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Econ 4970 Understanding Trade Policy

Understanding Trade Policy

Professor:  Douglas Nelson
Office: Tilton 108 (Murphy Institute), Phone: 865-5317
Office Hours: Tuesday and Thursday, 3:30-5:30
Phone: 865-5317
email: dnelson@tulane.edu
 
 
These days, it can seem as if the four horsemen of the apocalypse have been loosed on the earth: war (in Europe and potentially in Asia, with nuclear powers); famine (environmental collapse); plague (pandemic disease); and death.  All have been associated with international trade.  In this course we seek to understand just those associations and the national and international attempts to respond to them.  In the first part of the course, we develop a simple, robust model of the national economy that will provide a framework of the rest of the course.  We will then open that economy to international trade and develop a framework for the analysis of policy.  After a brief review of the core national and international institutions involved in the management of trade, the remainder of the course will focus on the way national security and environmental concerns affect and are affected by international trade.
 
Prerequisites: This is a 4000-level economics course, so I expect that you have had at least intermediate microeconomics.  In the first half of the course, we will be using geometry extensively and a bit of high school algebra.  The geometry we will use is not fancy, but the geometric argument can be a bit involved.  In lecture, I will also occasionally use a bit of basic, differential calculus.  I will not expect you to use calculus on exams, but I will expect you to try to follow the material.  Thus, I expect a bit of sophistication in your evaluation of such argument.  The payoff from this effort is that you will develop a very powerful framework for evaluating policy (in particular, in this course, trade policy as it relates to national security and environmental policy)
 
Evaluation: Your performance in this course will be evaluated on the basis of 5 homework assignments (worth 20 points), 2 examinations (worth 100 points each); and 2 short papers (worth 50 points each). To receive an A, you must earn at least 90 percent of the points available.  To pass the course you must earn at least 60 percent of the points available.  Grades between these limits will be determined on the basis of your performance relative to that of the class as a whole.
 
Readings for the course will be drawn from:
  • A (large) number of articles online and on Canvas.
Homework.  The syllabus that follows this course description lists the reading that you are expected to have done for the lecture on the listed date.  Homework assignments will be distributed in class the week before it is due. Homework is due on or before the first class in which that material is discussed. Late homework will not be accepted, and will receive a score of 0.  The percent of total available homework credit will be taken as your homework score.  For example, if you answer 90% of the homework questions correctly, your homework score is 90.
 
Examination format.  Both exams will have the following format: about 40% short answer questions and about 60% essays.  In general there will be more questions of both types than must be answered, so you will have some choice (though there is often one mandatory question which everyone must answer).  Exams must be written in blue books, which you must supply.
 
Policy on examinations.  The midterm exam will be given on 1 October (in class). Unless you have a standard university accepted excuse for missing the exam (e.g. health with standard university form), you must take the exam at its scheduled time. The final examination will only be given on the scheduled date:13 December, 8:00-11:00 am (there will be no exceptions so do not make travel plans that conflict with this).
 
Additional Exam and Homework Information: Exams will be returned in class, homework must be picked up at my office.  Exam answer keys will be available from my webpage. 
 
Short papers. There will be two short papers, one due in each of the substantive (i.e. environment and national security) parts of the course. The papers should be 5-7 pages long and should discuss the relevant reading for that section and evaluate some central aspect of its discussion.  Note: “evaluate” means that you must identify some central aspect of the books analysis, explain why you think this aspect is interesting/important, and present your evaluation of the author’s position (note that you must make an argument, simply asserting your agreement or disagreement will not be sufficient for a passing grade). The reaction papers are due in class on the first date scheduled for discussion of the readings (24 October and 7 December), late papers will not be accepted and will earn a grade of zero.
 
Some Good Advice (At No Extra Charge): First, keep current with the reading.  Not only will that maximize your homework grades, but it will allow you to make the most of lecture.  Second, do the homework.  This is virtually free credit, and it will improve your performance on exams as well.  Third, ask questions in class.  If you read something and it is unclear and then it is unclear during lecture, ask about it.  Your classmates will probably thank you.  This is one of the few ways, before an exam, that I can gauge how the material is getting across.  Fourth, come see me during my office hours.  This is another opportunity to get clarification and help on material about which you are unclear.  But don’t wait until the last minute, by then it is usually too late.

Some Good Advice (At No Extra Charge):

First, keep current with the reading. Not only will that maximize your homework grades, but it will allow you to make the most of lecture.

Second, do the homework. This is virtually free credit, and it will improve your performance on exams as well.

Third, ask questions in class. If you read something and it is unclear and then it is unclear during lecture, ask about it. Your classmates will probably thank you. This is one of the few ways, before an exam, that I can gauge how the material is getting across.

Fourth, come see me during my office hours. This is another opportunity to get clarification and help on material about which you are unclear. But don’t wait until the last minute, by then it is usually too late.

SACS-Related Material

I am aware that Tulane students are able to read a standard university syllabus and determine the content of the course and its relation to the major and the individual student’s course of study. However, the administration of Tulane University, along with the Southern Association of Colleges and Schools (SACS–which “accredits” primary and secondary schools as well as all varieties of 2 and 4 year undergraduate programs [with very little in the way of adjustment in rubrics, metrics, etc.]), has determined that you require additional information. I collect this material in a separate section so that you can refer to it, or discard it, as you consider appropriate.

STUDENT OBJECTIVES/OUTCOMES: By the end of the course, the student should be able to think, speak, and write fluently and competently about the ideas and issues covered in the course (as reflected in the course description and the syllabus). The student should have a solid understanding of the political and economic significance of ideas and concepts in the analysis of trade and trade policy, with particular reference to environmental and national security policy. The student should be able to formulate critical views concerning these issues and respond fluently and competently to questions concerning these views.

1. Students analyze basic general equilibrium theory in the evaluation of significant policy objectives.

2. Students will analyze, interpret, and discuss core issues of trade policy.

3. Students will analyze, interpret and discuss the links between trade and policy objectives like national security and the environment.

4. Students will appraise, evaluate, and appreciate the values and consequences of these issues.

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Econ 4970        SYLLABUS        Fall 2024

Topic I: Introduction (This will be lecture material)

  • 20 August: Course Introduction

  • 22 August: Very Brief Review of Microeconomics

  • 27 & 29 August: Introducing the Basic GE Model

    • (Not required) Chacholiades (1978). “Chapter 4. Opportunity Cost”. International Trade Theory and Policy. New York: McGraw-Hill. pp. 85-128.

    • (Not required) Chacholiades (1978). “Chapter 5. Community Indifference and Comparative Advantage”. International Trade Theory and Policy. New York: McGraw-Hill. pp. 129-147.

Topic II: Some Economics of International Trade

  • 3 & 5 September: Foundations of Trade (Technology, Endowments & Tastes)

    • Vousden (1990). “Chapter 1: Basic International Trade Theory”. The Economics of Trade Protection. Cambridge ; New York: Cambridge University Press. pp. 3-24. [Canvas]

    • Bhagwati, Panagariya and Srinivasan (1998). “Chapter 5: Model and Analytic Relationships under the Heckscher-Ohlin Theory”. Lectures on International Trade. Cambridge, Mass.: MIT Press. pp. 53-77. [Canvas]

    • (Not required) Chacholiades (1978). “Chapter 6. International Equilibrium”. International Trade Theory and Policy. New York: McGraw-Hill. New York: McGraw-Hill. (only part A), pp. 156-171, on Canvas.

  • 10 & 12 September: Consequences of Trade, 1: The Gains from Trade

  • 17 & 19 September: Consequences of Trade, 2: Winners, Losers & Politics

  • 24 & 26 September: Firms in Trade (Heterogeneity & Global Value Chains)

  • (Optional) Extending the Basic Model, 1: Unemployment & Monopolistic Competition

    • Davidson and Matusz (2011). “Trade and Labour Markets.” In Bernhofen, Falvey, Greenaway & Kreickemeier, eds. Palgrave Handbook of International Trade. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan, pp. 391-422.

    • Krugman (1989). “Industrial Organization and International Trade.” In Schmalensee & Willig, eds. Handbook of Industrial Organization, Amsterdam: Elsevier, 1179-223.

    • Francois and Nelson (2002). “A Geometry of Specialisation.” Economic Journal, V.112-#481: 649-678.

    • Eaton and Kortum (2012). “Putting Ricardo to Work.” The Journal of Economic Perspectives, V.26-#2, 65-89.

Midterm Exam: 1 October

Topic III: Trade Policy and the Theory of Economic Policy

  • 8 & 10 October: Trade Policy Instruments in the Basic Model

    • Feenstra (1992). “How Costly Is Protectionism?”. Journal of Economic Perspectives, V.6-#3, pp. 159-178.

    • Bhagwati, Panagariya and Srinivasan (1998). “Chapter 12: Tariffs and Trade Equilibrium”. Lectures on International Trade. Cambridge, Mass.: MIT Press. pp. 203-219. [Canvas]

    • (Not required) Chacholiades (1978). “Chapter 17. Import & Export Taxes: The Case of the Small Country”. International Trade Theory and Policy. New York: McGraw-Hill. pp. 441-462.

    • (Not required) Chacholiades (1978). “Chapter 18. Import & Export Taxes: The Case of the Large Country”. International Trade Theory and Policy. New York: McGraw-Hill. pp. 463-484.

    • (Not required) Chacholiades (1978). “Chapter 19. Trade Taxes & Welfare”. International Trade Theory and Policy. New York: McGraw-Hill. pp. 485-499.

  • 15 & 17 October: The Theory of Economic Policy, 1: The Basic Framework

    • Johnson (1965). “Optimal Trade Intervention in the Presence of Domestic Distortions”. Baldwin, et al. Trade, Growth & The Balance of Payments. Chicago: Rand-McNally, pp. 3-34. [Canvas]

    • Hoekman & Nelson (2020). “Rethinking International Subsidy Rules”. The World Economy; V.43-#12, pp. 3104-3132.

    • Bhagwati (1968). “The Theory and Practice of Commercial Policy: Departures from Unified Exchange Rates,” Special Papers in International Economics, #8, pp. 1-41.

    • (Not required) Bhagwati, Panagariya and Srinivasan (1998). “Chapter 28: Noneconomic Objectives”. Lectures on International Trade. Cambridge, Mass.: MIT Press. pp. 351-367. [Canvas]

    • (Not required) Chacholiades (1978). “Chapter 20. Domestic Distortions”. International Trade Theory and Policy. New York: McGraw-Hill. pp. 500-524.

    • (Not required) Chacholiades (1978). “Chapter 21. Infant Industry Argument and Noneconomic Objectives”. International Trade Theory and Policy. New York: McGraw-Hill. pp. 525-541.

  • 22 & 24 October: The Theory of Economic Policy, 2: Trade Wars, Terms-of-Trade Externalities, etc.

  • 29 & 31 October: Adjusting to Trade Shocks

Topic V: Trade & the Environment

Topic VI: Trade & National Security

Topic VII: The International System for Trade Policy

Final Exam: 13 December, 8:00-11:00 am