Download INTERNAITONAL

JIANGXI UNIVERSITY OF FINANCE AND ECONOMICS
SCHOOL OF INTERNATIONAL TRADE AND ECONOMICS
FACULTY OF INTERANTIONAL TRADE
INTERNATIONAL TRADE AND FINANCE (11033)
COURSE OUTLINE
LECTURE: Tu Yuanfen
COURSE OBJECTIVE
The general learning objective is to provide students with adequate theoretical, empirical and
policy base required for the understanding of key issues of International finance.
COURSE DESCRIPTION
The aim of this course is to provide students with an understanding of the principles and applications of
international economics, so that students will be prepared to face the future complexities of the world
economy. The course will cover balance of payments and adjustment policies, fixed and flexible exchange
rates, the internationalization of financial markets, international capital mobility, international
macroeconomic policy coordination.
PREREQUISITES
Western Economics and Advanced Mathematics
TEXT BOOK
International Economics by Robert J. Carbaugh (13th edition)
Other useful texts are
International Economics Theory and Policy by Paul R. Krugman and Maurice Obstfeld, 7 th edition,
2005.
International Economics by Dominick Salvatore 10th edition, 2010.
二、教学时数分配
Chapter
Teaching Arrangement
Contents of course
Lecture
1
The International Economy
3
2
Foundations of Modern
Comparative Advantage
3
Sources of Comparative Advantage
6
4
Tariffs
6
5
Non-tariff Trade Barriers
6
6
Trade Regulations and Industrial Policies
5
7
Trade Policies for the Developing Nations
4
Trade
Theory ：
6
experiment
8
Regional Trading Arrangements
9
International
Factor
Multinational Enterprises
合
6
Movements
and
计
6
48
三、单元教学目的、教学重难点和内容设置
Chapter 1 the International Economy and Globalization
【Objectives】 After completing this chapter, the student should be able to:

Define economic interdependence.

Discuss the importance of international trade for the U.S. economy.

Examine the factors that make a company American.

Discuss the nature of competitiveness and how it applies to firms, industries, and nations.

Identify the advantages and disadvantages of international trade for workers.
【Focal and difficult points】
Define economic interdependence.
Examine the factors that make a company American.
Discuss the nature of competitiveness and how it applies to firms, industries, and nations.
【Teaching Contents】
This chapter introduces students to the international economy. The first part of the chapter emphasizes the
high degree of economic interdependence that characterizes today’s economies.
Economic
interdependence includes international trade and international finance.
The chapter also focuses on the United States as an open economy. Data are provided that show U.S.
exports as a percent of gross domestic product and the value of U.S. trade with its major trading partners.
The chapter notes that many U.S. firms source a portion of the production of their goods in foreign
countries.
The chapter concludes by discussing the nature of international competitiveness--for firms, industries, and
nations. It is noted that exposure to global competition tends to improve the efficiency of firms. Finally,
the chapter introduces the potential effects that international trade has on workers.
Chapter 2
Foundations of Modern Trade Theory: Comparative
Advantage
【Objectives】 After completing this chapter, the student should be able to:
• Identify the trading ideas of the mercantilists, Adam Smith, and David Ricardo.
• Compare and contrast the principle of absolute advantage and the principle of comparative advantage.
• Identify the effects of comparative advantage under conditions of constant opportunity costs and
increasing opportunity costs.
• Explain how exit barriers and trade barriers modify the conclusions of the principle of comparative
advantage.
• Summarize the empirical evidence regarding comparative advantage.
• Explain how the equilibrium terms of trade is influenced by changing supply and demand conditions.
• Show how the commodity-terms-of-trade concept measures the direction of the gains from trade.
• Discuss how the introduction of community indifference curves into the trade model allows a
restatement of the basis for trade and the gains from trade.
【Focal and difficult points】
Compare and contrast the principle of absolute advantage and the principle of comparative advantage.
Identify the effects of comparative advantage under conditions of constant opportunity costs and increasing
opportunity costs.
【Teaching Contents】
This chapter introduces students to the foundations of modern trade theory which seeks to answer three
questions: (1)What constitutes the basis for trade? (2) At what terms of trade are products exchanged in
international markets? (3) What are the gains from trade in terms of production and consumption?
The chapter first examines the historical development of modern trade theory by introducing the ideas of
the mercantilists, Adam Smith, and David Ricardo. Next, the deficiencies of mercantilism and Adam
Smith’s principle of absolute advantage are noted and attention shifts to David Ricardo’s principle of
comparative advantage. This principle is explained in terms of a production possibilities table and also in
terms of money.
The principle of comparative advantage is then explained under conditions of constant opportunity cost
and increasing opportunity cost. The analysis concludes that international trade can provide economic gains
for all trading nations. The chapter then extends the principle of comparative advantage to more than two
products and two countries. The chapter concludes by examining the empirical evidence regarding
comparative advantage.
Attention then shifts to the determination of the equilibrium terms of trade. The chapter emphasizes the
theory of reciprocal demand and offer curves in the determination of the equilibrium terms of trade. The
effect of economic growth on the terms of trade is also examined as is empirical data regarding the terms of
trade.
This chapter also discusses the role of demand in the trading model. The inclusion of demand allows us
to determine the autarky point on each nation’s production possibilities schedule, the equilibrium value of
the international terms of trade, and the equilibrium consumption point of each nation under free trade.
Chapter 3 Sources of Comparative Advantage
【Objectives】 After completing the chapter, students should be able to:

Discuss the nature and operation of the theory of factor endowments.

Identify the predictions of the theory of overlapping demands.




Explain how industrial policy may create comparative advantage and how environmental regulatory
policies may alter comparative advantage.
Distinguish between inter-industry trade and intra-industry trade.
Identify the factors that underlie trade in business services.
Discuss the effects of transportation costs on international trade.
【Focal and difficult points】
Discuss the nature and operation of the theory of factor endowments.
Explain how industrial policy may create comparative advantage and how environmental regulatory
policies may alter comparative advantage.
【Teaching Contents】
This chapter examines the leading theories that attempt to explain what underlies relative price differentials
among nations. Attention is then turned to the role of transportation costs and their effect on trade flows.
The chapter begins with a discussion of the factor endowment theory of trade as developed by Eli
Heckscher and Bertil Ohlin. The discussion considers the process of factor-price equalization and the
impact of trade on the distribution of income. Next examined is empirical evidence regarding the factor
endowment theory. The chapter also considers the role of economies of scale, overlapping demands,
intra-industry trade, and product cycles.
The principle of comparative advantage is then examined in a dynamic framework. Special emphasis is
given to the role of industrial policy and environmental regulatory policies.
Trade in business services is also discussed in this chapter. Although there is no single theory involving
trade in business services, the chapter identifies the major determinants underlying a nation’s
competitiveness in various services.
Finally, the chapter considers the effects of transportation costs on international trade patterns. It is noted
that transportation costs tend to reduce the volume of international trade by increasing the prices of traded
goods
Chapter 4 Tariffs
【Objectives】 After completing the chapter, students should be able to:

Define specific tariff, ad valorem tariff, and compound tariff.

Discuss the effective rate of tariff protection and the process of tariff escalation.

Explain how a tariff affects the welfare of a small importing country and a large importing country.

Evaluate the arguments in favor of trade restrictions.

Discuss the political economy of protectionism.
【Focal and difficult points】
Discuss the effective rate of tariff protection and the process of tariff escalation.
Explain how a tariff affects the welfare of a small importing country and a large importing country.
【Teaching Contents】
This chapter discusses the operation and effects of tariffs. The chapter first defines import tariff, export
tariff, specific tariff, ad valorem tariff, and compound tariff. Next discussed is the effective rate of tariff
protection and the process of tariff escalation. Attention then turns to postponing import duties via
bonded warehouses and foreign trade zones.
The chapter examines the welfare effects of an import tariff for a small importing country and a large
importing county. It is noted that if a nation is small compared to the world its overall welfare necessarily
falls if it levies a tariff on imports. If the importing nation is large relative to the world, the imposition of
an import tariff may improve its welfare.
The chapter then examines the merits of trade restrictions. Among the arguments for trade barriers are job
creation, protection against cheap foreign labor, fairness in trade, maintenance of the domestic standard of
living, and equalization of production costs, infant-industry argument, and various non-economic
arguments. The chapter concludes by examining the political economy of protectionism.
Chapter 5 Non-tariff Barriers
【Objectives】 After completing the chapter, students should be able to:

Identify the major non-tariff barriers to trade.

Compare and contrast the effects of import quotas, voluntary export quotas, and tariff-rate quotas.

Differentiate between an import subsidy and an export subsidy.

Explain how local content requirements affect a firm’s ability to share production with other nations.
【Focal and difficult points】
Compare and contrast the effects of import quotas, voluntary export quotas, and tariff-rate quotas.
【Teaching Contents】
This chapter considers policies other than tariffs that restrict the volume of international trade. Such
policies are known as non-tariff barriers to trade.
The first non-tariff barrier considered is the import quota. A quota can be administered on a global basis
or on a selective basis. Special attention is given to the revenue effect of an import quota that may be
captured by domestic importers, foreign exporters, or the domestic government. Also considered is a
tariff-rate quota and a voluntary export quota.
The subsidization of domestic producers is another topic investigated in the chapter. Emphasis is placed
on the differences between a subsidy granted to import-competing producers and a subsidy granted to
exporters. It is noted that a subsidy granted to import-competing producers results in a deadweight
welfare loss to the economy of only a protection effect, not a consumption effect.
Finally, the chapter discusses the nature and operation of international dumping. The reasons for dumping
are examined and also the impact of dumping on a firm’s revenue and profit.
Chapter 6 Trade Regulations and Industrial Policies
【Objectives】After completing the chapter, students should be able to:

Summarize the history of trade protection in the United States.

Discuss the merits of the General Agreement on Tariffs and Trade and its successor, the World Trade



Organization.
Identify the trade-remedy laws of the United States.
Evaluate the advantages and disadvantages of industrial policy.
Explain the purpose and operation of economic sanctions.
【Focal and difficult points】
Discuss the merits of the General Agreement on Tariffs and Trade and its successor, the World Trade
Organization.
【Teaching Contents】.
This chapter discusses the trade regulations of the United States. It also considers the various industrial
policies implemented by nations to enhance the competitiveness of their producers.
The chapter first examines the tariff history of the United States. Of particular importance is the
Smoot-Hawley Act of 1930 and the Reciprocal Trade Agreement Act of 1934 which set the stage for a
wave of trade liberalization. Trade liberalization was further promoted with the advent of the General
Agreement on Tariffs and Trade in 1947 and the World Trade Organization in 1995.
The United States has implemented a series of trade-remedy laws to produce a fair trading environment for
all parties engaged in international trade. These laws include the escape clause, countervailing duties,
antidumping duties, and Section 301 of the Trade Act of 1974. Also of importance is protection of
intellectual property rights and the trade adjustment assistance program.
The operation of industrial policy is another important topic. The chapter considers the industrial policies
of the United States and Japan and also empirical evidence concerning their merits. The effects of
strategic trade policy are also analyzed. The chapter concludes by analyzing the nature and operation of
economic sanctions.
Chapter 8 Trade Policies for the Developing Nations
【Objectives】 After completing the chapter, students should be able to:

Identify the trade problems of the developing countries.

Discuss the nature and operation of international commodity agreements.

Explain how the generalized systems of preferences attempt to improve the welfare of developing
countries.

Discuss the advantages and disadvantages of import-substitution policies and export-led growth.

Assess the recent economic performance of the East Asian economies.
【Focal and difficult points】
Discuss the advantages and disadvantages of import-substitution policies and export-led growth.
【Teaching Contents】
This chapter discusses the economic characteristics of the developing countries and the trade policies that
have been implemented to improve the well being of their people. The chapter begins by identifying the
major trade problems of developing countries: (1) lack of economic diversification, (2) unstable export
markets, and (3) worsening terms of trade.
Attention then turns to policies to stabilize the prices of primary products: (1) production and export
controls, (2) buffer stocks, and (3) multinational contracts. In general, these policies have had only
modest success in stabilizing commodity markets. To further help developing countries improve their
economic well-being, industrial countries have extended nonreciprocal tariff preferences to exports of
developing countries.
To enhance economic growth, developing countries have enacted an inward-looking strategy (import
substitution) and an outward-looking strategy (export-led growth). Developing countries which have
pursued export-led growth have generally realized higher rates of economic growth than those countries
that adopted import-substitution policies.
From the 1960s to the mid-1990s, East Asian economies realized remarkable records of high and sustained
economic growth. By the late 1990s, however, several nations experienced financial crises that weakened
their economies.
Chapter 8 Regional Trading Arrangements
【Objectives】 After completing the chapter, students should be able to:

Identify the stages of economic integration.

Discuss the static and dynamic effects of a regional trading arrangement.

Assess the nature and operation of the EU.

Discuss the advantages and disadvantages of the NAFTA.

Identify the reforms that the transition economies have implemented to improve their standard of
living.
【Focal and difficult points】
Discuss the static and dynamic effects of a regional trading arrangement.
【Teaching Contents】
This chapter investigates the theoretical and empirical aspects of regional trading arrangements. The
chapter begins by discussing the nature and stages of economic integration: (1) free trade area, (2) customs
union, (3) common market, (4) economic union, and (5) monetary union.
Of particular importance are the economic effects of a regional trading arrangement. The chapter analyzes
the short-run effects of trade creation and trade diversion. Next are the long-run effects which include
economies of scale, competition, and stimulus of investment.
The rise of the European Union (EU) is emphasized in this chapter. Of particular importance are the
reasons for the EU, the path of economic integration the EU has followed, and the effects of the EU.
Next discussed is the North American Free Trade Agreement (NAFTA). Emphasis is placed on the case
for and case against NAFTA and also the empirical evidence regarding NAFTA three years after its
inception. The chapter concludes by examining the hurdles that the transition economies have faced in
implementing market economies.
Chapter 9 International Factor Movements and Multinational Enterprises
【Objectives】 After completing the chapter, students should be able to:

Describe a multinational enterprise and the reasons why it diversifies its operations in foreign
countries.

Explain why a multinational enterprise is a source of conflict for source and host countries.

Identify the welfare effects that can result from the formation of an international joint venture among
competing firms.

Discuss the benefits and costs of international migration of labor.

Assess the merits of U.S. production sharing with Mexico and other countries.
【Focal and difficult points】
Identify the welfare effects that can result from the formation of an international joint venture among
competing firms.
【Teaching Contents】
This chapter examines the role of international capital flows as a substitute for trade in capital-intensive
products. Special attention is given to the multinational enterprise that carries on the international
reallocation of capital. The chapter also analyzes the international mobility of labor as a substitute for
trade in labor-intensive goods.
The chapter begins by discussing the nature and operation of the multinational enterprise. The motives for
foreign direct investment are also considered, including both demand factors and cost factors. Next, the
chapter considers the least-cost method of supplying goods abroad, the linkage between traditional trade
theory and multinational enterprise, and multinational enterprise as a source of conflict.
Another area of multinational enterprise involvement is the international joint venture. Of particular
importance are the welfare effects of joint ventures which include a cost-reduction effect and a deadweight
loss of consumer surplus.
The international mobility of labor is another important topic. The chapter examines the economic effects
of immigration and why it is a controversial issue.