Gerald R. Ford School of Public Policy
Department of Economics

PubPol/Econ 541

Fall 2016, 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, Mondays ad Wednesdays, 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 Wednesday, October 12 8:40 AM
Exam #1 Wednesday, November 9 in class
Paper #2 Wednesday, November 16 8:40 AM
Paper #3 Monday, December 12 8:40 AM
Exam #2: Tuesday, December 20 8:00-10:00 AM




NOTES: 1. Click title for citation; click Online for item if on the web; for the few 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 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 7)
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 (Sep 12) [51 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]
Fergusson & Williams, "The Trans-Pacific Partnership", Summary only | Online. [2 pp]
Barfield, "Tipping Our TPP Hand" | Online. [3 pp]
~Stiglitz, "Stiglitz calls TPP 'outrageous'" | Online. [4:52 video]
Luce, "US-led globalism is dying with the TPP" | Canvas. [3 pp]
DG-Trade, "Inside TTIP", pp. 5-9 only | Online. [5 pp]
Siles-Brügge et al., "TTIP: The State of Play" | Online. [11 pp]
Economist, "The EU-Canada trade deal" | Online-Proquest. [3 pp]
A.2. The State of Play in International Trade and Trade Policy, continued (Sep 14) [47 pp] Questions
Wheeler and Hunt, "Brexit: All you need to know" | Online [21 pp]
Sandbu, "Brexit showroom" | Online [5:13 minute video]
Buttonwood, "Russian Sanctions" | Canvas [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]
Miller, "U.S. Steel Tariffs Create a Double-Edged Sword" | Online-Proquest. [4 pp]
Donnan, "US Steel given green light to seek China import ban" | Online-NewsBank. [3 pp]
Mauldin, "U.S. Challenges China Over Chicken as Trade Friction Rises" | Online-Proquest. [4 pp]
Mauldin, "U.S. WTO Challenge Against China Over Minerals" | Canvas. [3 pp]
Bradsher, "Union Seeks Higher Tariffs on U.S. Imports of Raw Aluminum" | Online-Proquest. [3 pp]
B. Exchange Rates (Sep 19) [21 pp] Questions - Kathryn Dominguez substitutes for Deardorff:
KOM, 9th Ed. Ch 14, pp. 320-328 [10 pp] Canvas (for those who bought the trade-only text)
Economist, "The Big Mac index : Patty-purchasing parity" | Canvas [4 pp]
Wei, "China Lets Yuan Depreciate" | Online-Proquest [4 pp]
Fick, "Nigeria adopts unorthodox measures" | Canvas [3 pp]
Blackstone, "The World's Most Powerful Currency" | Online-Proquest [4 pp]
C.Tariffs and Quotas (Sep 21, 26) [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]
D. International Transactions and the Trade Balance (Sep 28) [67 pp] Questions
KOM, 9th Ed. Ch 13 [23 pp] Canvas (for those who bought the trade-only text)
BEA, "International Transactions" | Online [8 pp]
~Scott, "Trade deficits and lost U.S. jobs" | Online [3 pp]
~Buffett, "Selling the Nation" | Online [5 pp]
WTO, "World Trade Developments 2015" | Online [28 pp]
E. Policies and Institutions: International (Oct 3, 5) [88 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" | Online-Proquest [2 pp]
F. Policies and Institutions: National, United States (Oct 10) [34 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 2016, pp. 1-4 only | Online [4 pp]
~Public Citizen, "Fast Track: An Undemocratic Path to Unfair "Trade"" | Online [1 pp]
Kabel, "What's the Hold-Up?" | Online [1 pp]
Calmes, "Senator Stymies the Export-Import Bank" | Online-Proquest [4 pp]
G. Policies and Institutions: National, Other (Oct 12) [33 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]
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 | Canvas [3 pp]
WTO, "Trade Policy Review: China" | Online [7 pp]

*** FALL STUDY BREAK, Oct 17-18 ***

II.Trade Barriers
A.Non-tariff Barriers (Oct 19) [36 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]
B.Multi-Market Analysis (Oct 24) [7 pp] Questions
Deardorff, "Trade Policy with Interacting Markets" | Online [7 pp]
C.Cost-Benefit Analysis of Trade Policies (Oct 26) [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 31) [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 (Nov 2, 7) [19 pp] Questions
KOM, Ch. 6 (any edition) [19 pp]
*** EXAM #1, in class, Monday Nov 9 ***
(Covers through assignments for Oct 31, Why Countries Restrict Trade.)
B. Behind the Standard Trade Model: Comp. Adv., Inc. Dist. (Nov 14) [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 (Nov 16) [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 21, 23) [59 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, "Trade Implications of the TPP" | Online-Proquest [20 pp]
CerameUnie, "EU Free Trade Agreements" | Online [3 pp]
B.Safeguards and Trade Adjustment Assistance (Nov 28, Nov 30) [70 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 TAA" | Online [2 pp]
USDOL, "TAA Reauthorization Act of 2015" | Online [2 pp]
C.Dumping and Anti-Dumping Policy (Dec 5, 7) [40 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]
D.Subsidies and Countervailing Duties (Dec 12) [31 pp] Questions (to be added)
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) ***
Tuesday, Dec 20, 8:00-10:00 AM