International Trade / Edition 1

by John McLaren

Overview

McLaren’s International Trade covers all of the conventional theory that students are expected to learn, but presents it in a modern and unique way. Aiming to teach students how to use economic theory instead of merely memorizing economic theory, International Trade introduces each topic with a real-world policy problem followed by the models and theories in an applied approach. This approach encourages more student engagement with the material and fosters a view of model theory as a tool for understanding the world. The text is designed well for undergraduate students but can be used in MBA, and Masters of Public Administration courses in international economics.

 

 

Product Details

ISBN-13:	9780470408797
Publisher:	Wiley
Publication date:	10/30/2012
Edition description:	New Edition
Pages:	352
Product dimensions:	6.90(w) x 9.90(h) x 1.50(d)

About the Author

John McLaren has a Ph.D in Economics from Princeton. He has been teaching International Trade in the Economics department at the University of Virginia for over 10 years and is well-published in key journals in economics. His motivation for writing the text is to have a better book with which to teach his own course.

Table of Contents

About the Author v

Preface vii

Part I Engines of Globalization

1 A Second Wave of Globalization 1

1.1 The First Wave 2

1.2 The Second Wave 3

1.3 Crisis, Peak Oil, Pirates-and De-Globalization? 8

1.4 The Forces at Work 9

2 Should Nigeria Strive for Self-Sufficiency' in Food? 13

2.1 A Presidential Agenda 14

2.2 The Comparative Advantage Argument Formalized: Introducing the Ricardian Model 15

2.3 Autarky in the Ricardian Model 17

2.4 Free Trade in the Ricardian Model 20

2.5 So What Actually Happened? 24

2.6 Additional Insights from Ricardo's Model 26

3 Why Do Americans Get Their Impalas from Canada? 30

3.1 Impalas on the Horizon 30

3.2 Increasing Returns More Generally 33

3.3 How to Tackle Europe: Trade versus FDI 35

3.4 On a Smaller Scale: Trade and Increasing Returns in Furniture 36

3.5 Adding Heterogeneity: The Melitz Effect 41

4 Trade and Large Corporations: Kodak versus Fuji 48

4.1 Big Players in the Game of Trade 48

4.2 Background on kodak, Fuji, and the War 49

4.3 Introducing Oligopoly 51

4.4 Autarky 52

4.5 Trade 53

4.6 Winners and Losers 56

4.7 Some Other Possibilities 58

Part II Politics and Policy in the World Economy

5 Why Did the North Want a Tariff, and Why Did the South Call It an Abomination? 64

5.1 A Cold War before the Hot War 64

5.2 A Pure Specific-Factors Model 68

5.3 The Tariff 71

5.4 A Constitutional Error, and the Lerner Symmetry Theorem 73

5.5 A Mixed Model 74

5.6 Specific Factors in Trade More Generally 79

6 Is Free Trade a Rip-off for American Workers? 86

6.1 The Charges 86

6.2 The Model with Fixed Coefficients 89

6.3 Supply, Demand, and Equilibrium 90

6.4 Trade and the Distribution of Income 93

6.5 Allowing Substitutability-and the Telltale Signs 97

6.6 Testing the Theory 100

6.7 The Upshot-with an Important Qualification 103

7 Why Doesn't Our Government Want Us to Import Sugar? 108

7.1 Sinking LifeSavers 108

7.2 Hypothesis I: The Terms-of-Trade Motive 110

7.2.1 A Partial-Equilibrium Model 110

7.2.2 The Effects of a Tariff 112

7.2.3 The Effects of a Quota 118

7.2.4 Evaluation: Is the Terms-of-Trade Motive Sufficient? 121

7.3 Hypothesis II: Interest Groups 122

7.4 Additional Observations 124

7.4.1 The Optimal Tariff 124

7.4.2 The Optimal Tariff for a Small Country Is Zero 125

7.4.3 Voluntary Export Restraints 126

7.4.4 Equivalence of Tariffs and Quotas (and How It Can Break Down) 126

7.4.5 Nonoptimality of Export Subsidies 128

7.4.6 The Argument in General Equilibrium 129

7.4.7 The Effective Rate of Protection 131

8 Who Are the WTO, and What Do They Have Against Dolphins? 135

8.1 The Dolphin Fiasco and Other Stories 135

8.2 The Trade War Problem and the Need for Coordination in Trade Policy 137

8.3 Problem: In an Interconnected World, All Policies Are Trade Policies 143

8.4 The Sham Problem 146

8.5 The WTO's Wobbly Tightrope Walk 148

9 Should Developing-Country Governments Use Tariffs to Jump-start Growth? 152

9.1 A Silver Bullet? 152

9.2 The Infant-Industry Argument: Background 153

9.3 Learning by Doing: An Insufficient Argument 156

9.4 Market-Failure Arguments for Infant-Industry Protection 159

9.4.1 Credit-Market Failures 159

9.4.2 Learning Spillovers 160

9.4.3 Agglomeration Externalities and Trade 162

9.5 What Has Actually Happened? 166

10 Was Ronald Reagan Punked by Japanese Automakers? 173

10.1 A Paradox of Aggressive Trade Policy 174

10.2 A First Attempt: A Competitive Model 174

10.3 Does a Cournot Interpretation Work? 175

10.4 Trying on a Bertrand Model 176

10.5 A Closer Look: Trade Policy with Cournot Oligopoly 180

10.6 Trade Policy with Bertrand Oligopoly 183

Part III Current Controversies

11 Should the iPod, Be Made in the United States? 188

11.1 Made All Over 189

11.2 Offshoring and Inequality: The Feenstra-Hanson Theory 190

11.3 Offshoring and Productivity: An Alternative Model 195

11.4 How Do These Theories Stand Up to the Data? 197

11.5 Another Approach: Evidence from Aggregate Employment 198

11.6 A Bottom Line, Open Questions, and the Obama Critique 205

12 Should We Build a Border Fence? 210

12.1 Calls for a Crackdown, and Calls for Compassion 211

12.2 Three Theories, and One Thing They Agree On 212

12.3 Three Key Pieces of Evidence 217

12.4 The Upshot 221

13 Trade and the Environment: Is Globalization Green? 226

13.1 A Disaster on a Global Scale? 227

13.2 Two Theories (but One Model) 227

13.3 The Evidence 232

14 Sweatshops and Child Labor: Globalization and Human Rights 239

14.1 Globalization and Child Labor 240

14.1.1 Did a Child Slave Pick the Cocoa for My Chocolate Bar? 240

14.1.2 Globalization and Child Labor - Some Theory 241

14.1.3 Evidence and Implications for Policy 244

14.1.4 Bottom Line on the Child Labor Question 247

14.2 Sweatshops and Multinationals 247

14.2.1 Sweatshops Arise from Poverty 248

14.2.2 Multinationals May Be Part of the Solution 250

14.2.3 But There May Still Be Good Reason to Keep the Pressure On 250

14.3 Globalization and Human Rights More Generally 254

14.3.1 The Effect on Democracy: The Political Influence of Multinational Firms 254

14.3.2 The Effect on Democracy: The Effect of Trade 255

14.3.3 Globalization and Civil War 256

14.3.4 A Note on Women's Rights 257

14.4 Conclusion: Getting the Globalization You Want 258

15 Is NAFTA a Betrayal of the Poor or a Path to Prosperity? 263

15.1 A Competition: Who Hates NAFTA the Most? 263

15.2 Preferential Trade Agreements: Background and Key Principles 265

15.2.1 Types of Agreement 265

15.2.2 Article XXIV 266

15.3 The Classic Trade-off: Trade Creation and Trade Diversion 267

15.4 Distributional Concerns 271

15.4.1 U.S. Workers 271

15.4.2 The Mexican Poor 273

15.5 The Notorious Chapter 11 275

15.6 Some Issues That Affect PTAs More Broadly 277

15.6.1 Counting Lost Jobs: A Popular Mismeasurement 277

15.6.2 National Bargaining-Power Issues 278

15.6.3 Preferential Agreements and the Multilateral Process 279

15.7 Conclusion 282

Part IV Macroeconomic Aspects of Globalization

16 Is the Trade Deficit a Time Bomb? 286

16.1 Note a Subtle Change 286

16.2 What Is a Trade Deficit? 287

16.2.1 Definitions, and why it Hasn't shown Up Before 287

16.2.2 The National Income Identity 288

16.2.3 The Current Account and the Financial Account 290

16.2.4 Bilateral versus Multilateral Deficits 292

16.3 Why Would a Country Run a Trade Deficit? 293

16.4 Can the Trade Deficit Ever Be a Problem? 299

17 Trade and Exchange Rates: Is the Renminbi the Culprit? 304

17.1 The Ultimatum 304

17.2 Basic Facts about Foreign-Exchange Markets 305

17.3 A Dynamic, General-Equilibrium Model of Exchange-Rate Determination 308

17.3.1 The Setup 308

17.3.2 Equilibrium 311

17.4 Equilibrium Responses 314

17.4.1 What Happens if the Value of the Renminbi Is Raised? 315

17.4.2 Anticipated Devaluation 315

17.4.3 Productivity Effects 317

17.4.4 Anticipated Productivity Changes 318

17.4.5 A Fiscal Interpretation 318

17.5 Adding Nominal Rigidity 321

Index 327