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International Trade

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Text book

International Economics:Theory and Policy(7ed)

Paul R. Krugman

Maurice Obstfeld

Chapter 1

Introduction

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About This Course…

Principle of Economics Theoretical Economics vs. Applied Economics About Mathematics Our stress: concepts & applications

Lecture: week 6-19; Test: week 20 Attendance Assignments & Class Discussions

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BRIEF CONTENTS

PREFACE 1 Introduction PART I INTERNATIONAL TRADE THEORY 2 World Trade: An Overview 3 Labor Productivity and Comparative Advantage: The

Ricardian Model 4 Resources, Comparative Advantage and Income

Distribution 5 The Standard Trade Model 6 Economies of Scale, Imperfect Competition, and

International Trade 7 International Factor Movements

5

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BRIEF CONTENTS

PART II INTERNATIONAL TRADE POLICY

8 The Instruments of Trade Policy

9 The Political Economy of Trade Policy

10 Trade Policy in Developing Countries

11 Controversies in Trade Policy

6

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Why are we caring about International trade?

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Fig 1-1

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Trade Openness

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0

Export

Import

Billion dollars

Exports and Imports of China

0

500

1000

1500

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31

year(1978-2008)

expo

rts,im

ports

Export

Import

Billion Dollars

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Introduction

What is International Economics About? International Economics: Trade and Money

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International trade deals with economic interactions that occur between sovereign nations.

(eg. Trade between U.S. & Mexico; Shanghai & Beijing?)

• The role of governments in regulating international trade and investment is substantial.

• Analytically, international markets allow governments to discriminate against a subgroup of companies.

• Governments also control the supply of currency.

What is International Economics About?

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1.What Is International Economics About?

13

The Gains from Trade

The Pattern of Trade

Protectionism

Micro-part

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The Gains from Trade• Can & cannot produce by itself.• Why import when a good could be produced domestically?• When countries sell goods and services to one another, all countries

benefit.(ch3, productivity & wage; ch4, production factor abundance; ch6,

economies of scale Specialization & effieicncy _tangible goodsch7, factor movements: international migration & borrowing and

lending._intangible goods)• Trade and income distribution

– International trade might hurt some groups within nations. (eg. specific resources owners; labor and capital owners)

– Trade, technology, and wages of high and low-skilled workers. (disputs) (ch4,ch5)

What is International Economics About?

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What is International Economics About?

The Pattern of Trade (Who trade with whom or sells what to whom?)

– Climate and resources determine the trade pattern of several goods.

– In manufacturing and services the pattern of trade is more subtle.

(eg. Japan for autos vs. U.S. for aircraft? )

-International difference in labor productivity.(ch3, Ricardo,19C)

-The relative supply & use of national resources such as capital, labor, and land.(ch4,20C, powerful but controversial)

-A substantial random component.(ch6, economy of scale, market structure, policy etc.)

– There are two types of trade

» Interindustry trade depends on differences across countries.

» Intraindustry trade depends on market size and occurs among similar countries.

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Protectionism? (How much to trade?)• Globalization: for or against? (NAFTA vs. EU? WTO negotiation,

ASIA…) (Seattle)

• Cost-benefit analysis? Many governments are trying to shield certain industries from international competition. (eg. Export subsidizing or import quota)

• Government interventions: politics.

(ch4 income distribution effects; ch9-11 power within countries matters)

• This has created the debate dealing with the costs and benefits of protection relative to free trade.

– Advanced countries’ policies engage in industrial targeting.

– Developing countries’ policies promote industrialization:– Import substitution versus export promotion industrialization.

What is International Economics About?

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The Balance of Payments• Some countries run large trade surpluses.

– For example, in 1998 both China and South Korea ran trade surpluses of about $40 billion each.

• Global Imbalance

• Is it good to run a trade surplus and bad to run a trade deficit?

Exchange Rate Determination• The role of changing (floating) exchange rates is at the

center of international economics.

What is International Economics About?

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What is International Economics About?

International Policy Coordination• A fundamental problem in international economics is

how to produce an acceptable degree of harmony among the international trade and monetary policies of different countries without a world government that tells countries what to do.

The International Capital Market• There are risks associated with international capital

markets:– Currency depreciation （ even contagious）– National default

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19

Macro-part

Exchange Rate Determination

The International Capital Market

International Policy Coordination

The Balance of Payments

返回

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2.International Economics: Trade and Money

International Economics

International Trade (real transactions)

International Money (financial transactions)

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Our Focus

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International Economics: Trade and Money

International trade analysis focuses primarily on the real transactions in the international economy.• These transactions involve a physical movement of

goods or a tangible commitment of economic resources.– Example: The conflict between the United States and

Europe over Europe’s subsidized exports of agricultural products.

– Antidumping case. Customs duties. Cow diseases…

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International monetary analysis focuses on the monetary side of the international economy. • That is, financial transactions such as foreign

purchases of U.S. dollars.– Example: The dispute over whether the foreign

exchange value of the dollar should be allowed to float freely or be stabilized by government action.

– Should RMB appreciate ? Is it undervalued? If yes, how much is it undervalued?

International Economics: Trade and Money

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International trade issues• Part I: International Trade Theory

• Part II: International Trade Policy

International monetary issues• Part III: Exchange Rates and Open-Economy

Macroeconomics

• Part IV: International Macroeconomic Policy

International Economics: Trade and Money