COURSE SYLLABUS
ECON 450: International Trade
University of Southern California
Summer 2007
ADMINISTRATIVE INFORMATION:
Faculty: Sheikh Shahnawaz (You can call me Ali)
Office: KAP 334B
e-mail: shahnawa@usc.edu
Office Hours: Mondays 10:30 am – 12:00 pm and Thursdays 12:00 – 1:30 pm
Schedule: TWTh, 10:00 am - 11:50 am in KAP 140
PURPOSE OF THE COURSE: The goal of the course is to develop skills that allow students to
(a) apply basic concepts of international trade to consider issues from an analytical perspective,
and (b) put these basic tenets in the context of current events and the global economy,
international economic relations, and international economic institutions.
COURSE OVERVIEW: This course covers the microeconomics of international trade, and
related issues of trade policy, foreign direct investment, and multinational corporations. We begin
with a brief introduction and then develop a theoretical framework to help us understand (1) why
countries trade with each other and what determines trade patterns (2) whether trade is beneficial
for a country and (3) how trade affects the distribution of income within a country. We then
analyze the effects of commercial policy (i.e., tariffs) on trade and economic welfare. We
conclude with a discussion of recent issues, including the World Trade Organization (WTO),
regional trade agreements such as NAFTA, the impact of trade policy on growth, and other
current concerns. I will expect you to become proficient in reading tables, graphs, and figures. An
understanding of basic regression analysis, although helpful, is not required.
AUDIENCE: This course uses microeconomic tools extensively, and therefore requires a solid
understanding of price theory. ECON 303 is a prerequisite.
REQUIREMENTS:
Students will be expected to prepare assigned readings before class.
Students will be assigned problem sets throughout the course in order both to reinforce the use of
tools for policy analysis and to expand the issues analyzed beyond those in the classroom. Late
problem sets will NOT be accepted. Students may work in small groups (2-3 students), but each
student must write up his or her answers separately.
In addition, there will be two exams, all closed-book.
Course grades will be based on these types of assignments as follows: Exams: 30% and 40%
(your better exam score will count for more), Problem Sets: 30%. The dates for your exams are:
Exam 1: Tuesday, June 12
Exam 2: Tuesday, July 10 (Last Day of Class)
POLICY ON MAKE-UPS: Absolutely no make-ups will be given. If you miss an exam with a
valid excuse such as a medical emergency, bring in a doctor’s note or the like and we will weight
the exams you have given more heavily. If, on the other hand, you miss an exam for no good
reason, you will get a zero!
STUDENTS WITH DISABILITIES: Students requesting academic accommodations based on
a disability are required to register with Disability Services and Programs (DSP) each semester.
A letter of verification for approved accommodations can be obtained from DSP when adequate
documentation is filed. Please be sure that the letter is delivered to me (or the TA) as early in the
semester as possible. DSP is open Monday-Friday, 8:30-5:00. The office is in Student Union
301 and their phone is (213) 740-0776.
MATERIALS: Readings will come primarily from International Economics: Theory and Policy
by Paul Krugman and Maurice Obstfeld, Seventh Edition (2005), Addison-Wesley.
Since general equilibrium models are widely used in trade policy analysis, General Equilibrium
Theory by Ross Starr is recommended for those who want to pursue this further.
Just as in your other economics courses, you are strongly encouraged to keep up-to-date with
current economic events with a periodical such as The New York Times, The Financial Times,
The Economist, or another periodical with frequent coverage of economics news.
OUTLINE OF TOPICS (Tentative):
The following is roughly our weekly plan for the course.
One: Introduction and overview (chapters 1-2)
The Ricardian Model (chapter 3)
Two: The Ricardian Model continued (chapter 3)
Specific Factors Model (some introductory material on this in chapter 4)
Three: Heckscher-Ohlin Model (chapter 4)
The Standard Trade Model (chapter 5)
Four: The Gravity Model (pages 11-17)
Trade and Wages
Foreign Investment (chapter 7)
Five: Trade and Imperfect Competition (chapter 6)
Immigration (chapter 7)
Six: Tariffs (chapter 8, chapter 9 appendix)
Other Trade Policy Instruments (chapter 8)
Seven: Dumping and International Price Discrimination (Chapter 6)
Regional Trade Agreements (Chapter 9)
Eight: Trade and Growth (Chapter 10)
Trade Policy Debates (Chapter 11)