Microeconomics

Leeds, vonAllmen and Schiming

Chapter 18,  International Trade

1. U.S. Trade Deficit

   1. History

      1. Open versus closed economy

      2. Annual trade deficit small until ~1980

      3. Today Exports + Imports = .26*GDP

   2. Pattern of deficits and surpluses with rich and poor trading partners

   3. Prosperity and trade deficits

2. Models of Free Trade

   1. Production Possibilities Frontiers, Again

   2. Autarky

   3. Consumption Possibilities Frontier

   4. Comparative Advantage and Increasing Opportunity Cost

3. The Impact of Trade: Consumer and Producer Surplus

   1. The world price is below the domestic price

      1. Consumers are gleeful

      2. Producers wring their hands

   2. The world price is above the domestic price

      1. Consumers wail

      2. Producers happy

4. Protectionist Policies

   1. Tariffs

   2. Quotas

      1. Voluntary restraint agreements

5. Arguments for government protection from trade

   1. Dumping

   2. National Interests

   3. Infant Industries

6. Free Trade, Developing Countries, and the Environment

   1. MNC's and exploitation

      1. Appropriate wage comparisons

      2. Trade and income growth

   2. Environment

      1. Enviroinmental protection costs / production costs and location decisions

      2. Protectionist policies, resource allocation and the environment

7. International Trade Organizations

   1. World Trade Organization (WTO)

      1. The Great Depression and Tariffs

      2. Reciprocal Trade Agreement (1934)

      3. General Agreement on Tariffs and Trade (1947)

      4. GATT forms WTO (1995)

         1. Forum for trade negotiations

         2. Enforce trade agreements

         3. Monitor trade policies

   2. NAFTA

   3. European Union (EU)

      1. Free trade area versus economic union