ECONOMICS
INTERNATIONAL TRADE THEORY

CD4 Outline                                                                           Course Structure Index

This course is an introduction to international trade and trade policy. Its objective is to provide students with a guide to the international trade that is comprehensive and up-to-date and help them to understand the theoretical aspect of trade policy. It covers the basic theories, ranging from comparative advantage, factor endowment based trade, economies of scale and imperfect competition, and reviews different arguments for restrictive trade policies and their impacts.

Although the course emphasizes the logic and method of economic modeling, it is necessarily taught with a minimum of mathematics. Students are expected to be able to read and interpret graphs and tables and to solve simple algebraic problems.

Because the course focuses on both theory and application, the teaching of each topic contains three parts. Basic concepts, theory and misconceptions are discussed, followed by evaluating the empirical evidence. To facilitate the analysis, case studies and class discussion of policy issues to which the theory may be applied are employed.

Topics Covered
The course has two sections. The first section covers traditional international trade theories and recent development. These include the classical comparative advantage model, the Hecksher-­Ohlin endowment-based trade model, and trade based on economies of scale, imperfect competition, technological gap and production cycle, etc. International factor mobility will also be discussed. Throughout this section, the emphasis is on the reasons for trade and gains from trade. The second section is devoted to the analysis of commercial policy. It covers traditional and new arguments for trade restrictions, tariff and non‑tariff policy tools and their impact, and strategic trade policy.

Key Books and Articles

 Paul Krugman and Maurice Obstfeld, International Economics: Theory and Policy, 3rd edition, HarperCollins Publishers Inc., 1994.

 Dominique Salvatore, International Economics, 5th edition, Prentice Hall, 1995.

 The main text is Krugman and Obstfeld. Students who have difficulty with basic concepts and theories, and who find Krugman and Obstfeld rather complex, are strongly recommended to read Salvatore as well.

Readings from journal articles and case study materials will be assigned during the module.

Criteria for Evaluating Teaching and Student Performance
The grade will be based on your performance on the final exam, one essay, problem sets and class participation.