Department of Economics
Temple University Center City
Economics 250
International Trade
Fall Semester 2000
Time: Monday: 4:40-7:10 P.M.
Room: 522
Main Campus Office: 879 Ritter Annex
Tel. 204-1677 (Main Campus)
Fax.204-8173 (Main Campus)
Professor Phelps
e-mail: cdphelps@ astro.temple.edu
TUCC Office: Rm. 520
Office Hours: After class or by
appointment at the Main Campus.
Text: Dominick Salvatore, International Economics, Sixth Edition (Prentice Hall, 1998)
Study Guide: Arthur Raymond, International Economics (Prentice Hall, 1998)
Topical Outline and Schedule
Week Date
Topic (All chapter references are from the Text.)
I. Introduction.
1. Sept. 11 Chapters 1 and 13
A. The rising importance of international trade to the United
States. Case Study 1-2 and 1-3
B. The major commodity exports and imports of the U.S.
C. The major trade partners of the U.S. Case Study 13-2
II. Trade Theory.
Chapter 2: The Law of Comparative Advantage
A. Theory: Constant Opportunity Costs. The Production
Possibility Frontiers of the United States and the United
Kingdom: Figure 2-1.
B. Problems assigned.
2. Sept. 18 Chapters 2 and 3. The Law of Comparative Advantage, continued.
Problems discussed.
B. Gains from Trade: Figure 2-2
C. Empirical Evidence
1). Labor Productivity and Comparative Advantage:
Figure 2-4
2). Revealed Comparative Advantage: Case Study 3-1
D. Paper assigned.
3. Sept. 25 Chapter 3: The Law of Comparative Advantage, continued.
Quiz Number 1 on Chapter 2
A. Increasing opportunity costs. Empirical evidence:
No nation specializes completely in one good. Case Study 3-2.
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B. The Gains from Trade: Figure 3-4
C. Trade Based on Differences in Tastes: Figure 3-6.
D. Problems assigned.
4. Oct. 2
Chapter 4: Demand and Supply. The Terms of Trade
Problems discussed.
A. The Equilibrium-Relative Commodity Price with Trade and
with Partial Equilibrium Analysis: Figure 4-1
B. The Terms of Trade for the United States: Figure 4-2.
C. The Terms of Trade of Industrial and Developing Countries:
Case Study 4-3.
5. Oct. 9
Chapter 5: The Heckscher-Ohlin Theory
Quiz Number 2 on Chapters 3 and 4.
A. Factor Endowments of the Leading Industrial Countries, 1980:
Case Study 5-1
B. Capital Stock per worker of Selected Countries: Case Study 5-2.
C. The Shape of the Production Frontiers of Nation 1 and Nation 2:
Figure 5-2.
D. The Gains from Trade: Figure 5-4.
E. Problems assigned.
6. Oct. 16
Chapter 5. The Heckscher-Ohlin Theory, continued.
Problems discussed.
F. Empirical Evidence: Export/Import Ratios of the Leading
Industrial Countries, 1979: Case Study 5-3
G. The Heckscher-Ohlin Model with Skills and Land: Case
Study 5-7
H. Relative Factor-Price Equalization: Figure 5-5.
I. Impact on the Distribution of Income. Has international trade
increased U.S. wage inequalities? Case 5-4.
J. Problems assigned.
7. Oct. 23
Chapters 6 and 7: Economies of Scale and Technological Gaps
Problems discussed.
A. Trade Based on Economies of Scale: Figure 6-1
B. U.S. Intra-Industry Trade in Automotive Products.
C. Predictions of the Heckscher-Ohlin Theory, assuming changes
in resource endowments.
1) Changes in Relative Resource Endowments of the
Leading Industrial Countries. Case Study 7-1.
2) Change in the Pattern of Comparative Advantage in the
Leading Industrial Countries. Case Study 7-4.
III.
Trade Policy
8. Oct. 30
Chapter 8. Tariffs
Quiz Number 3 on Chapters 5, 6, and 7.
A. Partial Equilibrium Analysis of a Tariff.
1) Effect of Tariff on Consumer and Producer Surplus:
Figure 8-2.
2) Costs and Benefits of a Tariff: Figure 8-3.
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9. Nov. 6
10. Nov.13
11. Nov. 20
12. Nov. 27
13. Dec. 4
14. Dec. 11
B. The Theory of Tariff Structure
1) Rising Tariff Rates with Degree of Domestic
Processing: Case Study 8-3.
2) Nominal and Effective Tariff Rates in the United
States, the European Union and Japan: Case Study 8-4.
C. Problems assigned.
Chapter 10. Economic Integration.
Problems discussed.
A. Trade-Creating Customs Union: Figure 10-1.
B. Trade-Diverting Customs Union: Figure 10-2.
C. Current Developments in the European Union, Nafta, and
Mercosur
Problems assigned.
Chapter 9. The World Trade Organization: historical perspective and
current developments.
Problems discussed.
A. The Political Economy of Protectionism: Fallacious and
questionable arguments for protection.
B. The History of U.S. Commercial Policy: Figure 9-3: U.S.
Average Tariff Rates on Dutiable Imports, 1900-1996.
C. The Uruguay Round and Outstanding Trade Problems.
Chapter 11. International Trade and Economic Development:
Current Problems Facing Developing Countries.
Quiz Number 4 on Chapters 8, 9 and 10
A. Growth According to Trade Orientation: Figure 11-2.
B. Manufactures in Total Exports of Selected Developing
Countries: Case study 11-4.
Paper due. Class discussion of papers.
Review for final exam.
Final exam.
Grade Weights:
Four Quizzes @15% each =
Paper
Final exam
Total
60%
10%
30%
100%
1. The quizzes and the final exam will be based on lectures and problems assigned from
the study guide. There will be NO MAKE UP quizzes. If you miss a quiz, the weight
of your final exam will be increased by the weight of the missed quiz. Quizzes will
be given during the FIRST thirty minutes of class time.
2. The subject of the paper is Revealed Comparative Advantage. Each student will write
a paper on a different country. The challenge is to infer the country’s revealed
comparative advantage from the data. The data are found in International Trade
Statistics Yearbook, Vol. II. World Development Indicators, 2000 (World Bank,
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Washington D.C. , March 2000) on Reference Shelf 22 in Paley Library at the Main
Campus. Imports and Exports are categorized in five categories: food; agriculture
and raw materials; fuels; ores and metals; manufactures. The paper must contain a
table in the same format as Table 3-1 Salvatore to support your inferences.
After you have inferred comparative advantage, write several paragraphs explaining
which parts of the table are explained by the Heckscher-Ohlin Theory, which by the
Economies of Scale Theory, and which by the Technological Gap theory and why
you think the data fit the relevant theory.
Length of paper: 500 to 750 words plus the Table. The paper should be doublespaced (250 words to the page). The paper may be submitted in Microsoft word as an
e-mail attachment or as a printed hard copy. It should be run through Spell Check of
the Word Processor.
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