GLOBE

Foreign Service Institute
International Trade Policy Course

http://internationalecon.com/MyCourses/FSI-TradePolicy.html

by Steven Suranovic ©2005

   
Professor: Steve Suranovic
Office Phone: (202) 994-7579
E-mail: smsuran@gwu.edu

Evaluation
3 Quizzes (20 min. each) 10% each
1 Final Exam 70%

 


  Course Outline
Session 1 Introduction to Course, Trade History, Trade Law, and the WTO
In the first session students are presented with an overview of the entire course. They learn some of the important results and the methods of analysis used. The trade policy tools section provides a way to begin discussion of some of ways in which governments regulate the flow of goods and services between countries. It is useful as a way to provide background information so students, who may not know too much about the issues of the course, can better relate the theory to the real world.

Readings:

Chapter 5 - Introductory Issues
Sections 5-1 to 5-5e
Chapter 10 - Trade Policy Tools
Sections 10-0 to 10-7
Chapter 20 - Trade History and Trade Law
Sections 20-0 to 20-4

Supplementary Readings:

Practice Problems:

Jeopardy Answers 5-1
Jeopardy Answers 10-1
Jeopardy Answers 20-1
Internet Questions 20-1
Internet Questions 20-4

Session 2 The Effects of Trade Policies: Tariffs
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:

Chapter 90 - Trade Policy Effects with Perfectly Competitive Markets
Read sections 90-0 to 90-10

Section 110-1 - Retaliation and Trade Wars


Supplementary Readings:

Practice Problems:

Jeopardy Answers 90-1
Problem Set 90-1
Problem Set 90-2
Problem Set 90-3

 

Session 3 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:

Chapter 90 - Trade Policy Effects
Read sections 90-12 to 90-27

Section 110-3a Countervailing Duties

Practice Problems:

Problem Set 90-4
Problem Set 90-4A
Problem Set 90-5
Problem Set 90-6

 

Session 4 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:

Chapter 95 - Domestic Policy Effects on International Trade
Read sections 95-0 to 95-3

Supplementary Readings:

Practice Problems:

Jeopardy Answers 95-1
Problem Set 95-1
Problem Set 95-2
Problem Set 95-3

 

Session 5 Market Imperfections and Distortions:
The Theory of the 2nd-Best - Unemployment, Infant Industries
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. The case of unemployment and the Infant Industry case are explored first.

Readings:

Chapter 100 - Trade Policies with Market Imperfections and Distortions
Read sections 100-0 to 100-4

Problems:

Jeopardy Answers 100-1
Problem Set 100-1

 

Session 6 The Theory of the 2nd-Best: Foreign Monopoly, Environment, Public Goods, Market Power
This session will continue with examples of the Second-Best theory by exploring cases of foreign monopolies, the interaction between trade and environmental issues, and issues related to public good provision and national market power.

Readings:

Chapter 100 - Trade Policies with Market Imperfections and Distortions
Read sections 100-5 to 100-8

Supplementary Readings:

Practice Problems:

Problem Set 100-2
Problem Set 100-3

 

Session 7 Free Trade Area Formation and Political Econhomy Issues
This session will discuss free trade area formation and introduce the concepts of trade creation and trade diversion. We will also discuss the interaction of economic issues with political decisionmaking especially in the formation of trade policy

Readings:

Chapter 110 - Special Topics
Read sections 110-2 and 110-2a

Chapter 105 - Political Economy and International Trade
Read sections 105-0 to 105-7

Supplementary Readings:

Session 8 Final Issues
This session will quickly wrap up loose ends by touching on some additional important issues in trade and by providing a brief overview of the course..

Readings:

Chapter 120 - Evaluating the Controversy Between Free trade and Protectionism
Read sections 120-1 to 120-6

Supplementary Readings:

Practice Problems:

Jeopardy Answers 120-1

 


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©1998-2005 Steven M. Suranovic, ALL RIGHTS RESERVED
Last Updated on 10/18/05