Gerald R. Ford School of Public Policy
Department of Economics

PubPol/Econ 541

Fall 2018, Alan Deardorff

Text Podcasts 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 1220 Weill.





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

Paper #1 Tuesday, October 8 8:30 AM
Exam #1 Thursday, November 1 in class
Paper #2 Tuesday, November 20 8:30 AM
Paper #3 Tuesday, December 11 8:30 AM
Exam #2: Tuesday, December 18 8:00-10:00 AM
Note: Final is third-to-last day of exams




There is a good chance that I will have to miss one or two classes this term, and I won't know much in advance when these will be. If that happens, topics may be pushed to the next later date, and if necessary coverage of some of the last three topics, Safeguards, Dumping and Subsidies, may be compressed.

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 KOM textbook 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 (Sep 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.
           Kudlow, "Don't blame Trump' for trade fights" YouTube (2:14)
           Oliver, "Trade" YouTube (21:13)
I. Overview of the International Economy
A.1. The State of Play in International Trade and Trade Policy (Sep 6) [83 pp] Questions
KOM, Chs. 1, 2 (any edition) [21 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]
Economist, "How to Rescue the WTO" | Canvas. [12 pp]
Pop & Peker, "EU Looks to Champion Free Trade" | Canvas. [2 pp]
Vieira, "Canada Pursues Trade With Asia" | Canvas. [2 pp]
Londoño and Rich, "U.S. Allies Sign Sweeping Trade Deal" | Canvas. [7 pp]
Economist, "Forty-four African countries sign a free-trade deal" | Canvas. [3 pp]
Harding et al., "China, Japan and South Korea draw closer on trade" | Canvas. [2 pp]
Peker, "EU Pursues Trade Talks with Australia" | Canvas. [2 pp]
Legorano, "Bring Down EU-Canada Free Trade Deal" | Canvas. [3 pp]
Jun, "Trump's 'Great Deal' With South Korea" | Canvas. [3 pp]
Lewis et al., "Japan and EU sign trade deal" | Canvas. [3 pp]
Swanson, "Nearing Nafta Compromise" | Canvas. [6 pp]
A.2. The State of Play in International Trade and Trade Policy, continued (Sep 11) [88 pp] Questions
Wheeler and Hunt, "Brexit: All you need to know 2016" | Canvas [21 pp]
Economist, "Dangerous delusion of no-deal Brexit" | Canvas [5 pp]
            Hunt and Wheeler, "Brexit: All you need to know 2018" | Online
            Trade Talks, "Brexit Two Years On" | Podcast [23:27 minutes]
Trade War:
Bown & Kolb, "Trade War Timeline" | Online. [8 pp]
Schlesinger & Ailworth, "U.S. Imposes New Tariffs" | Canvas. [4 pp]
      Trade Talks, "Tariff Time! Washing Machines and Dirty Trade Policy" | Podcast [21:31 minutes]
National Security:
Swanson, "White House to Impose Metal Tariffs" | Canvas. [6 pp]
Ward, "Deal to avoid a trade war" | Online. [4 pp]
            Trade Talks, "The Trump Administration Views Trade as National Security Threat" | Podcast [35:32 minutes]
            Trade Talks, "Steel and Aluminum Tariffs: Trump versus Everyone" | Podcast [19:22 minutes]
Intellectual Property:
Trump, "Addressing China's Laws, Policies, Practices, and Actions" | Online. [1 pp]
Barfield, "The president's China intellectual property order" | Online. [3 pp]
Branstetter, "China's Forced Technology Transfer Problem" | Online. [10 pp]
            Trade Talks, "Trade and Investment Talks: China Wants America's Technology" | Podcast [17:35 minutes]
Wroughton & Rampton, "Trump moves toward China tariffs" | Online. [3 pp]
Mitchell, "Trump's tariffs prove tougher obstacle than China expected" | Canvas. [5 pp]
            Trade Talks, "Trump, China, and Tariffs: $3 billion, $50 billion, or $100 billion?" | Podcast [21:16 minutes]
Other Disputes and Actions:
Porter, "To Punish Putin, Economic Sanctions Are Unlikely to Do the Trick" | Canvas. [4 pp]
Donnan, "Canada takes US to WTO" | Canvas. [3 pp]
O'Keeffe & Hughes, "Trump Deal to Save China's ZTE" | Canvas. [2 pp]
            Trade Talks, "ZTE, Trump, and China -- What's the Fuss?" | Podcast [17:18 minutes]
Economist, "Donald Trump's other trade war" | Canvas. [3 pp]
Economist, "A WTO ruling on aircraft subsidies" | Canvas. [3 pp]
Edmondson, "Tariffs on Canadian Newsprint" | Canvas. [3 pp]
B.Tariffs and Quotas (Sep 13, 18) [26 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]
Lahart, "The Imperfect Science of How Much Tariffs Will Hurt". | Canvas [2 pp]
C. Exchange Rates (Sep 20) [24 pp] Questions
KOM, 9th Ed. Ch 14, pp. 320-328 [10 pp] Canvas (for those who bought the trade-only text)
Economist, "Watch your BMI" | Canvas. [2 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 (Sep 25) [75 pp] Questions
KOM, 9th Ed. Ch 13 [23 pp] Canvas (for those who bought the trade-only text)
Murillo, "International Transactions" | Online [11 pp]
Obstfeld, "Game of whack-a-mole" | Canvas [2 pp]
~Scott, "Trade deficits and lost U.S. jobs" | Online [3 pp]
~Buffett, "Selling the Nation" | Online [5 pp]
WTO, "Highlights of world trade," and "Latest trends" | Canvas. [31 pp]
E. Policies and Institutions: International (Sep 27 - Oct 2) [82 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 Canvas [11 pp]
Jackson, Ch. 2 Canvas [48 pp]
WTO, Ministerial ends | Online [2 pp]
Rodrik, "The WTO has become dysfunctional" | Canvas [3 pp]
Swanson & Ewing, "Crisis at W.T.O." | Canvas [7 pp]
            Trade Talks, "WTO S.O.S. -- Save our System" | Podcast [17:36 minutes]
F. Policies and Institutions: National, United States (Oct 4) [30 pp] Questions
Jackson, Ch. 3, pp. 79-100 Canvas [21 pp]
Verrill, "U.S. Trade Remedies" | Canvas. [3 pp]
USTR, The President's 2018 Trade Policy Agenda | Canvas. [2 pp]
~Public Citizen, "Fast Track: An Undemocratic Path to Unfair "Trade"" | Online [1 pp]
Kabel, "What's the Hold-Up?" | Online [1 pp]
Ackerman, "Pushes to Revive U.S. Export-Import Bank" | Canvas. [3 pp]
G. Policies and Institutions: National, Other (Oct 9) [28 pp] Questions
European Union:
Jackson, Ch. 3, pp. 100-104 Canvas [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 Canvas [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 [6 pp]
            "The Facts and China‚Äôs Position on China-US Trade Friction" | Canvas

II.Trade Barriers
A.Non-tariff Barriers (Oct 11) [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 Canvas [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]
            Trade Talks, "Are Trump's Steel Quotas Worse than His Steel Tariffs?" | Podcast [20:26 minutes]

*** FALL STUDY BREAK, Oct 15-16 ***

B.Multi-Market Analysis (Oct 18) [7 pp] Questions
Deardorff, "Trade Policy with Interacting Markets" | Online [7 pp]
C.Cost-Benefit Analysis of Trade Policies (Oct 23) [41 pp] Questions
Fetzer, "U.S. Flat Rolled Steel" | Canvas. [26 pp]
Fetzer, "Tires from China" | Canvas. [15 pp]
D.Why Countries Restrict Trade (Oct 25) [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]

III. The Theory of International Specialization and Exchange
A. The Standard Trade Model (Oct 30, Nov 6) [23 pp] Questions
KOM, Ch. 6 (any edition) [19 pp]
Bernhofen & Brown, "Evidence from nineteenth century Japan" | Online [4 pp]
*** EXAM #1, in class, Thursday Nov 1 ***
(Covers through assignments for Oct 25, Why Countries Restrict Trade.)
B. Behind the Standard Trade Model: Comp. Adv., Inc. Dist. (Nov 8) [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. 89-93, 97-98
     10th Ed. (trade only): Ch. 5, pp. 94-98, 102-103
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 13) [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


IV. Uses and Abuses of Trade Policy
A.Preferential Trading Arrangements (Nov 15) [66 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 and Sharma, "Exempted Sectors in Free Trade Agreements" | Canvas [30 pp]
B.NAFTA and Its Renegotiation (Nov 20) [58 pp] Questions
DeLong, "NAFTA and other trade deals have not gutted American manufacturing" [28p] Online
Soergel, "What the U.S., Canada and Mexico Want" [5p] Canvas
USTR, "Summary of Objectives for the NAFTA Renegotiation" [17p] Online
Donnan, "Can Donald Trump deliver on his threat to pull out of Nafta?" [5p] Canvas.
Schultz & Aspe, "Nafta Needs an Update, Not Repeal" [3p] Canvas.
C.Safeguards and Trade Adjustment Assistance (Nov 27, 29) [73 pp] Questions
Jackson, Ch. 7 Canvas [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]
D.Dumping and Anti-Dumping Policy (Dec 4, 6) [66 pp] Questions
Jackson, Ch. 10 Canvas [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]
            Trade Talks, "Zeroing: The Biggest WTO Threat You've Never Heard Of" | Podcast [22:14 minutes]
E.Subsidies and Countervailing Duties (Dec 11) [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 Canvas [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) ***
Tuesday, Dec 18, 8:00-10:00 AM