Economics 383: International Trade Kimberly Clausing Spring 2014 clausing@reed.edu Vollum 230 Recent growth in economic integration has brought international trade issues to the forefront of both economics and society. This course will analyze the causes and consequences of international trade. The theory of international trade and the effects of trade policy tools will be developed in both perfect and imperfect competition, with reference to the empirical evidence. This will allow us to address many essential questions. Why do countries trade? Are countries better off because they trade? Are both trading partners better off? Who gains and who loses within a country? In what ways do countries intervene in trade? What are the effects of these actions? What if markets don't work perfectly? How does that affect our assessments? This framework will serve as a context for a discussion of several important contemporary issues, including the following questions. What is the impact of trade on income inequality? What is the relationship between trade and the environment? Is there a role for strategic trade policy? How does trade affect the economies of developing countries? What are the effects of free trade agreements such as NAFTA? Readings The text is Feenstra and Taylor, International Trade, 2 nd edition. You should purchase this at the bookstore. Substantial material will come from other sources, on e-reserve. Office Hours: I will hold regular office hours on Tuesdays from 9-10 am, and on Wednesdays from 10am-noon. You can also reach me by email to schedule other times. Requirements: Evaluation will be based on the following as well as class participation. Please mark your calendar with the following dates. Problem Sets Due: February 13, February 27, April 10 Exam: March 6 Conferences: April 3, 17, and 29 (one as presenter, two as participant) Final Exam: Monday, May 12, 1-4pm In fairness to other students, late assignments will be penalized at a rate of 5% per class day. Exceptions may be made in the event of unforeseen circumstances; these should be discussed with me at the earliest possible time.
Readings are marked with an * are optional. Course Outline and Readings The Patterns of Trade and Globalization (January 28 and 30) Feenstra and Taylor, c.1 Rose, Andrew K. Do We Really Know that the WTO Increases Trade? American Economic Review. 94(1). March 2004. 98-114. Acemoglu, Daron and Pierre Yared. Political Limits to Globalization. American Economic Review. May 2010. 83-88. * Tomz, Goldstein, and Rivers. Comment on Rose. American Economic Review, December 2007. Reply by Rose, same issue. The Gains from Trade and Ricardian Models of Trade (February 4 and 6) Feenstra and Taylor, c.2 Krugman, Paul. Ricardo s Difficult Idea: Why Intellectuals Don t Understand Comparative Advantage. http://web.mit.edu/krugman/www/ricardo.htm Li, Hongbin, Lei Li, Binzhen Wu, and Yanyan Xiong. The End of Cheap Chinese Labor. Journal of Economic Perspectives. 26(4). Fall 2012. 57-74. * Costinot, Arnaud, and Dave Donaldson. Ricardo s Theory of Comparative Advantage: Old Idea, New Evidence. American Economic Review. May 2012. 453-458. Specific Factors Model and Distribution (February 11 and 13) Feenstra and Taylor, c.3 Baicker and Rehavi. 2004. Policy Watch: Trade Adjustment Assistance. Journal of Economic Perspectives. 18(2). Spring. 239-55. The Heckscher-Ohlin Model and Distribution (February 18, 20, and 25) Feenstra and Taylor, c.4 Hanson, Gordon H. The Rise of Middle Kingdoms: Emerging Economies in Global Trade. Journal of Economic Perspectives. Spring 2012. 41-64.
* O Rourke, Kevin and Richard Sinnott. 2002. The Determinants of Individual Trade Policy Preferences: International Survey Evidence. Brookings Trade Review 2001. 157-86. * Pew Global Attitudes Project. World Welcomes Global Trade But Not Immigration. October 2007. 13-33. http://pewglobal.org/reports/pdf/258.pdf Trade and Income Distribution (February 27) Goldberg, P.K. and N. Pavcnik. Distributional Effects of Globalization in Developing Countries. Journal of Economic Literature. March 2007. 39-82. Haskel, Lawrence, Leamer, and Slaughter. Globalization and U.S. Wages: Modifying Classic Theory to Explain Recent Facts. Journal of Economic Perspectives. Spring 2012. 119-140. * Krugman, Paul R. Trade and Wages, Reconsidered. Brookings Papers on Economic Activity. Spring 2008. 103-137. * Irwin, Douglas. Trade, Jobs, and Income Distribution. in Free Trade Under Fire. 2009. 105-145. * Dollar, David, and Aart Kraay. Trade, Growth, and Poverty. Economic Journal. February 2004. 22-49. Instruments of Trade Policy (March 4 and 11) Midterm Exam: March 6 Feenstra and Taylor, c.8 Romer, Paul. New Goods, Old Theory, and the Welfare Costs of Trade Restrictions. Journal of Development Economics. 43. 1994. 5-38. * Irwin, Douglas. Protectionism: Economic Costs, Political Benefits? in Free Trade Under Fire. 2009. 70-104. * Bhagwati, Jagdish. "The Generalized Theory of Distortions and Welfare." in Bhagwati, Jagdish, ed. International Trade: Selected Readings. 265-286. Increasing Returns and Imperfect Competition (March 13 and 25) Feenstra and Taylor, c.6 Melitz, Marc J. and Daniel Trefler. Gains from Trade when Firms Matter. Journal of Economic Perspectives. 26(2). Spring 2012. 91-118.
Spring Break: March 18 and 20 Factor Mobility Immigration (March 27) Feenstra and Taylor, c.5, pp 127-146, 153-160 Clemens, Michael A. Economics and Emigration: Trillion Dollar Bills on the Sidewalk? Journal of Economic Perspectives. 25(3). 2011. 83-106. * Freeman, Richard B. 2006. People Flows in Globalization. Journal of Economic Perspectives. Spring. 145-170. * Gibson, John and David McKenzie. Eight Questions About Brain Drain. Journal of Economic Perspectives. 25(3). 2011. 107-28. * Clemens, Michael. Why do Programmers Earn more in Houston than Hyderabad? American Economic Review. May 2013. 198-202. Capital Mobility, Competitiveness, and the Trade Imbalances (April 1) Yang, Dennis Tao. Aggregate Savings and External Imbalances in China. Journal of Economic Perspectives. 26(4). Fall 2012. 125-146. * Cooper, Richard N. 2008. Global Imbalances: Globalization, Demography, and Sustainability. Journal of Economic Perspectives. 22(3). Summer. 93-112. * Feldstein, Martin. 2008. Resolving the Global Imbalance: The Dollar and the U.S. Savings Rate. Journal of Economic Perspectives. 22(3). Summer. 113-125. Conference 1: U.S. Immigration Policy (April 3) Council of Economic Advisors, Immigration, within Chapter 4, Economic Report of the President. 2013, pp. 148-159; http://www.gpoaccess.gov/eop/ Card, David. Immigration and Income Inequality. American Economic Review. 2009. 99(2). 1-21. * See four short articles on U.S. Immigration Issues in American Economic Review. 2009. 99(2). 22-44. * Borjas, The Economic Consequences of Immigration. 2013. Powerpoint.
http://www.sociology.uci.edu/files/economicsandpublicpolicy/docs/2013/borjas.pdf * Kapur, Devesh and John McHale. What is Wrong with Plan B? International Migration as an Alternative to Development Assistance. In Susan Collins and Carol Graham, eds. Brookings Trade Forum 2006. 137-72. Applications of Imperfect Competition Multinational Corporations and Offshoring (April 8 and 10) Feenstra and Taylor, c.5, pp 146-153, 160-161 and c.7 Blinder, Alan S. Offshoring: Big Deal, or Business as Usual? in Offshoring of American Jobs. 2009. 19-59. * Clausing, Kimberly. 2006. International Tax Avoidance and U.S. International Trade. National Tax Journal. 269-87. http://ntj.tax.org/ * Desai, Foley, and Hines. Domestic Effects of the Foreign Activities of US Multinationals. American Economic Journal: Economic Policy. February 2009. 1(1). 181-203. * Feenstra, Robert C. Integration of Trade and Disintegration of Production in the Global Economy. Journal of Economic Perspectives. Fall 1998. 31-50. Trade Policy Under Imperfect Competition (April 15) Feenstra and Taylor, c.9 and 10 Krugman, Paul. "Is Free Trade Passe?" Journal of Economic Perspectives. Fall 1987. 131-44. Irwin, Douglas. Relief from Foreign Competition: Antidumping and the Escape Clause. in Free Trade Under Fire. 2009. 146-175. Conference 2: Strategic Trade Policy (April 17) Harvard Business School Case. Bombardier: Canada versus Brazil at the WTO. February 2003. Krugman, Paul. A Country is Not A Company. Harvard Business Review Classics. 2009. * Krueger, Anne. "The Political Economy of Rent Seeking Society." in Bhagwati, Jagdish, ed. International Trade: Selected Readings. 291-309.
Trade Policy in Developing Countries (April 24) World Development Report Indicators Online. Browse statistics. http://databank.worldbank.org/data/home.aspx Frankel, Jeffrey and David Romer. 1999. Does Trade Cause Growth? American Economic Review. 89 (3). 379-99. Rodrik, Dani. Making Room for China in the World Economy. American Economic Review. May 2010. 89-93. * Romer, Paul M. What Parts of Globalization Matter for Catch-Up Growth? American Economic Review. May 2010. 94-98. Conference 3: Is free trade consistent with Environmental Protection? (April 29) Trade and Climate Change. United Nations Environment Programme and the World Trade Organization. 2009. Executive Summary. vii xxii. http://www.wto.org/english/res_e/booksp_e/trade_climate_change_e.pdf Ederingon, Josh. Should Trade Agreements Include Environmental Policy? Review of Environmental Economics and Policy. 4(1). Winter 2010. 84-102. * Esty, Daniel. Bridging the Trade-Environment Divide. Journal of Economic Perspectives. 15 (3). Summer 2001. 113-130. * Frankel, Jeffrey A. The Environment and Economic Globalization. in Weinstein, Michael M., ed. Globalization: What s New? 2005. 129-69. * Copeland, Brian R. and M. Scott Taylor. Trade, Growth and the Environment. Journal of Economic Literature. March 2004. 7-71. International Trade Agreements (May 1) Feenstra and Taylor, c.11 Krueger, Anne. Are Preferential Trading Arrangements Trade-Liberalizing or Protectionist? Journal of Economic Perspectives. Fall 1999. 13(4). 105-24. * Irwin, Douglas. The World Trading System. in Free Trade Under Fire. 2009. 219-269.