Gerald R. Ford School of Public Policy
Department of Economics

PubPol/Econ 541

Winter 2018, Alan Deardorff

Text Questions Requirements Schedule Expectations Accommodations Contacts Readings

PURPOSE: The aim of this course is to teach you a lot about the economics -- and a little about the institutions -- of international trade and trade policy. The course is companion to SPP/Econ 542, International Finance Policy, which deals with international macroeconomic topics such as the balance of trade and balance of payments, determination of exchange rates, and international macroeconomic policies. Each course will also include the bare essentials of the other course so that if you take only one of them, you won't be lost in the world economy.

The course is mainly about trade policy. You will learn what trade policies are, how they are used by the United States and other countries, and how their use is restricted by international agreements. More importantly you will learn how to use economic modeling to understand the effects of trade policies and to quantify these effects. Along the way you will also learn about the institutions of the world economy, especially those that have to do with trade. And you will learn a little bit about the economic theories of why nations trade, and why they gain from trade.

Prerequisite: PubPol/Econ 555 or equivalent course in intermediate microeconomics
Organization: The course meets twice a week, Tuesdays ad Thursdays, 8:30-10:00 AM, in room 1120 Weill.




Problem Sets   0%
Class participation 10%
Papers 30%
Exam #1 30%
Exam #2 30%

Paper #1 Tuesday, February 6 8:40 AM
Exam #1 Thursday, February 22 in class
Paper #2 Tuesday, March 13 8:40 AM
Paper #3 Tuesday, April 10 8:40 AM
Exam #2: Thursday, April 26 8:00-10:00 AM
Note: Final is last day of exams




NOTES: 1. Click title for citation; click Online for item if on the web; for the items not on the web, see Canvas.
2. Copies of all readings other than from the two textbooks are also available in Canvas.
3. All readings are required unless marked "optional," but a few are marked with a tilde, ~, representing views that are not necessarily justified by economic analysis. They contain useful factual information, but I disagree with some of their interpretations, and they are here so that you will be aware of a range of views.

0. Introduction to the Course (Jan 4)
No readings for today. For all subsequent classes, you should read everything assigned before the class meets.
I've listed the numbers of pages for each reading and for each topic, so plan accordingly.
I. Overview of the International Economy
A.1. The State of Play in International Trade and Trade Policy (Jan 9) [89 pp] Questions
KOM, Chs. 1, 2 (any edition) [21 pp]
Cottier, "Common Law of International Trade", Section I only, pp. 3-6 | Canvas. [3 pp]
Porter, "Trump's Trade Endgame Could Be the Undoing of Global Rules" | Canvas. [5 pp]
Schlesinger, "How China Swallowed the WTO" | Canvas. [12 pp]
Yong, "Push RCEP negotiations forward" | Online . [3 pp]
Donnan & Harding, "US bilateral trade deal with Japan" | Canvas . [3 pp]
Kanter, "E.U. Trade Deal With Ukraine" | Canvas . [4 pp]
Wright, "Trump expects to make 'very quick' UK trade deal" | Canvas . [3 pp]
Pop & Peker, "EU Looks to Champion Free Trade" | Canvas . [2 pp]
Mauldin & Jun, "U.S., Korean Officials Agree to Amend Trade Deal" | Canvas . [2 pp]
Brunsden & Beattie, "Brussels moves to seal Mercosur pact" | Canvas . [4 pp]
Ives, "Trade Deal in Vietnam" | Canvas . [4 pp]
Economist, "The EU-Canada trade deal" | Canvas. [3 pp]
Vieira, "Canada Pursues Trade With Asia" | Canvas. [2 pp]
Rao & Ewing, "E.U. and Japan Reach Deal to Keep 'Flag of Free Trade Waving High'" | Canvas. [3 pp]
Economist, "Who Needs America?" | Canvas. [4 pp]
Donnan, "Globalisation marches on without Trump" | Canvas. [11 pp]
A.2. The State of Play in International Trade and Trade Policy, continued (Jan 11) [49 pp] Questions
Wheeler and Hunt, "Brexit: All you need to know" | Online [21 pp]
Sandbu, "Brexit showroom" | Online [5:13 minute video]
Mauldin, "U.S. Challenges China Over Chicken as Trade Friction Rises" | Canvas. [4 pp]
Mauldin, "U.S. WTO Challenge Against China Over Minerals" | Canvas. [3 pp]
Porter, "To Punish Putin, Economic Sanctions Are Unlikely to Do the Trick" | Canvas. [4 pp]
Barfield, "The president's China intellectual property order" | Online. [3 pp]
Whelan, "Mexico's Berry Bounty Fuels U.S. Trade Dispute" | Canvas. [3 pp]
Swanson, "Promise to Impose Steel Tariffs" | Canvas. [4 pp]
Swanson, "Tariffs for Imported Washing Machines" | Canvas. [3 pp]
Donnan, "Trump team opens new front in trade battle with China" | Canvas. [3 pp]
Bradsher, "Trade Fight with China Could Be over Solar Panels" | Canvas. [2 pp]
B.Tariffs and Quotas (Jan 16, 18) [24 pp] Questions
KOM: [12 pp]
     9th Ed.: Ch. 9, pp. 192-202, 205-207
     10th Ed. (trade only): Ch. 9, pp. 206-217, 220-224
Deardorff, "Nontariff Barriers and Domestic Regulation", pp. 1-12 | Online [12 pp]
C. Exchange Rates (Jan 23) [24 pp] Questions
KOM, 9th Ed. Ch 14, pp. 320-328 [10 pp] Canvas (for those who bought the trade-only text)
Economist, "The Big Mac index: Of Bucks and Burgers" | Canvas [4 pp]
Taplin, "Why Beijing Won't Just Let the Yuan Go" | Canvas [3 pp]
Fick, "Nigeria adopts unorthodox measures" | Canvas [3 pp]
Blackstone, "The World's Most Powerful Currency" | Canvas [4 pp]
D. International Transactions and the Trade Balance (Jan 25) [55 pp] Questions
KOM, 9th Ed. Ch 13 [23 pp] Canvas (for those who bought the trade-only text)
BEA, "International Transactions" | Online [5 pp]
~Scott, "Trade deficits and lost U.S. jobs" | Online [3 pp]
~Buffett, "Selling the Nation" | Online [5 pp]
WTO, "Trends in World Trade," and "World trade and GDP growth" | Canvas [19 pp]
E. Policies and Institutions: International (Jan 30, Feb 1) [94 pp] Questions
KOM: [11 pp]
     9th Ed.: Ch. 10, pp. 234-244
     10th Ed. (trade only): Ch. 10, pp. 252-262
Jackson, Ch. 1 pp. 1-11, Ch. 2 [59 pp]
Bouët and Laborde, "Cost of a Failed Doha Round" | Online [8 pp]
WTO, Trade Facilitation Agreement | Online [8 pp]
Economist, "Bargaining Chips" | Canvas [2 pp]
WTO, Briefing (ITA) | Online [4 pp]
WTO, Ministerial ends | Online [2 pp]
F. Policies and Institutions: National, United States (Feb 6) [35 pp] Questions
Jackson, Ch. 3, pp. 79-100 [21 pp]
Verrill, "U.S. Trade Remedies" | Canvas [3 pp]
USTR, The President's Trade Policy Agenda | Canvas [7 pp]
~Public Citizen, "Fast Track: An Undemocratic Path to Unfair "Trade"" | Online [1 pp]
Kabel, "What's the Hold-Up?" | Online [1 pp]
Ackerman & Zumbrun, "Export-Import Bank Could Be a Drain on Taxpayers" | Canvas [2 pp]
      Donnan, "US poised to let emerging markets trade pact expire" | Canvas
G. Policies and Institutions: National, Other (Feb 8) [29 pp] Questions
European Union:
Jackson, Ch. 3, pp. 100-104 [5 pp]
EC, "The EU In Brief" | Online [2 pp]
EC DG-Trade, "Policy Making" | Online [2 pp]
EC DG-Trade, "Anti-dumping" | Online [2 pp]
Charlemagne, "The Trade War Within" | Online-Proquest [3 pp]
Jackson, Ch. 3, pp. 104-105 [1 p]
METI, "Trade Control" | Online [1 pp]
WTO, "Trade Policy Review: Japan" | Online [3 pp]
MOFCOM, "Mission" of the Ministry of Commerce, People's Republic of China | Canvas [3 pp]
WTO, "Trade Policy Review: China" | Online [7 pp]

II.Trade Barriers
A.Non-tariff Barriers (Feb 13) [44 pp] Questions
KOM: [8 pp]
     9th Ed.: Ch. 9, pp. 202-205, 208-211, 215-218
     10th Ed. (trade only): Ch. 9, pp. 217-220, 224-227, 232-235
Jackson, Ch. 5, pp. 153-156 [3 pp]
Deardorff, "Nontariff Barriers and Domestic Regulation", pp. 12-16 | Online [5 pp]
Feenstra, "How Costly Is Protectionism?" | Online-JSTOR [20 pp]
Beattie, "Mind your TRQs" | Canvas [4 pp]
Economist, "Buying local is more expensive than it looks" | Canvas [4 pp]
B.Multi-Market Analysis (Feb 15) [7 pp] Questions
Deardorff, "Trade Policy with Interacting Markets" | Online [7 pp]
C.Cost-Benefit Analysis of Trade Policies (Feb 20) [41 pp] Questions
Fetzer, "U.S. Flat Rolled Steel" | Canvas [26 pp]
Fetzer, "Tires from China" | Canvas [15 pp]
*** EXAM #1, in class, Thursday Feb 22 ***
(Covers through assignments for Feb 15, Multi-Market Analysis.)
*** SPRING BREAK, Feb 26 - Mar 2 ***
D.Why Countries Restrict Trade (Mar 6) [76 pp] Questions
KOM: [15 pp]
     9th Ed.: Ch. 10, pp. 219-234
     10th Ed. (trade only): Ch. 10, pp. 236-252
Hoekman and Kostecki, "Functions of the Multilateral Trading System" pp. 27-40 | Canvas [14 pp]
Baldwin and Magee, "Is Trade Policy For Sale?" | Online-Springer [22 pp]
Deardorff and Stern, "Introduction" | Canvas [19 pp]
Magee, "Why Are Trade Barriers So Low?" | Online-Wiley [6 pp]
      Davidson, "U.S. Tariffs On Shoes" | Online [4 minutes]

A.Preferential Trading Arrangements (Mar 8) [50 pp] Questions
KOM: [4 pp]
     9th Ed.: Ch. 10, pp. 245-249
     10th Ed. (trade only): Ch. 7, pp. 263-268
WTO, "Causes and Effects of PTAs" | Online [30 pp]
Posen, "The case for trade" | Canvas [2 pp]
Deardorff, "Sensitive Sectors in Free Trade Agreements" | Online [14 pp]
B.NAFTA (Mar 13) [58 pp] Questions
AFL-CIO, "NAFTA at 20", pp 1-29 only. [19p] Online
Brown, "Review of NAFTA Revisited" [4p] Online-JSTOR
Faux, "Overhauling NAFTA" [2p] Online
Porter, "Labor Wants to Make Nafta Its Friend. Here's the Problem." [5p] Canvas
DeLong, "NAFTA and other trade deals have not gutted American manufacturing" [28p] Online
C.NAFTA Renegotiation (Mar 15) [88 pp] Questions
*** Visit by Dave Camp, member of US House of Representatives 1991-2015 ***
AFL-CIO, "A NAFTA that Works Must Empower Working People, Not Corporations" [2p] Online
AFL-CIO, "Making NAFTA Work for Working People", pp 1-29 only. [29p] Online
Donnan, "Can Donald Trump deliver on his threat to pull out of Nafta?" [5p] Canvas
Economist, "The North American Free-Trade Agreement renegotiation begins" [3p] Canvas
Lester et al., "Renegotiating NAFTA in the Era of Trump" [16p] Online
Panetta, "Canada's 10 NAFTA demands: A list of what Canada wants as talks start this week" [2p] Online
USTR, "Summary of Objectives for the NAFTA Renegotiation" [17p] Online
Yglesias, "Justin Trudeau, unlike Trump, is taking NAFTA renegotiation really seriously" [7p] Online
Schultz & Aspe, "Nafta Needs an Update, Not Repeal" [3p] Canvas
Mufson et al., "How NAFTA talks could fail" [4p] Canvas

IV. The Theory of International Specialization and Exchange
A. The Standard Trade Model (Mar 20, 22) [23 pp] Questions
KOM, Ch. 6 (any edition) [19 pp]
Bernhofen & Brown, "Evidence from nineteenth century Japan" | Online [4 pp]
B. Behind the Standard Trade Model: Comp. Adv., Inc. Dist. (Mar 27) [51 pp] Questions
KOM, on comparative advantage: [15 pp]
     9th Ed.: Ch. 3, pp. 24-40
     10th Ed. (trade only): Ch. 3, pp. 24-40
KOM, on effects of trade: [10 pp]
     9th Ed.: Ch. 5, pp. 89-98
     10th Ed. (trade only): Ch. 5, pp. 94-103
Deardorff, "Intro to Comparative Advantage" | Online [7 pp]
Freeman, "Are Your Wages Set in Beijing?" | Online-JSTOR [19 pp]
C. Scale Economies and Imperfect Competition (Mar 29) [22 pp] Questions
KOM: [22 pp]
     9th Ed.: Ch. 7, pp. 137-148; Ch. 8, pp. 155-166
     10th Ed. (trade only): Ch. 7, pp. 145-156; Ch. 8, pp. 164-174


V. Uses and Abuses of Trade Policy
A.Safeguards and Trade Adjustment Assistance (Apr 3-5) [73 pp] Questions
Jackson, Ch. 7 [37 pp]
Brainard et al., "Insuring America's Workers" | Online [8 pp]
~James, "Maladjusted" | Online [13 pp]
Rosen, "Strengthening Trade Adjustment Assistance" | Online [10 pp]
Lawrence, "A Numbers Argument for Renewing " | Online [2 pp]
Beattie, "The flaws in trying to compensate globalisation's losers" | Canvas [3 pp]
USDOL, "TAA Reauthorization Act of 2015" | Online [2 pp]
B.Dumping and Anti-Dumping Policy (Apr 10, 12) [66 pp] Questions
Jackson, Ch. 10 [33 pp]
Deardorff, "Economic Perspectives on Anti-Dumping Law" | Online [15 pp]
~Jakob, "Lesser Duty Rule and Community Interest in Anti-dumping" | Online-Springer [5 pp]
Hufbauer and Cimino-Isaacs, "The Outlook for Market Economy Status for China" | Online [7 pp]
Beesley, "Brussels prepares market economy compromise" | Canvas [3 pp]
Donnan, "US seeks to deny China market economy status" | Canvas [3 pp]
C.Subsidies and Countervailing Duties (Apr 17) [36 pp] Questions
KOM: [6 pp]
     9th Ed.: Ch. 9, pp. 203-204, Ch. 12 pp. 274-277
     10th Ed. (trade only): Ch. 9, pp. 217-218, Ch. 12 pp. 293-296
Jackson, Ch. 11 [25 pp]
Mauldin, "U.S. Trade Fight With Canada" | Canvas [3 pp]
Wall, "Support to Boeing Not a Prohibited Subsidy" | Canvas [2 pp]
*** EXAM #2 (Semi-cumulative) ***
Thursday, Apr 26, 8:00-10:00 AM