Spring 2008
Kim Clausing
clausing@reed.edu
Vollum 230, x7388
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.
This framework will serve as a context for a discussion of several important contemporary issues, including the following questions.
Readings The text is Feenstra and Taylor, International Trade. 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 Mondays from 10 am until noon, and on Wednesdays from 1 to 2 pm. You can also reach me by phone or 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: Conferences: Final exam: |
February 21, March 6, April 10 (ideally, first 2 should be one class day later but still due on Ths??) March 13, April 29, May 1 to be announced |
The objective of the problem sets is to help solidify your understanding of the analytical tools and models used in international trade. There will also be “mini-essay” questions in the problem sets that allow you synthesize the course material, developing an understanding of the theoretical and empirical issues surrounding important topics. 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.
Introduction (January 29)
Patterns of Trade and Globalization (January 31)
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.
* And, if feeling ambitious, check out his website: http://faculty.haas.berkeley.edu/arose/ as well as the comment on this paper by Tomz, Goldstein, and Rivers in the December 2007 American Economic Review, and the reply by Rose, same issue.
* Head, Keith. “Gravity for Beginners.” 2003. http://strategy.sauder.ubc.ca/head//gravity.pdf
* Irwin, Douglas. “The United States in a New Global Economy?” in Free Trade Under Fire. 2002. 5-20.
The Gains from Trade and Ricardian Models of Trade (February 5 and 7)
Feenstra and Taylor, c.2
Krugman, Paul. “Ricardo’s Difficult Idea: Why Intellectuals Don’t Understand Comparative Advantage.” http://www.pkarchive.org/trade/ricardo.html
Specific Factors Model and Distribution (February 12 and 14)
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 19, 21, and 26)
Feenstra and Taylor, c.4
O’Rourke, Kevin and Richard Sinnott. 2002. “The Determinants of Individual Trade Policy Preferences: International Survey Evidence.” Brookings Trade Review 2001. 157-86.
Trade and Income Distribution (February 28)
Dollar, David, and Aart Kraay. “Trade, Growth, and Poverty.” Economic Journal. February 2004. 22-49.
Leamer, Edward. “Foreigners and Robots: Assistants to Some, Competitors to Others.” in Deardorff and Stern, eds. Social Dimensions of U.S. Trade Policies. 2000. 19-52.
Instruments of Trade Policy (March 4 and 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.
* Bhagwati, Jagdish. "The Generalized Theory of Distortions and Welfare." in Bhagwati, Jagdish, ed. International Trade: Selected Readings. 265-286.
* Gresser, Edward. “Toughest on the Poor: America’s Flawed Tariff System.” Foreign Affairs. 81(6). November/December 2002. 9-14.
Factor Mobility
Immigration (March 11)
Feenstra and Taylor, c.5, pp 141-161, 169-177
Freeman, Richard B. 2006. “People Flows in Globalization.” Journal of Economic Perspectives. Spring. 145-170.
Conference 1: U.S. Immigration Policy (March 13)
Hanson, Gordon. 2005. “Challenges for U.S. Immigration Policy.” in Bergsten, C. Fred ed. The United States and the World Economy. Washington: Institute for International Economics. 343-72.
* Council of Economic Advisors, “Immigration,” Chapter 4, Economic Report of the President. 2005, pp. 93-116; http://www.gpoaccess.gov/eop/
* Borjas, Heaven's Door: Immigration Policy and the American Economy. 1999. Chapters 1 and 5; pp. 3-18, 87-104.
SPRING BREAK: March 18 and 20
Capital Mobility, Competitiveness, and the Trade Deficit (March 25)
Mann, Catherine. 2002. “Perspectives on the U.S. Current Account Deficit and Sustainability.” Journal of Economic Perspectives. 16(3). Summer. 131-52.
Quiggin, John. 2004. “The Unsustainability of U.S. Trade Deficits.” The Economists’ Voice. 1(3). 1-10.
* Backus, D. et al. 2006. “Current Account Fact and Fiction.” Working Paper. May.
Increasing Returns and Imperfect Competition (March 27 and April 1)
Feenstra and Taylor, c.6
Administered Protection (April 3)
Irwin, Douglas. “Relief from Foreign Competition: Antidumping and the Escape Clause.” in Free Trade Under Fire. 2002. 111-137.
Mastel, Greg. Antidumping Laws and the U.S. Economy. 1998. c.1 and c.7.
* Mankiw, N. Gregory. and Phillip L. Swagel. “Antidumping: The Third Rail of Trade Policy.” Foreign Affairs, WTO Special Edition. 84(7). December 2005. http://www.foreignaffairs.org/2005/7.html
Multinational Corporations (April 8)
Feenstra and Taylor, c.5, pp 161-169, 177-180
Desai, Foley, and Hines. “Foreign Direct Investment and the Domestic Capital Stock.” American Economic Review. 95(2). May 2005. 33-8.
Clausing, Kimberly. 2006. “International Tax Avoidance and U.S. International Trade.” National Tax Journal. 269-87. http://ntj.tax.org/
* Clausing, Kimberly. "Does Multinational Activity Displace Trade?" Economic Inquiry, 38(2), April 2000, p.190-205.
Outsourcing and Offshoring (April 10)
Feenstra and Taylor, c.7
Mann, Catherine. “Offshore Outsourcing and the Globalization of U.S. Services: Why Now, How Important, and What Policy Implications.” in Bergsten, C. Fred ed. The United States and the World Economy. Washington: Institute for International Economics. 2005. 281-311.
* Clausing, Kimberly. “The Role of U.S. Tax Policy in Offshoring.” in S. Lael Brainard and Susan Collins, eds. Brookings Trade Forum 2005. Washington: Brookings.
* 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 and 17)
Feenstra and Taylor, c.9 and 10
Krugman, Paul. "Is Free Trade Passe?" Journal of Economic Perspectives. Fall 1987. 131-44.
Harvard Business School Case. “Bombardier: Canada versus Brazil at the WTO.” February 2003.
* 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 22)
World Development Report 2007 or 2008. Browse statistics in back. (These recent volumes are found in the library reference section.)
Frankel, Jeffrey and David Romer. 1999. “Does Trade Cause Growth?” American Economic Review. 89 (3). 379-99.
International Trade Agreements (April 24)
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.
* Frankel, Jeffrey A. Regional Trading Blocs In The World Economic System. 1997. c.1.
* Jackson, John. The World Trading System. c. 1-2.
Conference 2: Is free trade consistent with environmental protection? (April 29)
Esty, Daniel. “Bridging the Trade-Environment Divide.” Journal of Economic Perspectives. 15 (3). Summer 2001. 113-130.
* Bhagwati, Jagdish. “Trade and the Environment: Does Environmental Diversity Detract from the Case for Free Trade?” In Bhagwati and Hudec, eds., Fair Trade and Harmonization. 1997. 159-99.
* Daly, Herman. "Problems with Free Trade: Neoclassical and Steady State Perspectives", in Zaelke, ed. Trade and the Environment: Law, Economics, and Policy. 1993, 147-157.
* Weinstein, Michael M. and Steve Charnovitz. “The Greening of the WTO.” Foreign Affairs. 80 (6). November/December 2001. 147-56.
* Copeland , Brian R. and M. Scott Taylor. “Trade, Growth and the Environment.” Journal of Economic Literature. March 2004. 7-71.
* Dasgupta, Susmita et al. 2002. “Confronting the Environmental Kuznets Curve.” Journal of Economic Perspectives. 16(1). Winter. 147-68.
* Frankel, Jeffrey A. “ The Environment and Economic Globalization.” in Weinstein, Michael M., ed. Globalization: What’s New? 2005. 129-69.
Conference 3: NAFTAAfter 14 Years: What is the Verdict? (May 1)
Hufbauer, Gary Clyde. NAFTA Revisited: Achievements and Challenges. Washington: Institute for International Economics. 2005. c.1.
* Pastor, Robert. Toward a North American Community: Lessons from the Old World for the New. 2001.
* Krugman, Paul. "The Uncomfortable Truth about NAFTA." in Krugman, Paul. Pop Internationalism. 1996. 155-165.