1. Slide 1-1 International Trade

2. Slide 1-2  Text book International Economics:Theory and Policy(7ed) Paul R. Krugman Maurice Obstfeld

3. Chapter 1 Introduction

4. Slide 1-4 About This Course…  Principle of Economics  Theoretical Economics vs. Applied Economics  About Mathematics  Our stress: concepts & applications  Lecture: week 6-19; Test: week 20  Attendance  Assignments & Class Discussions

5. Slide 1-5 BRIEF CONTENTS  PREFACE  1 Introduction  PART I INTERNATIONAL TRADE THEORY  2 World Trade: An Overview  3 Labor Productivity and Comparative Advantage: The Ricardian Model  4 Resources, Comparative Advantage and Income Distribution  5 The Standard Trade Model  6 Economies of Scale, Imperfect Competition, and International Trade  7 International Factor Movements 5

6. Slide 1-6 BRIEF CONTENTS  PART II INTERNATIONAL TRADE POLICY 8 The Instruments of Trade Policy 9 The Political Economy of Trade Policy 10 Trade Policy in Developing Countries 11 Controversies in Trade Policy 6

7. Slide 1-7 Why are we caring about International trade?

8. Slide 1-8 Fig 1-1

9. Slide 1-9 Trade Openness

10. Slide 1-10 10 Export Import Billion dollars Export Import Billion Dollars

11. Slide 1-11 Introduction  What is International Economics About?  International Economics: Trade and Money

12. Slide 1-12  International trade deals with economic interactions that occur between sovereign nations. (eg. Trade between U.S. & Mexico; Shanghai & Beijing?) The role of governments in regulating international trade and investment is substantial. Analytically, international markets allow governments to discriminate against a subgroup of companies. Governments also control the supply of currency. What is International Economics About?

13. Slide 1-13 1.What Is International Economics About? 13 The Gains from Trade The Pattern of Trade Protectionism Micro-part

14. Slide 1-14  The Gains from Trade Can & cannot produce by itself. Why import when a good could be produced domestically? When countries sell goods and services to one another, all countries benefit. (ch3, productivity & wage; ch4, production factor abundance; ch6, economies of scale Specialization & effieicncy _tangible goods ch7, factor movements: international migration & borrowing and lending._intangible goods) Trade and income distribution –International trade might hurt some groups within nations. (eg. specific resources owners; labor and capital owners) –Trade, technology, and wages of high and low-skilled workers. (disputs) (ch4,ch5) What is International Economics About?

15. Slide 1-15 What is International Economics About? The Pattern of Trade (W ho trade with whom or sells what to whom?) –Climate and resources determine the trade pattern of several goods. –In manufacturing and services the pattern of trade is more subtle. (eg. Japan for autos vs. U.S. for aircraft? ) -International difference in labor productivity.(ch3, Ricardo,19C) -The relative supply & use of national resources such as capital, labor, and land.(ch4,20C, powerful but controversial) -A substantial random component.(ch6, economy of scale, market structure, policy etc.) –There are two types of trade »Interindustry trade depends on differences across countries. »Intraindustry trade depends on market size and occurs among similar countries.

16. Slide 1-16  Protectionism? (How much to trade?) Globalization: for or against? (NAFTA vs. EU? WTO negotiation, ASIA…) (Seattle) Cost-benefit analysis? Many governments are trying to shield certain industries from international competition. (eg. Export subsidizing or import quota) Government interventions: politics. (ch4 income distribution effects; ch9-11 power within countries matters) This has created the debate dealing with the costs and benefits of protection relative to free trade. –Advanced countries’ policies engage in industrial targeting. –Developing countries’ policies promote industrialization: –Import substitution versus export promotion industrialization. What is International Economics About?

17. Slide 1-17  The Balance of Payments Some countries run large trade surpluses. –For example, in 1998 both China and South Korea ran trade surpluses of about $40 billion each. Global Imbalance Is it good to run a trade surplus and bad to run a trade deficit?  Exchange Rate Determination The role of changing (floating) exchange rates is at the center of international economics. What is International Economics About?

18. Slide 1-18 What is International Economics About?  International Policy Coordination A fundamental problem in international economics is how to produce an acceptable degree of harmony among the international trade and monetary policies of different countries without a world government that tells countries what to do.  The International Capital Market There are risks associated with international capital markets: –Currency depreciation （ even contagious ） –National default

19. Slide 1-19 19 Macro-part Exchange Rate Determination The International Capital Market International Policy Coordination The Balance of Payments 返回

20. Slide 1-20 2.International Economics: Trade and Money International Economics International Trade (real transactions) International Money (financial transactions) 20 Our Focus

21. Slide 1-21 International Economics: Trade and Money  International trade analysis focuses primarily on the real transactions in the international economy. These transactions involve a physical movement of goods or a tangible commitment of economic resources. – Example: The conflict between the United States and Europe over Europe’s subsidized exports of agricultural products. – Antidumping case. Customs duties. Cow diseases…

22. Slide 1-22  International monetary analysis focuses on the monetary side of the international economy. That is, financial transactions such as foreign purchases of U.S. dollars. –Example: The dispute over whether the foreign exchange value of the dollar should be allowed to float freely or be stabilized by government action. –Should RMB appreciate ? Is it undervalued? If yes, how much is it undervalued? International Economics: Trade and Money

23. Slide 1-23  International trade issues Part I: International Trade Theory Part II: International Trade Policy  International monetary issues Part III: Exchange Rates and Open-Economy Macroeconomics Part IV: International Macroeconomic Policy International Economics: Trade and Money