Paul H. Nitze SAIS Bologna Center
Johns Hopkins University
International Trade Theory (EC.04B)
Spring 2008, Tuesdays, 3:00pm- 4:50 pm
Contact Information
Prof. David Cheong
Rm. 211
Email: dcheong@jhubc.it
Phone: 051 2917 824
Office Hours: Tuesdays and Wednesdays, 5:00-7:00 pm or by appointment
Course Overview
Why does international trade exist? Why do governments impose trade barriers? Why are
international trade talks so inflammatory? In this course, students will first develop an
understanding of the economic reasons for international trade. We will begin with an
examination of the causes of trade, the sources of the gains from trade, and the domestic
and international distribution of those gains. In the second part of the course, students will
study the economic impact of trade measures (such as tariffs and quotas) and the debate on
protectionism. This will provide the background for a political-economy analysis of trade
policy and the multilateral trading system, particularly the role of the World Trade
Organization in international trade negotiations and international trade disputes. The course
will also cover the topics of preferential trading arrangements, the impact of international
factor movements, namely labor migration and foreign investment.
Textbook
The textbook for this course is Robert Feenstra and Alan Taylor, International
Economics 1st ed. Worth Publishers.
Prerequisites
EC.01 or EC.01Acc (Microeconomics). The material in this course assumes that students are
familiar with concepts such as indifference curves, price ratios, consumer and producer
surplus, etc. Chapter 5 of the course textbook provides a review of microeconomic concepts
that will be used in our analysis of international trade.
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Course Schedule
The table below contains dates for lectures, distribution and submission of problem sets, and
the mid-term exam. The date of the final exam will be set by the Registrar. For each lecture,
students are required to prepare by reading the relevant textbook chapter(s) (FT = Feenstra
and Taylor). The other readings listed are recommended, and some will be used for class
discussion.
Class
Dates
12-Feb
19-Feb
26-Feb
4-Mar
11-Mar
1-Apr
Lecture Topics and Readings
INTRODUCTION
FT Chapter 1
THEORIES OF INTERNATIONAL TRADE (The "Classical" or Ricardian Theory)
FT Chapter 2
Problem Set 1 Distributed
 Krugman, Paul (1997), “Ricardo’s difficult idea”,
http://web.mit.edu/krugman/www/ricardo.htm
 Carlin, Wendy, Glyn, Andrew, and Van Reenen, John (2001), “Export Market
Performance of OECD Countries: An Empirical Examination of the Role of Cost
Competitiveness” Economic Journal.
THEORIES OF INTERNATIONAL TRADE (The Specific Factors Model)
FT Chapter 3
Problem Set 1 Due
THEORIES OF INTERNATIONAL TRADE (The Hecksher-Ohlin Model)
FT Chapter 4 (4.1-4.3)
THEORIES OF INTERNATIONAL TRADE (Applications and Empirical Tests of the HecksherOhlin Model)
FT Chapter 4 (4.4 and Appendix)
Problem Set 2 Distributed
 Trefler, Daniel (1993), “International factor price differences: Leontief was right!”
Journal of Political Economy.
 Freeman, Richard B. (1995), “Are Your Wages Set in Beijing?” Journal of Economic
Perspectives
 Slaughter, Matthew J., and Swagel, Phillip (1997), “Does Globalization Lower Wages
and Export Jobs?” Economic Issues No. 11, IMF. On the IMF web site
(www.imf.org/external/pubs/ft/issues11/index.htm)
 Greenaway, David and Nelson, Douglas (2000), “The assessment: globalization and
labour-market adjustment”, Oxford Review of Economic Policy
THEORIES OF INTERNATIONAL TRADE (Demand, Technological Change, Scale Economies,
Imperfect Competition, Firm-Level Characteristics)
FT Chapter 6
Problem Set 2 Due
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

8-Apr
15-Apr
22-Apr
29-Apr
6-May
Krugman, Paul (1979), “Increasing Returns, Monopolistic Competition, and
International Trade,” Journal of International Economics.
Helpman, Elhanan (1999), The Structure of Foreign Trade, Journal of Economic
Perspectives.
Bernard, Andrew. B., Jensen, J. Bradford, and Schott, Peter. K. (2005), “Importers,
Exporters, and Multinationals: A Portrait of Firms in the U.S. that Trade Goods”,
NBER Working Paper No. 11404
Mid-Term Exam
THE THEORY AND PRACTICE OF COMMERCIAL POLICY: Tariffs and Quotas under Perfect
Competition
FT Chapter 8
Problem Set 3 Distributed
 Feenstra, Robert C. (1992), “How Costly is Protection?” Journal of Economic
Perspectives.
THE THEORY AND PRACTICE OF COMMERCIAL POLICY: Tariffs and Quotas under
Imperfect Competition
FT Chapter 9
Problem Set 3 Due
 Schott, Jeffrey J. (2005), “Confronting Current Challenges to US Trade Policy”,
Chapter 8 in “The United States and the World Economy: Foreign Economic Policy
for the Next Decade” edited by C. Fred Bergsten, the Institute for International
Economics.
 Mankiw, Gregory N. (2005) “Antidumping: The Third Rail of Trade Policy,” Foreign
Affairs.
THE THEORY AND PRACTICE OF COMMERCIAL POLICY: Export Subsidies in Agriculture
and Hi-Tech Industries
FT Chapter 10
INTERNATIONAL TRADE AGREEMENTS
FT Chapter 11
Problem Set 4 Distributed
 Baldwin, Robert E. (1997), “The causes of regionalism”, The World Economy.
 World Bank (2000), “Trade Blocs”.
 World Bank (2004), “Global Economic Prospects, 2005: Trade, Regionalism, and
Development”.
 Krugman, Paul (1997), “What should trade negotiators negotiate about?” Journal of
Economic Literature.
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13-May
TRADE, GROWTH, AND DEVELOPMENT
Problem Set 4 Due
 Hallak, Juan Carlos and Levinsohn, James (2004), “Fooling Ourselves: Evaluating the
Globalization and Growth Debate,” 2004, Mimeo
http://www.umich.edu/~jamesl/FO_7.doc
 Hertel, Thomas W. and Winters, L. Alan (2005), “Poverty Impacts of A WTO
Agreement: Synthesis and Overview,” Chapter 1 in Poverty and the WTO: Impacts
of the Doha Development Agenda,
http://siteresources.worldbank.org/INTTRADERESEARCH/Resources/Overview
PovWTO.pdf
 Winters, L. Alan. 2004. “Trade Liberalization and Poverty: The Evidence So Far.”
Journal of Economic Literature.
20-May
INTERNATIONAL FACTOR MOVEMENTS AND FOREIGN OUTSOURCING
FT Chapters 5 and 7
 Blomstrom, M. and Kokko, A (1997), “How Foreign Direct Investment Affects Host
Countries”, World Bank Policy Research Working Paper Series, No. 1745
 Aitken B and Harrison A (1999), “Do Domestic Firms Benefit from Direct Foreign
Investment? Evidence from Venezuela”, American Economic Review, 89, 605-18.
 Lewis, Ethan (2005), “How Do Local Labor Markets in the U.S. Adjust to
Immigration?” Federal Reserve Bank of Philadelphia, Business Review.
(www.phil.frb.org/files/br/brq105el.pdf).
 Borjas, George (2005), “The Labor-Market Impact of High-Skill Immigrants,”
American Economic Review
(http://ksghome.harvard.edu/~GBorjas/Papers/w11217.pdf).
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Course Evaluation
Problem Sets (20%)
There will be four problem sets assigned during the semester. Each will make up 5% of your
final grade. These assignments are meant to advance your understanding of the models
studied in the course. You will have one week to complete each problem set once it is
assigned. You are encouraged to work in groups of not more than 3 members.
Exams (70%)
This course will have one mid-term and one final exam, each making up 30% and 40%
respectively of your final grade.
Participation (10%)
Students are actively encouraged to participate in lectures and course activities. The
assessment will be based on the quality of comments made during class and contributions to
extra-class activities.
Review Sessions
There will be weekly one-hour review sessions led by our teaching assistants, in which
students will test their comprehension of the lecture material by solving problems related to
the week’s lecture. These practice problems will enable students to focus on and apply key
ideas and concepts.
Communication
As the class meets only once a week, I will use email to make any urgent announcements or
carry on any prematurely-ended class discussions. So, please check your email regularly. If
you wish to contact me, my coordinates and contact details are on the first page of this
syllabus. You are welcome to see me during my office hours without an appointment. If you
would like to see me at other times, please email me to fix an appointment. Email is the
most efficient means of communicating with me outside of class or office hours.
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