Welcome!
MBA 628
Global Trade & Finance
Marriott School
Professor Bryson
TNRB 616, 422-2526
http://marriottschool.byu.edu/emp/em
ployee.cfm?emp=pjb3
Session 1
• Introduce Website
• Note that we will also use Blackboard
• Please review the syllabus before our next
meeting, where you can ask any questions
you may have about policies or procedures.
Session 1
• Among the major tasks of the course
– CD presentations. I have five basic
theory presentations on a CD available
in the computer lab (360 TNRB). Just
take in a blank CD.
– They are also available on line at sites
listed in the syllabus.
Session 1
– The CD does not represent extra work.
You will have one class day off for each
CD topic and quiz, following the plan in
the course outline. That time is to
prepare to take the related CD quiz on
Blackboard.
– Advantages of the CD. You can study or
review the topics at your own pace and
review them as many (or as few) times
as suits you.
Session 1
SECTION I, Introduction
• Discuss “Why Economics.ppt,” which partially
explain my views on economics.
• An aside: my views on Power Point
presentations.
The ones in the File Directory for the course are
my notes, not reading assignments.
Session 1
• Let us now take a moment to review why I
am an advocate of free trade.
• It’s simply because just about all
economists are. You will review the theory
from Smith and Ricardo through
contemporary economists. The theory is
clear and powerful.
Why Economics?
Its Nature and Functions
Prof. Bryson
Marriott School
Significance of economics

Before we got endowments and named
business or management school after rich
benefactors, we often named them
College of Business and Public
Administration or
College of Economics and Business
In Europe you often have Colleges of
Economics and Business and,
sometimes,
Universities of Economics
Significance of economics

If you believe economics is important for
business, why?

Economics is to business what
mathematics and physics are to
engineering.
Significance of economics

What is the conventional definition of
economics?
“Economics is the study of the allocation of
scarce resources for the satisfaction of
(unlimited) human wants.”
Alfred Marshall:

“Economics is the
study of mankind in
the ordinary
business of life.”

To you, what is “the
ordinary business
of life?”
Alfred Marshall: “Economics is the
study of mankind in the ordinary
business of life.”

“Man’s character has been moulded by his
every-day work, and the material resources
which he thereby procures, more than by any
other influence unless it be that of his religious
ideals…religious and economic influences have
nowhere been displaced from the front rank
even for a time; and they have nearly always
been more important than all others put
together. Religious motives are more intense
than economic, but their direct action seldom
extends over so large a part of life.”
Marshall, Principles of Economics,p.1
Why is economics so exciting?





Economics is mathematics and more.
It is at the core of most things we are
interested in. Beard’s history, for example.
Economics is a language
Economics is a system of logic
Economics is a method of
prediction and forecasting
Great Conceptions of Economics

1. Decision Optimization. Who optimizes?
 Consumers
 Firms
 Governments
and NGOs
2. Markets
 3. Organizations (the “New Institutional
Economics”)

Consider God’s Gifts as Resources
Spiritual
o Human life
o time for labor
o
o
and service,
scriptures,
temples
Temporal
o Homes, cars,
o machines and tools,
o human capital, land,
o technologies,
o productive capacities
Consider God’s Gifts as Resources
The Lord has said:
“Wherefore, verily I say unto you that all things
unto me are spiritual, and not at any time have I
given unto you a law which was temporal. …my
commandments are spiritual; they are not
natural nor temporal.”
D&C 29: 34, 35.
Consider God’s Gifts as Resources
We are stewards, owning nothing.
(Psalms 24:1)
“The earth is the Lord’s, and the
fullness thereof; the world, and they
that dwell therein.”
Our responsibility is to take care of (“to
allocate”) these resources well, increasing
them for the benefit of God’s children and for
building the kingdom.
My Philosophy of Education
1. There are revealed principles of the
gospel that are true. “Happy are ye if ye
do them.”
 2. There are foundation principles of
theory. These are of particular interest
when they are in harmony with divine
principles such as agency, human dignity,
regard for human life, etc.


3. There are interpretations of theory’s
implications. These suggest how the
theory should be applied. These
interpretations are influenced by the
individual’s preferences, educational
background, and experiences.

These interpretations may lead to a
political orientation American’s call
“liberal.” The philosophy here is
concern for the little man and the
disadvantaged and often implies
well-financed social programs.

Such interpretations may also lead to a
political orientation of conservatism.
The philosophy here is concern for
personal liberty and independence,
with limited government.
1. Principles 2.Theory
3. Interpretation
Liberal and
Conservative
attitudes

I am concerned about items 1 and 2. For
this course the emphasis will be on item 2.
I want you to understand the theory. The
interpretation is usually a matter of family
and previous educational experiences.
Economics and Belief



I want you to understand, not to
believe economic theory.
Science is the best set of hypotheses
available. These should be accepted
skeptically until the hypothesis can be
disproved (rejected)* or until a better
hypothesis comes along.
*In science, hypotheses must be set
up so that they can be rejected if
proved untrue. We accept them only
until someone is able to reject them.
Economics and Belief

We shall try very hard to aid the student in
understanding certain economic models. We
shall try not at all to convince him of their truth.
Indeed it would be counter to our purposes to
instill in the student belief in our models. Belief is
appropriate to theology. Science requires
understanding of the theoretical system that one
employs coupled with skepticism as to its
validity. We shall attempt to provide the reader
with the understanding. We trust that he will
provide himself with the skepticism.
Cliff Lloyd, Microeconomic Analysis
Economics and Abstraction
Finally, consider the words of the Lord:
 78 Teach ye diligently and my grace shall attend
you, that you may be instructed more perfectly
in theory, in principle, in doctrine, in the law of
the gospel, in all things that pertain unto the
kingdom of God, that are expedient for you to
understand; 79 Of things both in heaven and in
the earth, and under the earth; things which
have been, things which are, things which must
shortly come to pass; things which are at home,
things which are abroad; the wars and the
perplexities of the nations, and the judgments
which are on the land; and a knowledge also of
countries and of kingdoms— (My emphases)
D&C 88: 78, 79.
On the Beauty of Markets and Trade
• Trade Synonymous with Markets
“Fundamentally, the case for free trade is the case for the
market system. The benefits come in the form of greater
realization of the efficiencies available from
specialization, from more rapid technology transfer and
more productive allocation of resources, from
comparative advantage, and from the spur of competition.
They show up in higher rates of economic growth,
leading to higher wages and higher returns to capital,
leading to higher standards of living.”
Larry Summers, Past President, Harvard University,
Deputy Secretary of the Treasury, Clinton Administration
Session 1
• Henry George was a very famous early
American economist. His greatest work was
Progress and Poverty, 1879.
• A little later he wrote a book on the topic of
free trade, Protection or Free Trade: An
examination of the tariff question, with
especial regard to the interests of labor.
(1886)
• George found much wrong with the
economic theories of his day, but he agreed
with the growing tradition of free trade.
• Consider, as an introduction to the course,
some of his ideas on the topic.
• I have not only gone over the ground
generally traversed, and examined the
arguments commonly used, but…I have
sought to discover why protection retains
such popular strength in spite of all
exposures of its fallacies.
Protection or Free Trade, p. 7
NEAR the window by which I write, a great bull is
tethered by a ring in his nose. Grazing round and
round he has wound his rope about the stake until
now he stands a close prisoner, tantalized by rich
grass he cannot reach, unable even to toss his head to
rid him of the flies that cluster on his shoulders. Now
and again he struggles vainly, and then, after pitiful
bellowings, relapses into silent misery.
• This bull, a very type of massive strength, who,
because he has not wit enough to see how he
might be free, suffers want in sight of plenty, and
is helplessly preyed upon by weaker creatures,
seems to me no unfit emblem of the working
masses.
• In all lands, men whose toil creates abounding
wealth are pinched with poverty, and, while
advancing civilization opens wider vistas and
awakens new desires, are held down to brutish
levels by animal needs.
Bitterly conscious of injustice, feeling in their
inmost souls that they were made for more than
so narrow a life, they, too, spasmodically struggle
and cry out. But until they trace effect to cause,
until they see how they are fettered and how they
may be freed, their struggles and outcries are as
vain as those of the bull. Nay, they are vainer. I
shall go out and drive the bull in the way that will
untwist his rope. But who shall drive men into
freedom? Till they use the reason with which
they have been gifted, nothing can avail. For
them there is no special providence.
Protection or Free Trade, p. 9
I propose in these pages to examine a vexed
question which must be settled before there can
be any efficient union in political action for
social reform—the question whether protective
tariffs are or are not helpful to those who get
their living by their labor.
The policy of protection is again raising its head.
Here it is evident that the tariff question is the
great political question of the immediate future.
Protection or Free Trade, p. 9
For more than a generation the slavery
agitation, the war to which it led and the
problems growing out of that war have
absorbed political attention in the United
States. That era has passed, and a new one
is beginning, in which economic questions
must force themselves to the front. First
among these questions, upon which party
lines must soon be drawn and political
discussion must rage, is the tariff
question….one thing or the other must be
true—either protection does give better
opportunities to labor and raises wages, or
it does not. Protection or Free Trade, p. 11
Protection’s Effects
Protective tariffs are as much applications
of force as are blockading squadrons, and
their object is the same—to prevent trade.
The difference between the two is that
blockading squadrons are a means whereby
nations seek to prevent their enemies from
trading; …
Protection’s Effects
…protective tariffs are a means whereby
nations attempt to prevent their own people
from trading. What protection teaches us,
is to do to ourselves in time of peace what
enemies seek to do to us in time of war.
Protection or Free Trade, p. 47
Protectionism’s Bottom Line
It is as natural for men to trade as it is for
blood to circulate. Man is by nature a
trading animal, impelled to trade by
persistent desires, placed in a world where
everything shows that he was intended to
trade, and finding in trade the possibility of
social advance. Without trade man would
be a savage.
Where each family raises its own food,
builds its own house, makes its own
clothes and manufactures its own tools, no
one can have more than the barest
necessaries of life, and every local failure
of crops must bring famine.
A people living in this way will be
independent, but their independence will
resemble that of the beasts. They will be
poor, ignorant, and all but powerless
against the forces of nature and the
vicissitudes of the seasons.
Protection or Free Trade, p. 51
Effects of Free Trade
It is where trade could best be carried on
that we find wealth first accumulating and
civilization beginning. It is on accessible
harbors, by navigable rivers and muchtraveled highways that we find cities
arising and the arts and sciences
developing.
And as trade becomes free and extensive—
as roads are made and navigation
improved; as pirates and robbers are
extirpated and treaties of peace put an end
to chronic warfare—so does wealth
augment and civilization grow. All our
great labor-saving inventions, from that of
money to that of the steam-engine, spring
from trade and promote its extension.
Trade has ever been the extinguisher of
war, the eradicator of prejudice, the
diffuser of knowledge.
It is by trade that useful seeds and animals,
useful arts and inventions, have been
carried over the world, and that men in one
place have been enabled not only to obtain
the products, but to profit by the
observations, discoveries and inventions of
men in other places. .
Protection or Free Trade, pp. 53, 54
Fini
Session 2
• Fill out (non-required) information sheets.
• Major tasks of the course
– Team presentation and report. Organize
in teams of five.
– Submit your presentation priorities
Session 2
• Team presentation and report. Negotiate
about a topic:
• global role of some important country;
• an international economic institution
(World Bank, IMF, WTO, OECD);
• an international economic problem (the US
payments imbalance, US and EU antidevelopmental agricultural policies, etc.)
Session 2
• Please submit your topics priority list with
your team members and team name (I
suggest names after some kind of
electronic device).
Session 2
• Major tasks of the course
– Team report.
• The final reports will all be submitted
on November 30. To provide some
preparation time (either for the final or
the written report) and to provide the
fifth CD day, there will also be no
class on that day.
Session 2
• Make a seating chart.
• Are there any questions on the syllabus?
• You should now begin to review the CD
presentation “Markets” and prepare for the
quiz.
• In class we will review the Power Points
“Balance of Payments” and “Foreign
Exchange.”
Session 3
• Review team assignments.
• Take the CD quiz on Markets today.
Session 3
SECTION II. Trade Theory
• Review Power Points on
– Fixed and Floating Rates, and
– Exchange Rate Determination.
Session 4
• Review semester schedule, which now includes
class presentations.
• In the File Directory, see the Group Presentations
folder. It gives examples of past presentations.
Yours will be posted there in the course of the
semester.
• Discuss Power Point Presentation on
“Comparative Advantage” and
“Mercantilism”
Session 4
• Note that there is no class next session.
Use that class time to complete your
review of the CD presentation on Trade
Theory and take the CD Quiz on that topic.
You’ll find the quiz in Blackboard.
• Review Power Point presentation on
Mercantilism.
Session 5
• Discuss Power Point Presentation on
“Trade Theory Genesis” (See File
Directory)
• Review BM Trade and Welfare.ppt
• Note that there is no class tomorrow! Use
class time to take the CD quiz on Trade
Theory.
Session 6
• No class today. Use class time to complete
your review of the CD presentation on
Trade Theory and take the CD Quiz on that
topic. You’ll find the quiz in Blackboard.
Session 7
• Discuss the global petroleum market on the
basis of reading 11 in King. Discuss, as
time permits, the reading by Telhami and
Hill, "Does Saudi Arabia still matter?"
Session 8
• Trade policy discussion.
• Review steel protection policy
• Discuss the Chinese trade imbalance
problem
Steel Policy: The Good, the Bad,
and the Ugly
• Many were very surprised when President
Bush, expected to be an advocate for free
trade, listened and responded to the
arguments of the steel industry that steel
from foreign producers was being
“dumped” in the US market.
• To level the playing field, tariffs were
needed for a period of time to give the US
industry a chance to regroup, reorganize
and cut costs to become competitive in
fierce global competition.
Steel Policy: The Good, the Bad,
and the Ugly
• The Bush administration responded by
establishing steep tariffs for a period of a
few years. The EU and other steel
producers went ballistic.
• The tariffs were ultimately overturned by
the WTO and abandoned.
Steel Policy: The Good, the Bad,
and the Ugly
• Some were sure that the steel tariffs were
imposed because Bush hoped to win the
steel states in the next recession. (How
well did US manufacturing like the
tariffs?)
• Some contended that the exercise was one
step back, two steps forward. (See
Bergsten, “A Renaissance for U.S. Trade
Policy?” in the GTF reader.) Bush did it to
gain “fast-track” authority from congress.
Steel Policy: The Good, the Bad,
and the Ugly
• What mistakes do Huffbauer and Goodrich
think the Bush administration made in
proposing to protect the steel industry?
Steel Policy: The Good, the Bad,
and the Ugly
• One traditional argument for protecting an
industry like steel is that steel is critical for
national defense. Using what you have
learned from Huffbauer and Goodrich, do
you think failing to protect the US steel
industry would harm the US defense?
• Why or why not?
Steel Policy: The Good, the Bad,
and the Ugly
• What are legacy costs? Why are they
important in dealing with the steel
industry?
• Devise a non-protectionist national policy
to deal with these costs.
Session 9
• Trade and the environment
• Trade and labor standards
Session 10
Discussion on the WTO and Trade
Policy.
• Review the CD presentation on trade
policy for quiz in session 11.
Session 11
• No class today.
• Take CD quiz on Trade Policy