GWU - Econ 283
International Trade Theory and Policy
Course Syllabus

by Steven Suranovic ©2006

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This course will be an overview of international trade theory and policy. The purpose is to explain how economic theory and policy analysis can help us to understand the economic opportunities and challeges the world will face in the future. Students should have a working knowledge of basic algebra, graphical techniques and the basics of Micro and Macro economics.
 

	Professor: Steve Suranovic
	Meeting Time: Sep 5- Dec 11, 2006                          M 7:10 - 9:00p, Rome 352
	Office: 1957 E St - Room 501M
	Office Hours: Mondays, 3 - 6pm
	Office Phone: 994-7579
	E-mail: smsuran@gwu.edu

Evaluation
	2 Quizzes (20-30 min. each)	10% each
	1 Midterm	35%
	1 Final Exam	45%

 

Exam Schedule
	Quiz #1	Oct 9
	Midterm	Oct 30
	Quiz #2	Nov 27
	Final Exam (Tentative)	Dec 18

	Course Outline
Sept 11	Trade History, Trade Law and the WTO This session presents background information about the world of international trade. It covers bits and pieces of US trade history, a discussion of some international trade laws and an introduction to the World Trade Organization. It is not intended to be a comprehensive overview, but rather a way for students to learn some of the important real world issues to which the theory will later relate. Readings: Chapter 5 - Introductory Issues Sections 5-1 to 5-5e Chapter 10 - Trade Policy Tools Sections 10-0 to 10-7 Chapter 20 - Trade History and Trade Law Sections 20-0 to 20-4 U.S. Shares Blame for Trade Talk Collapse By Lael Brainard, Washington Post, July 28, 2006 Supplementary Readings: US Tariff Schedule Click here to find the most recent tariff schedule for all goods in the US. CLICK on these links for the tariffs schedules for vegetables and watches. Tariffication and Tariff Reduction A briefing paper by the Economic Research Service at the US Dept. of Agriculture US Import Quotas A list of US quotas from the Dept of Homeland Security administered by various agencies Agricultural Export Subsidies Overview Another briefing paper by the Economic Research Service at the US Dept. of Agriculture WTO Principles A description of MFN, national treatment and other WTO principles. The WTO Agreements A description of some of the details behind WTO rules on antidumping measures, subsidies and countervailing measures and safeguards. Global Safeguards FAQ - Frequently Asked Questions about Global Safeguards Procedures from the USITC website Understanding Antidumping & Countervailing Duty Investigations - Summary of Antidumping and Countervailing Duty Procedures from the US Intl. Trade Commission website. Steel: Big Problems, Better Solutions - An article discussing trade problems faced by the US steel industry. Problems: Jeopardy 5-1 Jeopardy 10-1 Jeopardy 20-1 Internet Questions 20-1A Internet Questions 20-1D
Sept 18 - 25	The Effects of Trade Policies: Tariffs and Quotas This session first shows a represention of a free trade equilibrium in a partial equilibrium model. This model is then used to demonstrate the price effects of a tariff in large and small country cases. After explaining the concepts of consumer and producer surplus, the welfare effects of a tariff are presented. Finally a tariff setting game between governments is used to identify the motivation for trade wars. Readings: Chapter 90 - Trade Policy Effects with Perfectly Competitive Markets Read sections 90-0 to 90-10 Section 110-1 - Retaliation and Trade Wars Problems: Jeopardy 90-1 Problem Set 90 3-1 Problem Set 110 2-1 Problem Set 110 2-2 Problem Set 110 2-3
Oct 2	More about Trade Policies: Quotas, VERs, Subsidies, etc. Trade policy analysis is continued with a look at import quotas, VERs, export taxes and export subsidies. The similarities between the policies is noted. Although the small country welfare effects of each policy are not yet included in the notes, students should be able to apply the principles learned to evaluate those situations. The effects of retaliation to an export subsidy with a countervailing duty is also presented. Readings: Chapter 90 - Trade Policy Effects Read sections 90-12 to 90-27 Section 110-3a Countervailing Duties Chapter 105 - Political Economy and International Trade Read sections 105-0 to 105-7 Problems: Problem Set 90 2-1 Problem Set 90 2-2 Problem Set 90 2-3 Problem Set 90 2-4 Problem Set 90 3-2
Oct 9	Domestic Policies and International Trade Concerns about domestic policy effects on international trade flows have become increasingly widespread. This session will emphasize three key ideas. The first is that domestic government policies, such as production subsidies or consumption taxes, can actually be a cause of international trade. The second is to show the welfare effects of domestic policies when a country is open to internationale trade. The third is to show that combinations of domestic policies can duplicate the effects of trade policies. Readings: Chapter 95 - Domestic Policy Effects on International Trade Read sections 95-0 to 95-3 Supplementary Readings: Domestic Support Policies A briefing paper by the Economic Research Service at the US Dept. of Agriculture Problems: Jeopardy 95-1 Problem Set 95 2-1 Problem Set 95 3-1 Problem Set 95 3-2
Oct 16 - 23	Trade Policy Choice Under Domestic Distortions: The Theory of the 2nd-Best This is perhaps the most important session in a trade course. It will first identify a series of market imperfections and distortions and point out how these are likely to be prevalent in the real world. Next it shows that in the presence of a market imprefection, carefully selected trade policies can often be used to raise the natioanl welfare of a country. Third it is shown that carefully selected domestic policies are often superior to trade policies as a way of promoting the national welfare of a country. Readings: Chapter 100 - Trade Policies with Market Imperfections and Distortions Read sections 100-0 to 100-8 Chapter 110 - Special Topics Read sections 110-2 and 110-2a Supplementary Readings: Trade and the Environment in the WTO This press brief provides an overview of the work by the WTO Committee on Trade and the Environment Problems: Jeopardy 100-1 Problem Set 100 2-1 Problem Set 100 2-2 Problem Set 100 3-2
Oct 30	Midterm Exam
Nov 6	The Ricardian Theory of Comparative Advantage This session presents the first formal model of international trade. The chapter emphasizes the importance of the assumptions in generating the model results. Students learn some of the surprising outcomes of the Ricardian model, such as, that less productive nations may nonetheless benefit from free trade with its more productive neighbors. Readings: Chapter 40 - The Ricardian Model of Comparative Advantage Read sections 40-0 to 40-5 Supplementary Readings: Moving South - A Lehrer Newshour video segment discussing the shift of jobs in the textile and apparel industry to southern countries. Problems: Jeopardy 40-1 Problem Set 40 1-1 Problem Set 40 2-1
Nov 13	More Ricardo and Immobile Factors The welfare effects in the Ricardian model are worked out by emphasizing changes in the real wages of workers. This allows us to focus on individuals rather than the effect of trade on the nation. (as is done with the national indifference curve diagram). The immobile factor model introduces a realistic issue (factor immobility) into the Ricadian model and shows that trade may cause a redistribution of income, with some individuals winning and others losing. The model is also a great way to show how small assumption changes can lead to important changes in outcomes. Readings: Chapter 40 - The Ricardian Model of Comparative Advantage Read sections 40-6 to 40-9 Chapter 70 - Factor Mobility and Trade Read sections 70-0 to 70-19 When Labor Loses Out to Trade by Gustav Ranis and David Corderi, YaleGlobal, 10 August 2006 Supplementary Readings: Information about US Trade Adjustment Assistance a brief description of TAA provided by the Office of the White House Problems: Problem Set 40 3-1 Problem Set 70 2-1 Problem Set 70 2-2 Problem Set 70 3-1
Nov 20	The Heckscher-Ohlin Model: Rybczynski, Stolper-Samuelson The factor proportions model is the second major trade model presented formally. This session presents the key assumptions of the model then builds the key relationships between endowments and outputs in the Rybczynski theorem and the relationship between output prices and factor prices in the Stolper-Samuelson theorem. Both of these relationships are extended to the more general versions of the theorems, the magnification effects. Readings: Chapter 60 - The Heckscher-Ohlin (Factor-Proportions) Model Read sections 60-0 to 60-6 Problems: Problem Set 60 3-1
Nov 27	More H-O Model The session presents the H-O theorem which predicts the pattern of trade, notes the redistributive welfare effects of trade because of the changes in factor prices, discusses the factor-price equalization theorem and notes the importance of the compensation principle. Readings: Chapter 60 - The Heckscher-Ohlin (Factor-Proportions) Model Read sections 60-7 to 60-14 Why ‘Outsourcing’ May Lose Its Power as a Scare Word By DANIEL GROSS, NY Times, August 13, 2006 Supplementary Readings: The Leontief Paradox Kwan Choi's comprehensive discussion of the famous trade paradox. Problems: Jeopardy 60-1 Problem Set 60 2-1 Problem Set 60 2-2 Problem Set 60 2-3
Dec 4 - 11	Economies of Scale and then some In the last two sessions we'll introduce economies of scale, discuss free trade area formation and provide a brief overview of the course. Readings: Chapter 80 - Economies of Scale and International Trade Read sections 80-0 to 80-5e Chapter 120 - Evaluating the Controversy Between Free trade and Protectionism Read sections 120-1 to 120-6 Problems: Jeopardy 80-1 Jeopardy 110-1 Jeopardy 120-1
Dec 18	Final Exam (Tentative)