Gerald R. Ford School of Public Policy
Department of Economics

PubPol/Econ 541

Fall 2015, Alan Deardorff

Text Requirements Schedule Disabilities 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, Mondays ad Wednesdays, 8:30-10:00 AM, in room 1230 Weill.



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

Paper #1 Wednesday, October 14 8:40 AM
Exam #1 Monday, November 9 in class
Paper #2 Wednesday, November 18 8:40 AM
Paper #3 Monday, December 14 8:40 AM
Exam #2: Friday, December 18 10:30 AM-12:30 PM




NOTES: 1. Click title for citation; click Online for item if on the web, or see CTools; for the few items not on the web, see CTools.
2. All readings are required, but those marked with a tilde, ~, represent 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 (Sep 9)
No readings for today. For all subsequent classes, you should read everything assigned before the class meets.
I. Overview of the International Economy
A. The State of Play in International Trade and Trade Policy (Sep 14)
KOM, Chs. 1, 2 (any edition) [21 pp]
Cottier, "Common Law of International Trade" | CTools, Section I only, pp. 3-6. [3 pp]
Meltzer, "From TPP to FTAAP?" | Online. [3 pp]
~Zornick, "Fast-Track Fight Is Effectively Over" | Online. [5 pp]
Barfield, "Tipping Our TPP Hand" | Online. [3 pp]
Siles-Brügge et al., "TTIP: The State of Play" | Online. [11 pp]
Smyth, "Australia-China Trade Deal" | CTools. [3 pp]
Buttonwood, "Russian Sanctions" | CTools [2 pp]
Economist, "Torture by Tariff" | Online-Proquest. [2 pp]
ST&R, "Senators Work to Avoid Sanctions" | Online. [1 pp]
ST&R, "U.S. Argues for Lower Retaliation" | Online. [1 pp]
Miller, "U.S. Steelmakers Again Ask for Tariffs" | Online-Proquest. [3 pp]
B.Tariffs and Quotas (Sep 16, 21):
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. International Transactions and the Trade Balance (Sep 23):
KOM, 9th Ed. Ch 13 [23 pp] CTools
BEA, "International Transactions" | Online [8 pp]
~Kimball & Balding, "The Trade Deficit is Responsible..." | Online [2 pp]
~Buffett, "Selling the Nation" | Online [5 pp]
WTO, "World Trade Developments 2013" | Online [8 pp] (See also Excel Tables)
D. Exchange Rates (Sep 28) - Kathryn Dominguez substitutes for Deardorff:
KOM, 9th Ed. Ch 14, pp. 320-328 [10 pp] CTools
Sender, "Currency skirmish not made in China" | CTools [3 pp]
McCain, "Will China's Currency Devaluation Spark A Trade War?" | Online [2 pp]
Fick, "Nigeria adopts unorthodox measures" CTools [3 pp]
E. Policies and Institutions: International (Sep 30, Oct 5)
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]
Johns, "WTO Trade Facilitation Agreement" | Online [2 pp]
Economist, "Bargaining Chips" | Online-Proquest [2 pp]
F. Policies and Institutions: National, United States (Oct 7)
Jackson, Ch. 3 [26 pp]
Verrill, "U.S. Trade Remedies" | CTools [3 pp]
USTR, "The President's Trade Policy Agenda" | Online [22 pp]
~Public Citizen, "Fast Track: An Undemocratic Path to Unfair "Trade"" Online [1 pp]
Kabel, "What's the Hold-Up?" | Online [2 pp]
      CRS, "TPA FAQs" | Online [31 pp]
G. Policies and Institutions: National, Other (Oct 12)
European Union:
EU, "How the EU works" | Online [1 pp]
EC DG-Trade, "Policy Making" | Online [2 pp]
Charlemagne, "The Trade War Within" Online-Economist | Online-Proquest [3 pp]
Solis, "Japan's Trade Policy" | Online [6 pp]
WTO, "Trade Policy Review: Japan" | Online [3 pp]
MOFCOM, "Mission" of the Ministry of Commerce, People's Republic of China | CTools [3 pp]
WTO, "Trade Policy Review: China" | Online [5 pp]
II.Trade Barriers
A.Non-tariff Barriers (Oct 14)
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]

*** FALL STUDY BREAK, Oct 19-20 ***

B.Multi-Market Analysis (Oct 21)
Deardorff, "Trade Policy with Interacting Markets" | Online [7 pp]
C.Cost-Benefit Analysis of Trade Policies (Oct 26)
Fetzer, "U.S. Flat Rolled Steel" | CTools [26 pp]
Fetzer, "Tires from China" | CTools [15 pp]
D.Why Countries Restrict Trade (Oct 28)
KOM: [15 pp]
     9th Ed.: Ch. 10, pp. 219-234
     10th Ed. (trade only): Ch. 10, pp. 236-252
Hoekman and Kostecki, "The Trading System in Perspective: Functions of the Multilateral Trading System" pp. 27-40 | CTools [14 pp]
Baldwin and Magee, "Is Trade Policy For Sale?" | Online-Springer [22 pp]
Deardorff and Stern, "Introduction" | CTools [20 pp]
Magee, "Why Are Trade Barriers So Low?" | Online-Wiley [6 pp]
      Davidson, "U.S. Tariffs On Shoes" | Online [4 minutes]

III. The Theory of International Specialization and Exchange
A. The Standard Trade Model (Nov 2, 4)
KOM, Ch. 6 (any edition) [19 pp]
*** EXAM #1, in class, Monday Nov 9 ***
(Covers through assignments for Oct 28, Why Countries Restrict Trade.)

*** NO CLASS, Nov 11 ***
(I'm away)

B. Behind the Standard Trade Model: Comp. Adv., Inc. Dist. (Nov 16)
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 (Nov 18)
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


IV. Uses and Abuses of Trade Policy
A.Preferential Trading Arrangements (Nov 23, 25)
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" | CTools [2 pp]
Deardorff, "Trade Implications of the TPP" | CTools [20 pp]
B.Safeguards and Trade Adjustment Assistance (Nov 30, Dec 2)
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 TAA" | Online [2 pp]
USDOL, "TAA Reauthorization Act of 2015" | Online [2 pp]
C.Dumping and Anti-Dumping Policy (Dec 7, 9)
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 [5 pp]
~Scott and Jiang, "Market Economy Status Will Put Jobs at Risk" | Online [22 pp]
D.Subsidies and Countervailing Duties (Dec 14)
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]
*** EXAM #2 (Semi-cumulative) ***
Friday, Dec 18, 10:30 AM-12:30 PM