International Trade: Theory and Policy

Table of Contents

• Licensing Information

• Preface

• Chapter 1: Introductory Trade Issues: History, Institutions, and Legal Framework

  • The International Economy and International Economics
  • Understanding Tariffs
  • Recent Trade Controversies
  • The Great Depression, Smoot-Hawley, and the Reciprocal Trade Agreements Act (RTAA)
  • The General Agreement on Tariffs and Trade (GATT)
  • The Uruguay Round
  • The World Trade Organization
  • Appendix A: Selected U.S. Tariffs—2009
  • Appendix B: Bound versus Applied Tariffs

• Chapter 2: The Ricardian Theory of Comparative Advantage

  • The Reasons for Trade
  • The Theory of Comparative Advantage: Overview
  • Ricardian Model Assumptions
  • The Ricardian Model Production Possibility Frontier
  • Definitions: Absolute and Comparative Advantage
  • A Ricardian Numerical Example
  • Relationship between Prices and Wages
  • Deriving the Autarky Terms of Trade
  • The Motivation for International Trade and Specialization
  • Welfare Effects of Free Trade: Real Wage Effects
  • The Welfare Effects of Free Trade: Aggregate Effects
  • Appendix: Robert Torrens on Comparative Advantage

• Chapter 3: The Pure Exchange Model of Trade

  • A Simple Pure Exchange Economy
  • Determinants of the Terms of Trade
  • Example of a Trade Pattern
  • Three Traders and Redistribution with Trade
  • Three Traders with International Trade
  • The Nondiscrimination Argument for Free Trade

• Chapter 4: Factor Mobility and Income Redistribution

  • Factor Mobility Overview
  • Domestic Factor Mobility
  • Time and Factor Mobility
  • Immobile Factor Model Overview and Assumptions
  • The Production Possibility Frontier in the Immobile Factor Model
  • Autarky Equilibrium in the Immobile Factor Model
  • Depicting a Free Trade Equilibrium in the Immobile Factor Model
  • Effect of Trade on Real Wages
  • Intuition of Real Wage Effects
  • Interpreting the Welfare Effects
  • Aggregate Welfare Effects of Free Trade in the Immobile Factor Model

• Chapter 5: The Heckscher-Ohlin (Factor Proportions) Model

  • Chapter Overview
  • Heckscher-Ohlin Model Assumptions
  • The Production Possibility Frontier (Fixed Proportions)
  • The Rybczynski Theorem
  • The Magnification Effect for Quantities
  • The Stolper-Samuelson Theorem
  • The Magnification Effect for Prices
  • The Production Possibility Frontier (Variable Proportions)
  • The Heckscher-Ohlin Theorem
  • Depicting a Free Trade Equilibrium in the Heckscher-Ohlin Model
  • National Welfare Effects of Free Trade in the Heckscher-Ohlin Model
  • The Distributive Effects of Free Trade in the Heckscher-Ohlin Model
  • The Compensation Principle
  • Factor-Price Equalization
  • The Specific Factor Model: Overview
  • The Specific Factor Model
  • Dynamic Income Redistribution and Trade

• Chapter 6: Economies of Scale and International Trade

  • Chapter Overview
  • Economies of Scale and Returns to Scale
  • Gains from Trade with Economies of Scale: A Simple Explanation
  • Monopolistic Competition
  • Model Assumptions: Monopolistic Competition
  • The Effects of Trade in a Monopolistically Competitive Industry
  • The Costs and Benefits of Free Trade under Monopolistic Competition

• Chapter 7: Trade Policy Effects with Perfectly Competitive Markets

  • Basic Assumptions of the Partial Equilibrium Model
  • Depicting a Free Trade Equilibrium: Large and Small Country Cases
  • The Welfare Effects of Trade Policies: Partial Equilibrium
  • Import Tariffs: Large Country Price Effects
  • Import Tariffs: Large Country Welfare Effects
  • The Optimal Tariff
  • Import Tariffs: Small Country Price Effects
  • Import Tariffs: Small Country Welfare Effects
  • Retaliation and Trade Wars
  • Import Quotas: Large Country Price Effects
  • Administration of an Import Quota
  • Import Quota: Large Country Welfare Effects
  • Import Quota: Small Country Price Effects
  • Import Quota: Small Country Welfare Effects
  • The Choice between Import Tariffs and Quotas
  • Export Subsidies: Large Country Price Effects
  • Export Subsidies: Large Country Welfare Effects
  • Countervailing Duties
  • Voluntary Export Restraints (VERs): Large Country Price Effects
  • Administration of a Voluntary Export Restraint
  • Voluntary Export Restraints: Large Country Welfare Effects
  • Export Taxes: Large Country Price Effects
  • Export Taxes: Large Country Welfare Effects

• Chapter 8: Domestic Policies and International Trade

  • Chapter Overview
  • Domestic Production Subsidies
  • Production Subsidies as a Reason for Trade
  • Production Subsidy Effects in a Small Importing Country
  • Domestic Consumption Taxes
  • Consumption Taxes as a Reason for Trade
  • Consumption Tax Effects in a Small Importing Country
  • Equivalence of an Import Tariff with a Domestic (Consumption Tax plus Production Subsidy)

• Chapter 9: Trade Policies with Market Imperfections and Distortions

  • Chapter Overview
  • Imperfections and Distortions Defined
  • The Theory of the Second Best
  • Unemployment and Trade Policy
  • The Infant Industry Argument and Dynamic Comparative Advantage
  • The Case of a Foreign Monopoly
  • Monopoly and Monopsony Power and Trade
  • Public Goods and National Security
  • Trade and the Environment
  • Economic Integration: Free Trade Areas, Trade Creation, and Trade Diversion

• Chapter 10: Political Economy and International Trade

  • Chapter Overview
  • Some Features of a Democratic Society
  • The Economic Effects of Protection: An Example
  • The Consumers’ Lobbying Decision
  • The Producers’ Lobbying Decision
  • The Government’s Decision
  • The Lobbying Problem in a Democracy

• Chapter 11: Evaluating the Controversy between Free Trade and Protectionism

  • Introduction
  • Economic Efficiency Effects of Free Trade
  • Free Trade and the Distribution of Income
  • The Case for Selected Protection
  • The Economic Case against Selected Protection
  • Free Trade as the “Pragmatically Optimal” Policy Choice