1. Lecture 0 Introduction: Overview of the International Economy by Alan V. Deardorff University of Michigan 2016 PubPol/Econ 541

2. Lecture 1: Overview2 Outline “Globalization” Trade Policies that Affect Others

3. Lecture 1: Overview3 Means different things to different people –My definitions (see my online Glossary): 1. The increasing world-wide integration of markets for goods, services and capital. 2. Also role of MNCs, IMF, WTO, World Bank. 3. Elsewhere: domination by United States. –Some see good, others see bad “Globalization”

4. Lecture 1: Overview4 Outline “Globalization” Trade Policies that Affect Others

5. Lecture 1: Overview5 Trade (per CIA, 2015 est.) –World exports: $16.64 trillion (compare world GDP of $74 trillion) –World trade has grown faster than world GDP most years But not during 2008-9, due to world recession And not now: Just lately it has declined! Country Interactions: Trade

6. Lecture 1: Overview6

7. 7 World Recession Recent Slowdown

8. Lecture 1: Overview8 See below for –Who trades most? –Who trades with whom? –Share of trade in GDP –US: What do we export/import? To/from whom? Country Interactions: Trade

9. Lecture 1: Overview9 Who Trades the Most? ($ b. & % share, 2014) ExportersImporters ValueShareValueShare China 234215.5 US 241315.9 EU-28* 226215.0 EU-28* 223214.7 US 162110.7 China 195912.9 Japan 6844.5 Japan 8225.4 Korea, S. 5733.8 Hng Kng 6014.0 World14622100.0World15191100.0 *EU external only Source: WTO, International Trade Statistics, 2015, Table I.8

10. Lecture 1: Overview10 WTO, World Trade Report 2015

11. Lecture 1: Overview11 WTO, World Trade Report 2015 Or, including Intra-EU(28) trade…

12. Lecture 1: Overview12 WTO, World Trade Report 2013

13. Lecture 1: Overview13 WTO, World Trade Report 2013

14. Lecture 1: Overview14 WTO, World Trade Report 2013

15. Lecture 1: Overview15 WTO, World Trade Report 2013

16. Lecture 1: Overview16 WTO, World Trade Report 2013

17. Lecture 1: Overview17 WTO, World Trade Report 2013

18. Lecture 1: Overview18 WTO, World Trade Report 2015

19. Lecture 1: Overview19 Importance of Trade for Countries? (GDP in US$ b., Exports % of GDP, Selected countries, 2015) GDPExports/GDP United States 1598.09% Japan 624.015% Germany 1292.038% Canada 428.328% India 287.614% Mexico 430.938% Netherlands 488.366% Singapore 384.6131% Philippines 58.720% Nepal 0.94% Source: CIA World Fact Book

20. Lecture 1: Overview20 Importance of Trade for Countries? A Few More of Interest GDPExports/GDP China 2270.021% Hong Kong 499.4161% Korea, South 535.539% Korea, North (2009) 4.014% Burma 9.815% Syria 3.012% Israel 56.419% Source: CIA World Fact Book

21. Lecture 1: Overview21 Who Trades with Whom? ($ b., 2014, Intra- and inter-regional merchandise trade) Source: WTO, International Trade Statistics, 2015, Table I.4 Destination: Origin:North Amer. Latin Amer. Eur.AsiaAfricaOther North Amer.12512143795044397 Latin Amer.1731791141701826 Europe5401194665738221447 Asia10651859003093207428 Africa39292011529820 Other1281853282851273 World3195744679254856391292

22. Lecture 1: Overview22 WTO, World Trade Report 2013

23. Lecture 1: Overview23 WTO, World Trade Report 2013 of Intra-Industry Trade

24. Lecture 1: Overview24 WTO, World Trade Report 2013

25. Lecture 1: Overview25 WTO, World Trade Report 2013

26. Lecture 1: Overview26 WTO, World Trade Report 2013 1990 2011

27. Lecture 1: Overview27 WTO, World Trade Report 2013

28. Lecture 1: Overview28 What Does the World Trade? ($ b. 2014 & annual % growth rates, merchandise exports) Source: WTO, International Trade Statistics, 2015, Table II.1 Value00-0505-13200910-14201220132014 All Products17,797 Agriculture1,76599– 12 7–152 Fuel&Mining3,7891610– 36 62–3–6 Manuf.12,24396– 20 5034

29. Lecture 1: Overview29 WTO, World Trade Report 2013

30. Lecture 1: Overview30 WTO, World Trade Report 2015

31. Lecture 1: Overview31 WTO, World Trade Report 2014

32. Lecture 1: Overview32 WTO, World Trade Report 2013

33. Lecture 1: Overview33 What Does the US Trade? ($ b. 2011) ExportsImports Total1,497.42,235.8 Agriculture140.0 Petroleum462.3 Industrial supplies496.4319.8 Capital goods, exc. auto493.2513.4 Automotive133.1255.2 Other non-ag234.6 Other non-petrol685.1 Source: Economic Report of the President, Feb 2013, Table B-104. Did (Not available since 2011)

34. Lecture 1: Overview34 What Does the US Trade? US imports are much larger than US exports US is a big… –Exporter of agricultural products –Importer of oil (but that’s been falling) –Exporter and importer of capital goods (i.e., machines for making things)

35. Lecture 1: Overview35 Outline “Globalization” Trade Policies that Affect Others

36. Lecture 1: Overview36 –Policies that affect other countries Direct Indirect Ways that countries interact economically

37. Lecture 1: Overview37 Ways that countries interact economically –Policies that affect other countries Direct –Trade policies (tariffs, quotas, FTAs, anti-dumping,…) –Foreign aid –Capital controls –Exchange rate management –Immigration restrictions Indirect

38. Lecture 1: Overview38 Ways that countries interact economically –Policies that affect other countries Indirect –Subsidies (esp. agriculture) »US farm subsidies > foreign aid –Macro policies (monetary, fiscal) »Exchange-rate policies –Environmental policies –Standards »Labor »Health & safety »Norms

39. Lecture 8: US39 US tariff history: 1810-1920 Today landandfreedoml.org

40. Lecture 8: US40 US tariff history: 1865-1960 Today Average tariff Smoot-Hawley Irwin, “Trade Restrictiveness and Deadweight Losses from U.S. Tariffs,” 2008, Fig 1.

41. Lecture 1: Overview41 OECD, Global Value Chains: Challenges, Opportunities, and Implications for Policy, 2014

42. Lecture 1: Overview42 OECD, Global Value Chains: Challenges, Opportunities, and Implications for Policy, 2014

43. Lecture 1: Overview43 Trade Agreements Past –GATT Rounds: Multilateral reductions in tariffs and other barriers Uruguay Round created WTO in 1995 –European Economic Community (now EU) Customs union –NAFTA = North American Free Trade Agreement Free trade among US, Canada, Mexico –Other FTAs: Several hundred in force today

44. 44 WTO

45. 45

46. 46

47. 47

48. 48

49. 49

50. 50

51. 51

52. 52

53. 53

54. 54

55. Lecture 1: Overview55 Trade Agreements Present –Doha Round: Multilateral negotiations, begun 2001 Negotiations limped along until December 2015 Round ended in failure at 2015 WTO Ministerial in Nairobi –Trans-Pacific Partnership (TPP) 12 country-FTA, “21 st century trade agreement” Includes: US, Japan and others Does not include China –Trans-Atlantic Trade and Investment Partnership (TTIP): US and EU

56. Lecture 1: Overview56 Trade Agreements Most Recent –“Bali Package” on Trade Facilitation December 2013 First ever agreement reached under WTO Adopted in November 2014 –The 2015 Nairobi commitment to abolish export subsidies for farm products

57. Lecture 1: Overview57 OECD, Global Value Chains: Challenges, Opportunities, and Implications for Policy, 2014