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International Trade: Economic Analysis of Globalization and Policy



Pub. Date:
John Wiley & Sons Inc
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McLaren's Economics of International Trade reviews economic models and present theories to explain the benefits and goals of trade between countries, generally assume a minimum exposure to Principles of Microeconomics. It is rigorous and unique in its presentation of stories about countries in today's world first. Following the real-world stories, the text also offers standard theoretical constructs and economic models.

Table of Contents


I. Engines of globalization.

1. A second surge of globalization.

[Key Facts About Globalization; its Main Forms; and Outline of Book.]

1.1. The First Wave.

1.2. The Second Wave.

1.3. Crisis, Peak Oil – and De-Globalization?

1.4. The Forces at Work.


2. Should Nigeria strive for food self-sufficiency?

[The Ricardian Model, and Comparative Advantage as a Reason for Trade.]

2.1. A Presidential Agenda.

2.2. The Comparative Advantage Argument Formalized: Introducing the Ricardian Model.

2.3. Autarky in the Ricardian Model.

2.4. Free Trade in the Ricardian Model.

2.5. So what actually happened?

2.6. Additional insights from Ricardo’s model.

2.7. Main ideas.


3. Why do Americans get their Impalas from Canada?

[Increasing Returns to Scale as a Reason for Trade.]

3.1. Impalas on the horizon.

3.2. Increasing returns more generally.

3.3. How to tackle Europe: Trade vs. FDI.

3.4. On a smaller scale: Trade and increasing returns in furniture.

3.5 Adding Heterogeneity: The Melitz Effect.

3.6. Main ideas.


4. Kodak and Fuji: Is world trade rigged in favor of large corporations?

[Oligopoly as a Reason for Trade.]

4.1. Big Players in the Game of Trade.

4.2. Background on Kodak, Fuji, and the War.

4.3. Introducing Oligopoly.

4.4. Autarky.

4.5. Trade.

4.6. Winners and Losers.

4.7. Some other possibilities.

4.8. Main ideas.


II. Politics and policy in the world economy.

5. Why did the North want a tariff, and why did the South call it an abomination?

[Specific Factors and the Effects of Trade (with preliminary look at Tariffs).]

5.1. A Cold War Before the Hot War.

5.2. A Pure Specific-Factors Model.

5.3. The Tariff.

5.4. A Constitutional Error, and the Lerner Symmetry Theorem.

5.5. A Mixed Model.

5.6. Main ideas.


6. Is free trade a rip-off for American workers?

[The Heckscher-Ohlin Model.]

6.1. The Charges.

6.2. The Model with Fixed Coefficients.

6.3. Supply, Demand, and Equilibrium.

6.4. Trade and the Distribution of Income.

6.5. Allowing substitutability – and the tell-tale signs.

6.6. Testing the Theory.

6.7. Main ideas.


7. Why doesn’t our government want us to import sugar?

[Trade policy in comparative-advantage models; tariffs, quotas, and VER’s.]

7.1. Sinking LifeSavers.

7.2. Hypothesis I: The terms-of-trade motive.

                7.2.1. A Partial-equilibrium Model.

                7.2.2. The Effects of a Tariff.

                7.2.3. The Effects of a Quota.

                7.2.4. Evaluation: Is the Terms-of-Trade Motive Sufficient?

7.3. Hypothesis II: Interest Groups.

7.4. Additional Observations.

                7.4.1.The Optimal Tariff.

                7.4.2. The Optimal Tariff for a Small Country is Zero.

                7.4.3. Voluntary Export Restraints.

                7.4.4. Equivalence of Tariffs and Quotas (and How It Can Break Down).

                7.4.5. Non-optimality of Export Subsidies.

                7.4.6. The Argument in General Equilibrium.

                7.4.7. The Effective Rate of Protection.

7.5. Main Ideas.


8. Who Are the WTO, and What Do They Have Against Dolphins?

8.1. The Dolphin Fiasco, and Other Stories.

8.2. The need for trade policy coordination: The trade war problem and the role of the WTO.

8.3. But In an Interconnected World, All Policies are Trade Policies.

8.4. The Sham Problem.

8.5. The WTO’s wobbly tightrope walk.

8.6. Main ideas.


9. Should Third-World Governments use tariffs to jump-start growth?

[Infant-industry protection, ISI, and economic development.]

9.1. A Silver Bullet?

9.2. The Infant-Industry Argument: Background.

9.3. Learning by Doing: An Insufficient Argument.

9.4. Market-failure Arguments for Infant-Industry Protection.

                9.4.1. Credit-market Failures.

                9.4.2. Learning Spillovers.

                9.4.3. Agglomeration Externalities and Trade.

9.5. What Has Actually Happened?

9.6. Main ideas.


10. Did Ronald Reagan get punked by Japanese automakers?

[Strategic trade policy; tariffs, quotas and VER’s with oligopoly.]

10.1. A Paradox of Aggressive Trade Policy.

10.2.A First Attempt: A Competitive Model.

10.3. Does a Cournot Interpretation Work?

10.4. Trying on a Bertrand Model.

10.5. A Closer Look: Trade Policy with Cournot Oligopoly.

10.6. Trade Policy with Bertrand Oligopoly.


III. Current controversies.

11. Should the iPod be made by American workers?

11.1. Made All Over.

11.2. Offshoring and Inequality: The Feenstra-Hanson Theory.

11.3. Offshoring and Productivity: An Alternative Model.

11.4. How Do These Theories Stand Up To The Data?

11.5. Another Approach: Evidence from Aggregate Employment.

11.6. A Bottom Line, Open Questions, and the Obama Critique.


12. Should we build a border fence?

12.1. Calls for a Crackdown, and Calls for Compassion.

12.2. Three Theories, and One Thing They Agree On.

12.3. Three Key Pieces of Evidence.

12.4. The Upshot.


13. Trade and the environment: Is globalization green?

13.1. A Disaster on a Global Scale?

13.2. Two Theories (but One Model).

13.3. The Evidence.


14. Sweatshops and child labor: Globalization and human rights.

14.1. Globalization and Child Labor.

                14.1.1. Did a Child Slave Pick the Cocoa for My Chocolate Bar?

                14.1.2. Globalization and Child Labor – Some Theory.

                14.1.3. Evidence and Implications for Policy.

                14.1.4. Bottom Line on the Child Labor Question.

14.2. Sweatshops and Multinationals.

                14.2.1. Sweatshops Arise from Poverty.

                14.2.2. Multinationals May Be Part of the Solution.

                14.2.3. But There May Still Be Good Reason to Keep the Pressure On.

14.3. Globalization and Human Rights More Generally.

                14.3.1. The Effect on Democracy: Political Influence of Multinational Firms.

                14.3.2. The Effect on Democracy: The Effect of Trade.

                14.3.3. Globalization and Civil War.

                14.3.4. A Note on Women’s Rights.

14.4. Conclusion: Getting the Globalization You Want.


15. Is NAFTA a betrayal of the poor, or a path to prosperity?

15.1.  A Competition: Who Hates NAFTA the Most?

15.2.  Preferential trade agreements: Background and key principles.

                15.2.1.  Types of agreement.

                15.2.2.  Article XXIV.

15.3.  The Classic Trade-off: Trade Creation and Trade Diversion.

15.4.  Distributional Concerns.

                15.4.1.  US Workers.

                15.4.2.  The Mexican poor.

15.5.   The Notorious Chapter 11.

15.6.  Some Issues That Affect PTA’s More Broadly.

                15.6.1.  Counting Lost Jobs: A Popular Mismeasurement.

                15.6.2.  National Bargaining-Power Issues.

                15.6.3.  Preferential Agreements and the Multilateral Process.

15.7.  Conclusion.


IV. Macroeconomic aspects of globalization.

16. Is the trade deficit a time bomb?

[National accounting, intertemporal trade, and the Fisher model.]

16.1. Not a Subtle Change.

16.2. What is a Trade Deficit?

                16.2.1. Definitions, and Why it Hasn’t Shown Up Before.

                16.2.2. The National Income Identity.

                16.2.3. The Current Account and the Financial Account.

                16.2.4. Bilateral vs. Multilateral Deficits.

16.3. Why Would a Country Run a Trade Deficit?

16.4.Can the Trade Deficit Ever be a Problem?


17. Trade and exchange rates: Is the Renminbi the culprit?

[Money and exchange rates in a dynamic general-equilibrium trade model.]

17.1. The Ultimatum.

17.2. Basic Facts About Foreign-Exchange Markets.

17.3. A Dynamic, General-Equilibrium Model of Exchange-Rate Determination.

                17.3.1. The Setup.

                17.3.2. Equilibrium.

17.4. Equilibrium Responses.

                17.4.1. What Happens if the Value of the Renminbi is Raised?

                17.4.2. Anticipated Devaluation.

                17.4.3. Productivity Effects.

                17.4.4. Anticipated Productivity Changes.

                17.4.5. A Fiscal Interpretation.

17.5. Adding Nominal Rigidity.

17.6. Main Ideas.



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