TEMPLATE. Course descriptor. World Economy and International Trade. Core Principles of Economics or Principles of Microeconomics

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1 Title of the course Title of the Academic Programme Type of the course 1 Prerequisites ECTS workload 6 Total indicative study hours Course Overview Intended Learning Outcomes (ILO) 2 Indicative Course Content TEMPLATE Course descriptor World Economy and International Trade Bachelor of International Business and Managment Core Principles of Economics or Principles of Microeconomics Directed Study Self-directed study Total The course familiarise students with main concepts and theories of international trade as well as with basic facts on the spatial distribution of economic activity in the modern world and its driving forces. The classes are focused on problem solving and analysis and discussion of recent economic events and actively use newspapers, magazines and economic blogs such as voxeu.org. This activity helps to learn how to make economic knowledge useful in daily life and form judgements on particular economic issues. Another type of activity in the classes is working with data. Students will be acquainted with major data sources on world economy such as COMTRADE database. One of the assessments provides an opportunity to practice with the data and solve individual business-related problems. This assignment is complemented with presentation and discussion of the solutions in the class. This task is designed to train students in backing their opinion with relevant data and in combining collates theory, data and the common sense for purposes of economic analysis. Knowledge of major facts on the international trade in the modern world and an understanding of its driving forces Ability to use knowledge of economic theory and relevant data in discussions simple issues related to the world economy Topic 1. The first and second waves of globalisation. The world around Spatial distribution of economic activity. Transportation and communications of those times. Business practices in international trade and finance. Take-off of Europe. Technical progress in transportation and communications; railroads, steam ships and telegraph, Suez channel. Transportation costs and international trade. Labour migrations. Development and internationalisation of capital markets. Notes: 1 Type of the course - core (mandatory); optional or elective. 2 Intended Learning Outcomes (ILO) - for the academic programmes which are exposed to international accreditation or other forms of external evaluation, the list of ILO must be complemented with Mapping of Programme and Course/module learning outcomes.

2 Global economic and financial institutions of XIX and early XX centuries. The world around Deglobalisation induced by the World War I. Crash of the gold standard. Smoot-Hawley tariff and its consequences. Bretton Woods system and GATT. Trade liberalisation in second half of XX century. Modern trade policy development: key issues. The WTO as a cornerstone of the modern international trading system. The organization. Accession rules in the WTO system. Dispute Settlement in the WTO. Theory and Policy, Ch.12. Supplementary reading: Baier and Bergstrand (2001), Clemens and Williamson (2004), Jacks et al. (2008), Redding and Turner (2014), Rua (2014), Williamson (1995), Williamson (1998). Examples of problems: McLaren, Ch. 1, problems 1-6. Topic 2. Comparative advantages Comparative advantages. Ricardian theory (2x2 settings). Relative demand and relative supply. Misconceptions about comparative advantages. Comparative advantages with many goods/many countries. Relative wages in the Ricardian economy. Empirical evidence on the Ricardian model. Theory and Policy, Ch. 3 Supplementary reading: Baier and Bergstrand (2001), Baldwin (1971), Bernhofen (2004), Clemens and Williamson (2004), Examples of problems: KOM, Ch. 3 problems Topic 3. Economy of scale. Love for variety. Heterogeneity of firms. Economy of scale vs love for variety. Monopolistic competition. Introduction to the Krugman model. Effect of increased market size. Effect of market integration. Intraindustry trade. Grubel-Lloyd index. Exporters premia. Introduction to the Melitz model. Gaining, loosing and exiting firms in case of international trade opening. Trade costs and decision to export. Selection effect. Evidence on Krugman and Melitz type gains from trade. Reading Krugman P., Obstfeld M., Melitz M. International Economics: Theory and Policy, Ch.8. Supplementary reading: McLaren, ch. 3, KOM, ch. 7-8, Trefler (2004). Examples of problems: KOM, Ch.7, problems 3-4, Ch. 8, problems 2-4. Topic 4. International trade and competition Cournot oligopoly model. Number of firms, economic efficiency and profits. Market integration and number of firms. Symmetric and asymmetric cases. Krugman-Brander model.

3 Theory and Policy, Ch.1. Supplementary reading: Brander and Krugman (1983). Examples of problems: McLaren, Ch. 2, problems 1-6. Topic 5. Trade policy analysis in partial equilibrium framework Protectionism in international trade. Tariff methods of trade regulation. Import duty and welfare effect (the case of small open economy). Dumping/Antidumping. Effective rate of protection. Non-tariff methods of trade regulation. Quotas. (Non-) Equivalence of tariffs and quotas. Export subsidy. Licensing. Embargo. Currency control and trade. Subsidies and countervailing measures. Technical barriers to trade. Protectionism: arguments pro and contra. Theory and Policy, Ch. 9, 10. Supplementary reading: WTO agreement on Subsidies and countervailing measures. WTO agreement on Antidumping. Examples of problems: KOM, Ch. 9, problems 1-11, Ch. 10, problems 1-9. Topic 6. Firms in Global Economy: Multinationals, FDI, and Outsourcing. Multinational enterprises. Forms of foreign investments: debt vs equity. Foreign direct investments. Greenfield and brownfield FDI. Investments and divestments. Sources and destinations of FDI. Horizontal and vertical FDI. Reasons for FDI. FDI vs outsourcing. Barriers to international trade and investments. Offshoring. Offshoring and inequiality. Feenstra- Hanson theory. Productivity effect. Value chains. Theory and Policy, Ch.8. Supplementary reading: Feenstra and Hanson (1996), Grossman and Rossi-Hansberg (2008), KOM (2012), Ch. 8, Kraemer et al. (2011), Xing (2016). Examples of problems: KOM, Ch.8, problems Topic 7. Free trade agreements and trade diversions Degrees of economic integration. Free trade agreements. Consequences of WTO rules on preferential trade agreements. Trade creation and trade diversion. Losses from trade diversion. FTAs and liberalisation of trade with other partners. Theory and Policy, Ch.9. Examples of problems: McLaren, Ch. 15, problems 1, 2. Topic 8. Trade and exchange rates. Nominal and real exchange rates. Theories of real exchange rates:

4 Teaching and Learning Methods Indicative Assessment Methods and Strategy Absolute Purchase Power Parity, Relative Purchasing Power Parity. Balassa-Samuelson effect and its probable explanations. Productivity and anticipating productivity growth and exchange rate. Exchange rate regimes. Terms of trade shocks and currency depreciations. Theory and Policy, Ch.14. Supplementary reading: Rogoff (1996), Taylor (2000), Taylor and Taylor (2004), KOM, Ch. 16. Examples of problems: KOM, Ch. 15, problems 2, 5, 9, 18, 19. Lectures, workshops Grading Cumulative grade 70% Workshop participation 30% Lectures 20% Interim exam 20% Final exam 30% Types of examinations: Interim exam 1 is a take home individual data-oriented project. Project is assigned and submitted through LMS. Topics covered: 2-5. Execution time: one week. Readings / Indicative Learning Resources 3 Final exam covers all topics and organised in the same way as the Interim exam 2. Mandatory Krugman P., Obstfeld M., Melitz M. International Economics: Theory and Policy. 9th ed. Addison-Wesley Optional Antras P, Yeaple S. Multinational Firms and the Structure of International Trade // Handbook of International Economics, vol. 4 / ed. G. Gopinath, E. Helpman, and K.Rogoff. Elsevier, 2014, ch.2. Baier S.L., Bergstrand J.H. The growth of world trade: tariffs, transport costs, and income similarity. Journal of International Economics, 2001, vol. 53, Issue 1, pp Baldwin R.E. Determinants of the Commodity Structure of U.S. Trade. The American Economic Review, Vol. 61, No. 1 (Mar., 1971), pp Bernhofen D.M., Brown J.C. A Direct Test of the Theory of Comparative Advantage: The Case of Japan. // Journal of Political Economy, 2004, Vol. 112, No. 1, pp Brander, J. and Krugman, P., A reciprocal dumping model of international trade. Journal of international economics, 15(3-4), pp Clemens M.A., Williamson J.G. Wealth Bias in the First Global Capital Market Boom, Economic Journal, 2004, vol. 114, pp Indicative Learning Resources - to be filled either in the Course descriptor or in the Course Syllabus.

5 Course Instructor 337. Feenstra, R.C. and Hanson, G.H., Globalization, outsourcing, and wage inequality (No. w5424). National Bureau of Economic Research. Grossman, G.M. and Rossi-Hansberg, E., Trading tasks: A simple theory of offshoring. American Economic Review, 98(5), pp Jacks D.S., Christopher M.M., Novy D. Trade Costs, The American Eco-nomic Review, Vol. 98, No. 2, 2008, pp Kraemer, K.L., Linden G., Dedrik J. Capturing Value in Global Networks: Apple s ipad and iphone McLaren J. International Trade. 1st ed. Wiley, Redding S.J. and Turner M.A. Transportation costs and Spatial organization of Economic Activity. NBER Working Paper #20235, Rogoff K. The Purchasing Power Parity Puzzle. Journal of Economic Literature, Vol. 34, No , pp Rua G. Diffusion of Containerization. Finance and Economics Discussion Series. Federal Reserve Board, 2014, # Taylor A.M. A century of Purchasing-power parity. NBER WP 8012, Taylor A.M. and Taylor M.P. The Purchasing Power Parity Debate. Journal of Economic Perspectives, vol. 18 (Fall 2004), pp Trefler D. The Long and Short of the Canada-U.S. Free Trade Agreement, American Economic Review, vol. 94 (September 2004), pp Williamson J.G. The Evolution of Global Labour Markets since 1830: Background Evidence and Hypotheses. Explorations in Economic History, 1995, vol. 32, pp Williamson J.G. Globalization, Labour markets and Policy Backlash in the Past. Journal of Economic Perspectives, 1998, vol. 12, no 4, pp World Investment Report, UNCTAD, Geneva, 2015 Xing Y.(ed.) Uncovering value added in trade new approaches to analyzing global value chains.world Scientific, Olga Trofimenko Maria Pakhareva