Week 8 - International Trade


A protest against the EU-Canada Comprehensive Economic Trade Agreement in Berlin.

Questions

The most simple models of international trade tell us that opening to trade makes a small open economy better off: by expanding the trade possibilities, the total surplus in the economy increases. If this "gains from trade theorem" is correct, why is there is so much resistance against trade liberalization? If there are, always and indisputably, gains from trade, why can trade liberalization result in such strong opposition?


References


- Unit 18 in the Core-Econ ebook

- Chapter 4 "Globalization and Inequality" in the World Economic Outlook, IMF 2007

- Chapter 5 "Trade Liberalization: Why so much controversy?" in Economic growth in the 1990s: learning from a decade of reform  World Bank, 2005
- Rodriguez, Francisco and Dani Rodrik (2000), "Trade Policy and Economic Growth: a Skeptic's guide to the Cross-National Evidence" in NBER Macroeconomics Annual

- Dani Rodrik. The Fatal flaw of neoliberalism, The Guardian, 14th Nov 2017
- O’Rourke (2000), "Tariffs and Growth in the Late 19th Century", The Economic Journal, 110.
- Chapters 16, 17, and 18 in Debraj Ray (1998), Development Economics, Princeton University Press

- Stiglitz (2017), “The overselling of globalization”, Business Economics.

Assignments


Assignment 1

Does trade liberalization lead to more development?

Assignment 2

Is international trade an engine of growth in developing countries? Through what mechanisms can import and export liberalization enhance or stifle productivity growth?

Assignment 3

A democratic government is elected in Cuba. You are asked to advise the new government on its trade policy. Make four arguments, at least one for and at least one against a free-trade policy for Cuba. Back up your arguments with sound economic mechanisms and empirical evidence as needed.