The World Economy: International Trade

1 Why Study International Trade? ......Page 16
2 What Do We Mean by International Interdependence? ......Page 17
2.1 Trade-Policy Implications of International Interdependence ......Page 20
2.2 Symptoms of International Interdependence ......Page 21
3 The Economic Significance of Political Boundaries ......Page 25
4 Studying International Economics ......Page 26
1 Introduction ......Page 33
3 The Decline of Mercantilism (and the Birth of Economics) ......Page 34
4 Keeping Things Simple: Some Assumptions ......Page 35
5.1 Production in Autarky ......Page 36
5.2 Consumption in Autarky ......Page 38
5.3 Equilibrium in Autarky ......Page 40
6 The Ricardian World with Trade ......Page 41
6.1 Adam Smith and Absolute Advantage ......Page 42
6.2 David Ricardo and Comparative Advantage ......Page 43
6.3 International Equilibrium with Trade ......Page 46
7.1 Gains from Exchange ......Page 50
8.1 Demand and Supply in Autarky ......Page 52
8.2 Demand and Supply with Trade ......Page 54
Case One: Can the Ricardian Model Really Explain Trade? ......Page 55
Case Two: Does Labor Productivity Really Vary? ......Page 57
Case Three: Which Plants Export? ......Page 58
Appendix: What Can the World Produce? The World Production Possibilities Frontier ......Page 64
1 Introduction ......Page 66
2.1 Production in Autarky ......Page 67
2.2 Equilibrium in Autarky ......Page 74
3.1 Productive Specialization ......Page 75
3.2 International Equilibrium with Trade ......Page 77
4.1 The Role of Factor Endowments ......Page 79
4.2 The Role of Tastes ......Page 81
Case One: Lights-Out Factories ......Page 82
Case Three: Socks: Madein USA ......Page 83
Case Four: Can Heckscher-Ohlin Explain China's Trade? ......Page 84
Appendix A: The Edgeworth Box ......Page 89
Appendix B: Offer Curves ......Page 93
2 How Do Output Prices Affect Factor Prices? The Stolper-Samuelson Theorem ......Page 96
3 How Do Factor Prices Vary Across Countries? The Factor Price Equalization Theorem ......Page 100
3.2 Why Don't We Observe Full Factor Price Equalization? ......Page 103
4.1 What Are the Reasons for Short-Run Factor Immobility? ......Page 107
4.2 Effects of Short-Run Factor Immobility ......Page 108
4.3 Trade with an Industry-Specific Factor ......Page 110
5 Trade and Welfare: Gainers, Losers, and Compensation ......Page 112
5.1 Potential versus Actual Utility ......Page 113
5.4 Adjustment Costs and Compensation in Practice: Trade Adjustment Assistance ......Page 114
Case One: Trade and Wages I: Asia ......Page 116
Case Two: Trade and Wages II: The United States ......Page 117
Case Four: A Rare Opportunity: Learning from Japanese Fconomic History ......Page 119
2 Questions to Be Answered ......Page 125
3 How Do We Know if a Theory about Trade Is Correct? ......Page 126
4.1 Early Tests ......Page 127
4.2 Fine-Tuning the Heckscher-Ohlin Model ......Page 128
5.1 What Is It, and How Big Is It? ......Page 130
5.2 Intra-Industry Trade in Homogeneous Goods ......Page 132
5.4 Vertical Specialization, or Breaking Up the Production Chain ......Page 133
5.5 Why Does Intra-Industry Trade Matter? ......Page 134
6 Trade with Economies of Scale ......Page 135
6.1 Internal Economies of Scale ......Page 138
6.2 External Economies of Scale ......Page 140
6.4 The Scope of Economies and Learning ......Page 143
7 Technology-Based Theories of Trade: The Product Cycle ......Page 144
8 Overlapping Demands as a Basis for Trade ......Page 146
9 Transport Costs as a Determinant of Trade ......Page 148
10 Location of Industry ......Page 151
Case Two: Are there Economies of Scale? ......Page 152
Case Three: Around the World in 22 Days ......Page 154
2 Why Would a Country Impose a Tariff? ......Page 160
3 Types of Tariffs and Ways to Measure Them ......Page 162
4.1 Effects on Production, Consumption, and Price ......Page 165
4.2 Effects on Welfare ......Page 167
4.3 Estimating the Effects of High U.S. Tariffs ......Page 170
5.1 Effects on Production, Consumption, and Price ......Page 171
5.2 Optimal Tariffs and the Threat of Retaliation ......Page 174
8 The Effective Rate of Protection ......Page 175
9 Offshore Assembly Provisions ......Page 178
10.1 An Export Tax Imposed by a Small Country ......Page 179
10.2. An Export Tax Imposed by a Large Country ......Page 181
Case Two: Binding Policy Makers' Hands ......Page 183
Case Three: China, Tariffs;andthe WIO ......Page 185
Appendix A: Offer Curves and Tariffs ......Page 190
Appendix B: General-Equilibrium Tariff Effects in a Small Country ......Page 193
2 Quotas ......Page 195
3 Comparison of Import Tariffs and Quotas ......Page 198
4 Export Quotas ......Page 200
4.2 Large-Country Case ......Page 201
5.1 Export Subsidies ......Page 203
5.2 The Controversy over Export Subsidies ......Page 208
5.3 Trade-Relevant Production Subsidies ......Page 209
6 Dumping ......Page 210
6.2 Persistent Dumping ......Page 211
6.3 Predatory Dumping ......Page 213
6.4 Policy Responses to Dumping ......Page 214
7 Administrative and Technical Standards ......Page 216
7.1 Domestic-Content Requirements and Rules of Origin ......Page 217
7.2 Government-Procurement Policies ......Page 218
7.3 Technical, Administrative, and Regulatory Standards ......Page 220
8 How Can We Measure Nontariff Barriers? ......Page 221
Case One: Shooting Down the Byrd Amendment ......Page 222
Case Two: Cotton Pits Farmer versus Farmer ......Page 223
2 Categories of Arguments for Trade Restrictions ......Page 227
3 What about "Infant" Industries? ......Page 228
4.1 The Optimal Tariff: Monopoly in a World Market ......Page 232
4.2 Protection and Monopolized Industries ......Page 233
4.3 Strategic Trade Policy ......Page 238
5 What If There Are Externalities? ......Page 240
5.1 Production Externalities ......Page 241
5.2 Consumption Externalities ......Page 243
5.3 International Trade and the Environment ......Page 245
7 How Can We Compete with Low-Wage Countries? ......Page 247
8 How Do We Handle National Security and Defense? ......Page 248
9 Aren't Goods and Money Better than Just Goods? ......Page 249
10 Can We Threaten Other Countries into Trade Liberalization? ......Page 250
Case Two: No, the Other Type of Dumping ......Page 252
Case Three: Spawning a Trade Dispute ......Page 253
Case Four: MITI Miracles? ......Page 254
Case Five: Science, or Politics? ......Page 255
1 Introduction ......Page 259
2 The Political Economy of National Trade Policy ......Page 260
3.1 Before Smith, Ricardo, and Hume: Mercantilism ......Page 262
3.2 Britain and the Rise of the United States ......Page 263
3.3 The Reciprocal Trade Agreements Act of 1934 ......Page 264
3.4 Post-World War II Trade Policy ......Page 265
3.5 Trade Policy in the 1960s and 1970s ......Page 266
3.6 Trade Policy in the 1980s and 1990s ......Page 268
4 Economic Integration and Regional Trading ......Page 271
4.1 Stages of Integration ......Page 272
4.2 Trade Creation and Trade Diversion: Integration and Welfare ......Page 274
4.3 Additional Considerations ......Page 276
4.4 Efforts at Integration: Success and Failure ......Page 277
5 Interregional Trade ......Page 284
5.2 The Role of Economic Policy ......Page 285
Case One: NAFTA Traffic Jams ......Page 287
Case Two: I.D. Cards for Avocados ......Page 288
Case Three: Allinthe Family ......Page 289
Case Four: Is Japan Being Left Out? ......Page 290
1 Introduction ......Page 294
2.1 More Labor and Capital ......Page 297
2.2 Just More Labor ......Page 300
2.3 Just More Capital ......Page 302
2.4 An Extreme Case: Immiserizing Growth ......Page 303
3 Economic Growth II: More Productivity ......Page 304
3.1 Types of Technical Progress ......Page 305
3.2 How Does Increased Productivity Affect Welfare? ......Page 306
4 What if Factors Can Move? ......Page 307
4.1 Inter-Country Labor Mobility ......Page 308
4.2 Inter-Country Capital Mobility ......Page 316
4.3 Taxation and Factor Mobility ......Page 323
4.4 Multinational Enterprises and the World Economy ......Page 327
Case One: Growth Myths and Miracles ......Page 332
Case Three: Saving, Investment, and Intertemporal Trade ......Page 334
Case Four: Send Money ......Page 335
1 Introduction ......Page 340
2 Defining Development ......Page 341
3 Development Issues ......Page 345
4 Agriculture, Industry, or Both? ......Page 346
4.2 Import Substitution ......Page 347
4.3. Asthe World Learns: Changing Views on Development ......Page 348
4.5 Lessons ......Page 351
5.1 Agricultural Policy ......Page 352
5.2 Technology, Intellectual Property, and Development ......Page 353
5.3 Debts for Development ......Page 356
5.4 Economic Development and the Environment ......Page 364
6 Developing Markets: Economies in Transition ......Page 366
6.1 International Trade and Central Planning ......Page 367
6.2 The Painful Transition from Central Planning ......Page 369
6.3 The Reform Agenda and Prospects ......Page 370
Case One: Does Aid Aid Growth? ......Page 374
Case Two: Does Policy Matter? The Two Koreas ......Page 375
Case Three: Opento Development ......Page 377
Case Four: Reproducing Pharmaceuticals ......Page 378
Case Five: Oil Junkies? ......Page 379
Case Six: WTO Member or Market Economy? ......Page 380
Country or Economy Index ......Page 384
Subject Index ......Page 387