The International Economics
Study Center


 

Econ 6283
International Trade Theory and Policy
Course Syllabus

Fall 2019 (Last Update: Nov 5)

COURSE DESCRIPTION: This course is 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 will learn the reasons why countries trade and the effects of trade. They will also learn the effects of a variety of trade policies. Students will learn how economic models are constructed and applied to answer these questions.

PREREQUISITES: Students should have a working knowledge of basic algebra, graphical techniques and an introductory Microeconomics course.

LEARNING OUTCOMES:

  1. to understand the current controversies relating to trade policies, laws and institutions.
  2. to be able to explain the distinction between comparative and absolute advantage.
  3. to understand the multiple motivations for international trade
  4. to understand the price and welfare effects of trade
  5. to understand the effects of tariffs, import quotas, and export subsidies
  6. to understand the effects of domestic policies on trade
  7. to be able to give several examples of the theory of the second best.
  8. to be able to provide arguments both supporting and opposing free trade.

 

ACADEMIC INTEGRITY: You are bound by the GW Code of Academic Integrity which states: “Academic dishonesty is defined as cheating of any kind, including misrepresenting one's own work, taking credit for the work of others without crediting them and without appropriate authorization, and the fabrication of information.” For the remainder of the code, see: https://studentconduct.gwu.edu/code-academic-integrity

SUPPORT FOR STUDENTS OUTSIDE THE CLASSROOM

DISABILITY SUPPORT SERVICES (DSS): Any student who may need an accommodation based on the potential impact of a disability should contact the Disability Support Services office at 202-994-8250 in the Marvin Center, Suite 242, to establish eligibility and to coordinate reasonable accommodations. For additional information please refer to: https://disabilitysupport.gwu.edu/

UNIVERSITY COUNSELING CENTER (UCC): 202-994-5300, The University Counseling Center (UCC) offers 24/7 assistance and referral to address students' personal, social, career, and study skills problems. Services for students include: crisis and emergency mental health consultations and confidential assessment, counseling services (individual and small group), and referrals http://gwired.gwu.edu/counsel/CounselingServices/AcademicSupportServices

Professor: Steve Suranovic
Meeting Time: Aug 28 - Dec 4 2019
                         Wednesdays, 5:10-7pm : 1957 E St Room 112
Office: 1957 E St. N.W., Room 502B
                        Mondays 3-4:45pm; Wednesdays afternoon by appt.; Other times by appt.
E-mail: smsuran@gwu.edu

Readings

TEXTBOOK: This course will use my International Economics text (customized version) available in several distinct formats from Flat World Knowledge. For access click here: https://students.flatworldknowledge.com/course/2589083>. 

You will be given several purchase options including, Online Access for $29.95, which will give you access to an online reader, or the Online Access + Ebook Downloads for $49.95, which gives you a PDF version for your computer or a version for eReaders, Tablets or Smartphones. For $54.95 you may order a color textbook with online access.

Practice Problems

To prepare for the quizzes and exams it is advised that you work through the practice problems located at the end of each assigned reading section. An answer key will be provided.

Evaluation

6 Quizzes (20 min. each)
5 Quizzes Count (Drop the Lowest score)

10% each
1 Final Exam 50%

 

Exam Schedule

Quiz #1 Sept 11
Quiz #2 Sept 25
Quiz #3 Oct 9
Quiz #4 Oct 23
Quiz #5 Nov 6
Quiz #6 Nov 20
Final Exam Dec 11

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

  Course Outline
AUG 28 & SEPT 4 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 1 - Introductory Trade Issues: History, Institutions, and Legal Framework

Lecture PPT

What Next for the US-China Trade War?
(Aug 2019) This video has the latest news about the escalation in US tariffs against China.

US-China Trade War: The Guns of August
(Aug 2019) This article highlights the increase in US tariffs against China.

The following podcasts discuss the rationale behind trade agreements.

What Are Trade Deals For? Part 1

What Are Trade Deals For? Part 2

What Are Trade Deals For? Part 3

 

Supplementary Readings:

Trade Talks Episode 42: Trump and Tariff Tweets: It's More Complicated Than That
This is a podcast that discusses the difficulty of comparing average tariff rates between countries to decide who is more protectionist.

Trade Policy Review: US (2017)
This is a review of US trade policies conducted by the WTO.

Trade Policy Review: China (2016)
This is a review of China's trade policies conducted by the WTO.

US Tariff Profile
This is a WTO summary of tariffs in the US.

Brazil Tariff Profile
This is a WTO summary of tariffs in Brazil.

China Tariff Profile
This is a WTO summary of tariffs in China.

India Tariff Profile
This is a WTO summary of tariffs in India.

Kenya Tariff Profile
This is a WTO summary of tariffs in Kenya.

 

SEPT 11 The Pure Exchange Model and Market Ethics
This session presents the simplest model of trade between two individuals. The chapter emphasizes the importance of the assumptions in generating the model results. Students learn how trade creates surplus value and how it is distributed.

Readings:

 

 

SEPT 18 Production, Trade and Comparative Advantage
This session presents the first formal model of production and trade, introducing the principle of comparative advantage.

Readings:

 

 

SEPT 25 The Ricardian Theory of Comparative Advantage
This session introduces the Ricardian model of international trade between countries and illustrates the effects of trade on national welfare and real wages. Students learn some of the surprising outcomes, such as, that less productive nations may nonetheless benefit from free trade with its more productive neighbors.

Readings:

 

 

OCT 2

Immobile Factors and Intro to the Heckscher-Ohlin Model
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 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:

OCT 9 More Heckscher-Ohlin Model
This class develops the H-O theorem predicting the pattern of trade between countries and the redistributive effects on income due to trade. It also introduces the factor-price equalization theorem and discusses the issue of factor mobility across countries.

 

Readings:

OCT 16 Specific Factors and Economies of Scale
This class considers the specific factor model and several economies of scale models including monopolistic competition.

 

Readings:

Chapter 8 - The Heckscher-Ohlin (Factor-Proportions) Model
Read sections 13 - 17

Chapter 9 - Economies of Scale and International Trade
Read sections 1 - 7

Chapter 13 - Political Economy and International Trade
Read 13-1, 13-2, and 13-7

The rise of China and the future of US manufacturing
(Jan 2018) This article discusses the effects of the China Shock on US manufacturing jobs.

Reconsidering the ‘China shock’ in trade
(Jan 2018) This article offers a more complete analysis of the job effects in the US due to the China Shock.

OCT 23

The Effects of Trade Policies: Tariffs and Retaliation

This session first shows a representation 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:

 


OCT 30

The Effects of Trade Policies: Quotas, Export Taxes, and Subsidies 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:

 


NOV 6

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 international 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

 

NOV 13

 

Trade Policy Choice with Market Imperfections - The Theory of the 2nd-Best - Part 1

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 imperfection, carefully selected trade policies can often be used to raise the national 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

 

 

NOV 20

 

Trade Policy Choice with Market Imperfections - The Theory of the 2nd-Best - Part 2

More Examples of the Theory of the Second-Best.

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

 

 

 

NOV 27

 

 

Thanksgiving Break: No Class

DEC 4

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:

Chapter 14 - Evaluating the Controversy Between Free trade and Protectionism
Read sections 1 - 6

The Truth about Trade
(June 2016) This article discusses the mistakes politicians often make understanding trade issues.

The Real Problem with Free Trade
A Project Syndicate opinion article by Jayati Ghosh highlighting some of the current perceptions about free trade.

 

 

Wed DEC 11

 

TENTATIVE FINAL EXAM - 5:20 - 7:20pm