The International Economics
Study Center


 

GWU Econ 283
Survey of International Economics
Course Syllabus - Spring 2008

This course will be an overview of international trade theory and policy. The purpose is to explain how economic theory and policy analysis can help us to understand the economic opportunities and challeges the world will face in the future. Students should have a working knowledge of basic algebra, graphical techniques and the basics of Micro and Macro economics.
 

Professor: Steve Suranovic

Time & Location:
        Jan 16 - April 23, 2008

        W 6:10 - 8:00 pm, Monroe B01

Office (for Office Hours only): GOV 323
Main Office: 1957 E St, Room 501M
Office Hours: Weds, 2 - 4:30 pm and by appt. in GOV 323
Office Phone: 994-7579
E-mail: smsuran@gwu.edu

Evaluation
6 Quizzes (20 minutes)
10% each
1 Final Exam
40%

 

Exam Schedule
Quiz #1
Jan 30
Quiz #2
Feb 13
  Quiz #3
Feb 27
  Quiz #4
Mar 12
  Quiz #5
Apr 2
  Quiz #6
Apr 16
Final Exam
May 7 ?

Note: Makeup quizzes or exams will be considered only for emergencies or conflicts outside the student's control and only with prior instructor approval.

  Course Outline
Jan 16 Introduction to International Economics, Trade History, Trade Law and the WTO
In the first session we explore the topics and issues of international trade. We will review highlights from history, describe notable current trade laws, and introduce the WTO.

Readings:

Chapter 5 - Introductory Issues
Sections 5-1 to 5-5F
(Note: There is no need to follow the links in this chapter)

Chapter 10 - Trade Policy Tools
Sections 10-0 to 10-7

Chapter 20 - Trade History and Trade Law
Sections 20-0 to 20-4

The WTO Agreements
A description of some of the details behind WTO rules on antidumping measures, subsidies and countervailing measures and safeguards.

How the WTO Works

 

In the News:

 

Supplementary Readings:

Think Again: International Trade
Article by Arvind Panagariya that highlights some important regularities about international trade.

Trade Policy Review: US (2006)
This is an overview of US trade policies conducted by the WTO.

US Tariff Schedule
Click here to find the most recent tariff schedule for all goods in the US. CLICK on these links for the tariffs schedules for vegetables and watches.

Understanding US Antidumping & Countervailing Duty Investigations - Summary of Antidumping and Countervailing Duty Procedures from the US Intl. Trade Commission website.

Practice Problems:

Jan 23 The Ricardian Theory of Comparative Advantage
This session presents the first formal model of international trade. The chapter emphasizes the importance of the assumptions in generating the model results. Students learn some of the surprising outcomes of the Ricardian model, such as, that less productive nations may nonetheless benefit from free trade with its more productive neighbors.

Readings:

 

In the News:

Davos 2008: On the cusp of economic history, International Herald Tribune , Jan 2008

Free trade: dangerous policy for this world, Daytona Beach News, Jan 2008

The new world order in services: Sify Business, India, Jan 2008

 

Practice Problems:

Jan 30 &

Feb 6

More Ricardo, Pure Exchange and Immobile Factors
The welfare effects in the Ricardian model are worked out by emphasizing changes in the real wages of workers. This allows us to focus on individuals rather than the effect of trade on the nation. (as is done with the national indifference curve diagram). The pure exchange model introduces the notion that trade can redistribute income. The immobile factor model introduces a realistic issue (factor immobility) into the Ricadian model and provides a reason for the redistribution of income. The model also demonstrates how small assumption changes can lead to important changes in the outcomes.

 

Readings:

Chapter 40 - The Ricardian Model of Comparative Advantage
Read sections 40-6 to 40-9

Chapter 30 - A Pure Exchange Model of Trade
Read sections 30-1 to 30-5

Chapter 70 - Factor Mobility and Trade
Read sections 70-0 to 70-19

Schumpeter's Creative Destruction
This is an except from Capitalism, Socialism and Democracy (1942) describing the process of creative destruction

Economic Turbulence

More on Economic Churning

When Labor Loses Out to Trade
by Gustav Ranis and David Corderi, YaleGlobal, 10 August 2006

 

Supplementary Readings:

Information about US Trade Adjustment Assistance
a brief description of TAA provided by the Office of the White House

 

Practice Problems:

Feb 13 The Heckscher-Ohlin Model: Rybczynski, Stolper-Samuelson
The factor proportions (or H-O) model is the second major trade model presented formally. This session presents the key assumptions of the model then builds the key relationships between endowments and outputs in the Rybczynski theorem and the relationship between output prices and factor prices in the Stolper-Samuelson theorem. Both of these relationships are extended to the more general versions of the theorems, the magnification effects.

 

Readings:

Practice Problems:

Feb 20 More H-O Model
The session presents the H-O theorem which predicts the pattern of trade, notes the redistributive welfare effects of trade because of the changes in factor prices, discusses the factor-price equalization theorem and notes the importance of the compensation principle.

Readings:

Supplementary Readings:

The Leontief Paradox
Kwan Choi's comprehensive discussion of the famous trade paradox.

Practice Problems:

Feb 27 Economies of Scale
In this session we'll introduce economies of scale as a basis for international trade.

Readings:

Practice Problems:

Mar 5

The Effects of Trade Policies: Tariffs, Quotas and Retaliation

This session first shows a represention of a free trade equilibrium in a partial equilibrium model. This model is then used to demonstrate the price effects of a tariff in large and small country cases. After explaining the concepts of consumer and producer surplus, the welfare effects of a tariff are presented. Finally a tariff setting game between governments is used to identify the motivation for trade wars.

Readings:

 

Practice Problems:

Mar 12 & 26

More about Trade Policies: Quotas, VERs, Subsidies, etc.

Trade policy analysis is continued with a look at import quotas, VERs, export taxes and export subsidies. The similarities between the policies is noted. Although the small country welfare effects of each policy are not yet included in the notes, students should be able to apply the principles learned to evaluate those situations. The effects of retaliation to an export subsidy with a countervailing duty is also presented.

Readings:

 

Practice Problems:

Apr 2

Domestic Policies and International Trade

Concerns about domestic policy effects on international trade flows have become increasingly widespread. This session will emphasize three key ideas. The first is that domestic government policies, such as production subsidies or consumption taxes, can actually be a cause of international trade. The second is to show the welfare effects of domestic policies when a country is open to internationale trade. The third is to show that combinations of domestic policies can duplicate the effects of trade policies.

Readings:

Supplementary Readings:

Domestic Support Policies
A briefing paper by the Economic Research Service at the US Dept. of Agriculture

Practice Problems

Apr 9 & 16

Trade Policy Choice Under Domestic Distortions: The Theory of the 2nd-Best

This is perhaps the most important session in a trade course. It will first identify a series of market imperfections and distortions and point out how these are likely to be prevalent in the real world. Next it shows that in the presence of a market imprefection, carefully selected trade policies can often be used to raise the natioanl welfare of a country. Third it is shown that carefully selected domestic policies are often superior to trade policies as a way of promoting the national welfare of a country.

Readings:

 

Supplementary Readings:

Trade and the Environment in the WTO
This press brief provides an overview of the work by the WTO Committee on Trade and the Environment

 

Practice Problems:

Apr 23 Evaluating the Controversy over Free Trade
In this session we'll review the course findings by focusing on what trade theory teaches us about the controversy over free trade.

Readings:

Practice Problems:

 

 

 

 

Final Exam: Wednesday May 7 ??


Last Updated on 2/6/08