures the feedback loop between trade patterns and transaction costs. It traces the structural evolution of trade—from inter‐industry trade to R&D competition, and even to decoupling—as technology transaction efficiencies interact across developed and developing countries. The comparative‐static results provide a welfare‐based interpretation of why first‐mover countries may retreat from openness, how latecomers may develop indigenous R&D capability, and why technology‐related frictions may subsequently weaken. The model offers a theoretical explanation for the persistent and recurring nature of technology‐related trade frictions, as observed both historically and in today's geopolitical landscape.