International Trade (Economics 371) Wesleyan University, Fall 2010 Professor: Bill Craighead E-mail: bcraighead@wesleyan.edu Office: PAC 330 Office hours: Monday, 3:30-5:00 pm; Tuesday 1:00-2:30 pm; and by appointment Class meets Monday and Wednesday, 11:00 am - 12:20 pm, in PAC 136 This course will examine the causes and consequences of the exchange of goods and services between countries. Several different theories of international trade will be studied, beginning with David Ricardo s insight about comparative advantage and continuing through recent developments such as Paul Krugman s monopolistic competition trade model. The course will also examine trade policy and the institutions of the world trading system. Several controversial issues related to international trade will be considered. Intermediate microeconomics is a prerequisite for this course. Familiarity with basic microeconomic concepts such as utility and profit maximization will be assumed. The lectures, problem sets and exams will make use of algebra and some calculus. Readings will be drawn from a variety of sources, including Robert C. Feenstra and Alan M. Taylor, International Trade (Worth Publishers, 2008) and Douglas A. Irwin, Free Trade Under Fire, 3 rd Edition (Princeton University Press, 2009). Other readings will be available through moodle or library reserve. Approximately 4-6 problem sets will be assigned during the course. Students may work together, but must turn in the assignments individually. Grades will be based on selected problems from each problem set. Late assignments will not be accepted and no extensions will be granted. Each student s lowest problem set grade will be dropped from the overall grade calculation. Students will also be required to write a paper, which will be a case study that describes and assesses an international trade agreement or dispute. Grades will be calculated as a weighted average, based on the problem sets (10%), two in-class midterm exams (20% each), the paper (20%) and a comprehensive final exam (30%). Midterm exams are tentatively scheduled for Monday, October 11 and Monday, November 15. In the event of a serious illness, family emergency or university-sponsored travel, students may ask, in advance, for permission to take exams early or to have weight added to the final exam grade in place of the midterm; no late exams will be given. In the event of a perceived mistake in grading, a written explanation should be attached to the exam and submitted within 5 business days after the exams are returned to the class. The final exam is scheduled for Friday, December 17 at 2 pm. The use of computers, mobile phones, etc. including for text messaging is not permitted in class. This syllabus and the course outline and reading list are subject to changes, which will be announced in class.
International Trade (Econ 371) Wesleyan University, Fall 2010 Professor: Bill Craighead Course Outline and Reading List FT refers to Robert C. Feenstra and Alan M. Taylor, International Trade (Worth Publishers, 2008) Irwin refers to Douglas A. Irwin, Free Trade Under Fire, 3 rd Edition (Princeton University Press, 2009) Readings Marked (o) are optional I. Introduction Mathematical Tools for Econ 371 P. Krugman, Growing World Trade: Causes and Consequences, Brookings Papers on Economic Activity, 1995 (p. 327-343) (o) Helpman, Elhanan, The Structure of Foreign Trade, Journal of Economic Perspectives, Spring 1999 II. III. Standard Trade Theory a. Classical Trade Theory FT, ch. 2 P. Samuelson, Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization, Journal of Economic Perspectives, Summer 2004 b. Neoclassical Trade Theory FT, ch. 4 D. Bernhofen and J. Brown, A Direct Test of the Theory of Comparative Advantage: The Case of Japan, Journal of Political Economy, February 2004 J. Bernstein and J. Bivens, The Pain of Globalization, The Guardian, Nov. 8, 2007 (o) H. Bowen, E. Leamer and L. Sveikauskas, Multicountry, Multifactor Tests of the Factor Abundance Theory, American Economic Review, December 1987 (o) D. Trefler, The Case of the Missing Trade and Other Mysteries, American Economic Review, December 1995 The Institutional Setting of World Trade a. GATT and the WTO FT, ch 8.1 Irwin, p. 219-244 P. Blustein, Misadventures of the Most Favored Nations, chs. 2 and 8. The Economist, The Doha Round and Round and Round, Jul. 31, 2008 K. Bradsher, After Carmakers Adapt, China Trade Dispute Ends, New York Times, Aug. 30, 2009 S. Chan, US and Brazil Reach Agreement on Cotton Dispute, New York Times, April 6, 2010 (o) The Economist, The Battle of Smoot-Hawley, Dec. 18, 2008 b. Preferential Trade Agreements FT, ch. 11.1
Irwin, p. 260-269 The Economist, Afta Doha, September 4, 2008 V. Fung, Bilateral Deals Destroy Global Trade, Financial Times, Nov. 4, 2005 J. Bhagwati and A. Panagariya, Bilateral Trade Treaties are a Sham, Financial Times, July 13, 2003 W. Eithier, The New Regionalism, Economic Journal, July 1998 J. B. DeLong, Afta Thoughts on NAFTA, Berkeley Review of Latin American Studies, Fall 2006 D. Rodrik, The Good and Bad Kind of External Discipline, Dani Rodrik s Weblog, Oct. 9, 2007 (o) R. Baldwin, Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade, The World Economy, November 2006 (o) Krueger, Anne O., Are Preferential Trading Arrangements Trade- Liberalizing or Protectionist? Journal of Economic Perspectives, Fall 1999 (o) M. Burfisher, S. Robinson and K. Thierfelder, The Impact of NAFTA on the United States, Journal of Economic Perspectives, Winter 2001 c. Antidumping, Countervailing Duties and Safeguards FT, ch. 9.4 Irwin, ch. 5 R. Feinberg and K. Reynolds, The Spread of Antidumping Regimes and the Role of Retaliation in Filings, Southern Economic Journal, April 2006 The Economist, Playing With Fire, Sept. 17, 2009 H. Meyerson, The Rubber Meets the Road for Obama, Washington Post, Sept. 2, 2009 J. B. DeLong, Barack Obama Does a Really Stupid Thing, Grasping Reality with Both Hands, Sept. 13, 2009 (o) N. G. Mankiw and P. Swagel, Antidumping: The Third Rail of Trade Policy, Foreign Affairs, Jul.-Aug. 2005 IV. Tariffs (and Quotas) FT, ch. 8, 9.3 V. New Trade Theory a. Increasing Returns and Monopolistic Competition FT, p. 185-209 P. Krugman, Increasing Returns, Monopolistic Competition and Trade, Journal of International Economics, November 1979 The Economist, Bold Strokes, October 16, 2008 D. Hummels and J. Levinsohn, Monopolistic Competition and International Trade: Reconsidering the Evidence, Quarterly Journal of Economics, August 1995 (o) P. Debaere, Monopolistic Competition and Trade, Revisited: Testing the Model Without Testing for Gravity, Journal of International Economics, May 2005 b. The Gravity Equation FT, p. 209-215 J. McCallum, National Borders Matter: Canada-US Regional Trade Patterns, American Economic Review, June 1995
A. Rose, Do We Really Know That the WTO Increases Trade? American Economic Review, March 2004 The Economist, Is There Any Point to the WTO? August 4, 2005 c. Intermediate Goods Trade FT, ch. 7.1 R. Feenstra, Integration of Trade and Disintegration of Production in the Global Economy, Journal of Economic Perspectives, Fall 1998 H. Varian, An ipod Has Global Value. Ask the (Many) Countries That Make It, New York Times, June 28, 2007 (o) R. Feenstra and G. Hanson, Globalization, Outsourcing, and Wage Inequality, American Economic Review, May 1996 (o) D. Hummels, J. Ishii and K. Yi, The Nature and Growth of Vertical Specialization in World Trade, Journal of International Economics, June 2001 VI. VII. VIII. Trade and Developing Countries FT, ch. 9.2 Irwin, ch. 6 (p. 176-204) D. Rodrik, The Global Governance of Trade as if Development Really Mattered, United Nations Development Programme, Oct. 2001 J. Fallows, How the World Works, Atlantic Monthly, December 1993 W. Easterly, Asian Success Mythology, Aid Watch, February 26, 2009 (o) A. Krueger, Trade Policy and Economic Development: How We Learn, American Economic Review, March, 1997 (o) S. Lehman and K. O Rourke, The Structure of Protection and Growth in the Late 19 th Century, NBER Working Paper 14493, November 2008 Trade and the Environment FT, ch. 11.3 Irwin, ch. 7 (p. 244-260) L. Wallach, and P. Woodall, The WTO s Environmental Impact: First Gattzilla Ate Flipper, ch. 1 of Whose Trade Organization (New Press, 2004) G. C. Hufbauer and J. Kim, Border Measures in US Climate Policy Options, Vox, Oct. 17 2008 (o) M. Weinstein and S. Charnovitz, The Greening of the WTO, Foreign Affairs, Nov.-Dec. 2001 (o) J. A. Frankel and A. K. Rose, Is Trade Good or Bad for the Environment? Sorting Out the Causality, Review of Economics and Statistics, February 2005 (o) D. Esty, Bridging the Trade-Environment Divide, Journal of Economic Perspectives, Summer 2001 Trade and Labor Standards FT, ch. 11.2 Irwin, ch. 6 (p. 204-218) P. Krugman, In Praise of Cheap Labor, Slate, Mar. 21, 1997 P. Krugman, Divided Over Trade, New York Times, May 14, 2007 D. Brown, Labor Standards: Where Do They Belong on the International Trade Agenda, Journal of Economic Perspectives, Summer 2001
IX. Intellectual Property J. Stiglitz, Patents, Profits and People, Ch. 6 of Making Globalization Work (Norton, 2006) J. Surowiecki, Exporting I.P. The New Yorker, May 14, 2007 L. MacFarquhar, Bag Man, The New Yorker, March 19, 2007 X. Outsourcing J. Bhagwati, A. Panagariya and T. Srinivasan, The Muddles Over Outsourcing, Journal of Economic Perspectives, Fall 2004 A. Blinder, Offshoring: The Next Industrial Revolution? Foreign Affairs, Mar.-Apr. 2006 D. Wessel and B. Davis, Pain From Free Trade Spurs Second Thoughts, Wall Street Journal, March 28, 2007 XI. XII. Trade in a Dynamic Setting C. Davidson and S. Matusz, Globalization and Labour-Market Adjustment: How Fast and at What Cost? Oxford Review of Economic Policy, 2000 Trade in Perspective B. Bernanke, Embracing the Challenge of Free Trade: Competing and Prospering in a Global Economy, Speech, May 1, 2007 J. Galbraith, Why Populists Need to Rethink Trade, The American Prospect, May 10, 2007 M. Kinsley, Free Trade Butters, Slate, Jan. 8, 2004 P. Krugman, What Do Undergrads Need To Know About Trade? American Economic Review, May 1993 D. Rodrik, The Cheerleaders Threat to Global Trade, Financial Times, Mar. 27, 2007 D. Rodrik, And Now on to Something Economists Can Really Discuss, Dani Rodrik s Weblog, May 4, 2007