International Economics, 12th Edition

Front Cover......Page 1
Title Page......Page 4
Copyright......Page 5
Contents......Page 8
CHAPTER 1 The International Economy and Globalization......Page 24
Globalization of Economic Activity......Page 25
First Wave of Globalization: 1870–1914......Page 26
BIKE IMPORTS FORCE SCHWINN TO DOWNSHIFT......Page 27
Second Wave of Globalization: 1945–1980......Page 28
Latest Wave of Globalization......Page 29
Trade Patterns......Page 31
Labor and Capital......Page 34
DETROIT'S BIG THREE FACE OBSTACLES IN RESTRUCTURING......Page 35
Why Is Globalization Important?......Page 37
Common Fallacies of International Trade......Page 40
Does Free Trade Apply to Cigarettes?......Page 41
Is International Trade an Opportunity or a Threat to Workers?......Page 42
Backlash Against Globalization......Page 44
Terrorism Jolts the Global Economy......Page 45
COMPETITION IN THE WORLD STEEL INDUSTRY......Page 47
Summary......Page 48
Study Questions......Page 49
PART 1: INTERNATIONAL TRADE RELATIONS......Page 50
Historical Development of Modern Trade Theory......Page 52
DAVID RICARDO......Page 56
Production Possibilities Schedules......Page 57
Trading under Constant-Cost Conditions......Page 59
BABE RUTH AND THE PRINCIPLE OF COMPARATIVE ADVANTAGE......Page 64
Dynamic Gains fromTrade......Page 65
Changing Comparative Advantage......Page 67
Trading under Increasing-Cost Conditions......Page 68
The Impact of Trade on Jobs......Page 71
Comparative Advantage Extended to Many Products and Countries......Page 73
Empirical Evidence on Comparative Advantage......Page 75
Does Comparative Advantage Apply in the Face of Job Outsourcing?......Page 77
BOEING'S OUTSOURCING OF 787 MORE DIFFICULT THAN EXPECTED......Page 79
Summary......Page 82
Study Questions......Page 83
Exploring Further 2.1: Comparative Advantage in Money Terms......Page 86
Exploring Further 2.2: Indifference Curves and Trade......Page 87
Factor Endowments as a Source of Comparative Advantage......Page 90
UNITED AUTO WORKERS VOTE GIVEBACKS TO SAVE JOBS......Page 97
Are Actual Trade Patterns Explained by the Factor-Endowment Theory?......Page 102
Does Trade Make the Poor Even Poorer?......Page 104
DOES A ''FLAT WORLD'' MAKE RICARDO WRONG?......Page 107
Increasing Returns to Scale and Specialization......Page 108
Overlapping Demands as a Basis for Trade Intraindustry Trade......Page 109
Intraindustry Trade......Page 110
The Product Cycle: A Technologically Based Theory of Trade......Page 113
Dynamic Comparative Advantage: Industrial Policy......Page 115
Government Subsidies Support Boeing and Airbus......Page 117
Government Regulatory Policies and Comparative Advantage......Page 118
Transportation Costs and Comparative Advantage......Page 121
NIKE AND REEBOK RESPOND TO SWEATSHOP CRITICS: BUT WAGES REMAIN AT POVERTY LEVEL......Page 123
Summary......Page 126
Key Concepts & Terms......Page 127
Study Questions......Page 128
EXPLORING FURTHER 3.1: The Specific-Factors Theory......Page 130
CHAPTER 4 Tariffs......Page 132
The Tariff Concept......Page 133
Types of Tariffs......Page 134
Effective Rate of Protection......Page 135
Tariff Escalation......Page 138
Outsourcing and Offshore-Assembly Provision......Page 139
Dodging Import Tariffs: Tariff Avoidance and Tariff Evasion......Page 141
Postponing Import Tariffs......Page 142
Tariff Welfare Effects: Consumer Surplus and Producer Surplus......Page 144
Tariff Welfare Effects: Small-Nation Model......Page 145
CALCULATING THE WELFARE EFFECTS OF A TARIFF......Page 147
Tariff Welfare Effects: Large-Nation Model......Page 148
GAINS FROM ELIMINATING IMPORT TARIFFS......Page 152
How A Tariff Burdens Exporters......Page 153
Steel Tariffs Buy Time for Troubled Industry......Page 155
Tariffs and the Poor......Page 156
Arguments for Trade Restrictions......Page 157
PETITION OF THE CANDLE MAKERS......Page 164
The Political Economy of Protectionism......Page 165
Summary......Page 167
Key Concepts & Terms......Page 168
Study Questions......Page 169
Import Quota......Page 171
Quotas Versus Tariffs......Page 175
Tariff-Rate Quota: A Two-Tier Tariff......Page 177
Export Quotas......Page 179
Domestic Content Requirements......Page 181
Subsidies......Page 182
HOW ''FOREIGN'' IS YOUR CAR?......Page 184
Dumping......Page 186
Antidumping Regulations......Page 189
SWIMMING UPSTREAM: THE CASE OF VIETNAMESE CATFISH......Page 191
Is Antidumping Law Unfair?......Page 192
Other Nontariff Trade Barriers......Page 195
Summary......Page 198
Study Questions......Page 199
EXPLORING FURTHER 5.1: Tariff-Rate Quota Welfare Effects......Page 202
EXPLORING FURTHER 5.2: Export Quota Welfare Effects......Page 204
U.S. Tariff Policies Before 1930......Page 206
Smoot-Hawley Act......Page 207
Reciprocal Trade Agreements Act......Page 209
General Agreement on Tariffs and Trade......Page 210
World Trade Organization......Page 213
From Doha to Hong Kong: Failed Trade Negotiations......Page 219
Trade Promotion Authority (Fast-Track Authority)......Page 220
Safeguards: The Escape Clause......Page 221
Countervailing Duties......Page 223
Antidumping Duties......Page 225
Section 301: Unfair Trading Practices......Page 229
Protection of Intellectual Property Rights......Page 230
Trade Adjustment Assistance......Page 232
Will Wage and Health Insurance Make Free Trade More Acceptable to Workers?......Page 233
Industrial Policies of the United States......Page 234
Industrial Policies of Japan......Page 236
Strategic Trade Policy......Page 237
Economic Sanctions......Page 240
Summary......Page 243
Key Concepts & Terms......Page 244
Study Questions......Page 245
EXPLORING FURTHER 6.1: Welfare Effects of Strategic Trade Policy......Page 246
Developing-Nation Trade Characteristics......Page 249
Tensions Between Developing Countries and Advanced Countries......Page 251
Trade Problems of the Developing Nations......Page 252
HOW TO BRING DEVELOPING COUNTRIES IN FROM THE COLD......Page 253
Stabilizing Primary-Product Prices......Page 260
The OPEC Oil Cartel......Page 263
ARE INTERNATIONAL LABOR STANDARDS NEEDED TO PREVENT SOCIAL DUMPING?......Page 267
Aiding the Developing Countries......Page 268
Economic Growth Strategies: Import Substitution Versus Export-Led Growth......Page 272
East Asian Economies......Page 277
China's Transformation to Capitalism......Page 279
DOES FOREIGN DIRECT INVESTMENT HINDER OR HELP ECONOMIC DEVELOPMENT?......Page 282
India: Breaking out of the Third World......Page 284
Summary......Page 286
Study Questions......Page 287
Regional Integration Versus Multilateralism......Page 288
Types of Regional Trading Arrangements......Page 289
Effects of a Regional Trading Arrangement......Page 291
European Union......Page 295
Economic Costs and Benefits of a Common Currency: The European Monetary Union......Page 303
North American Free Trade Agreement......Page 307
FROM NAFTA TO CAFTA......Page 315
Free Trade Area of the Americas......Page 316
Transition Economies......Page 318
Summary......Page 323
Study Questions......Page 324
The Multinational Enterprise......Page 326
Motives for Foreign Direct Investment......Page 328
DO U.S. MULTINATIONALS EXPLOIT FOREIGN WORKERS?......Page 330
Supplying Products to Foreign Buyers: Whether to Produce Domestically or Abroad......Page 332
Country Risk Analysis......Page 335
International Trade Theory and Multinational Enterprise......Page 336
Japanese Transplants in the U.S. Automobile Industry......Page 337
International Joint Ventures......Page 339
Multinational Enterprises as a Source of Conflict......Page 343
International Labor Mobility: Migration......Page 348
DOES U.S. IMMIGRATION POLICY HARM DOMESTIC WORKERS?......Page 353
Summary......Page 354
Study Questions......Page 355
PART 2: INTERNATIONAL MONETARY RELATIONS......Page 358
Double-Entry Accounting......Page 360
INTERNATIONAL PAYMENTS PROCESS......Page 362
Balance-of-Payments Structure......Page 363
U.S. Balance of Payments......Page 367
DO CURRENT ACCOUNT DEFICITS COST AMERICANS JOBS?......Page 369
What Does a Current Account Deficit (Surplus) Mean?......Page 370
Is There a Global Savings Glut?......Page 378
PARADOX OF FOREIGN DEBT: HOW THE UNITED STATES HAS BORROWED WITHOUT COST......Page 379
Balance of International Indebtedness......Page 380
Key Concepts & Terms......Page 382
Study Questions......Page 383
Foreign-Exchange Market......Page 384
Types of Foreign-Exchange Transactions......Page 386
Interbank Trading......Page 387
Reading Foreign-Exchange Quotations......Page 389
Forward and Futures Markets......Page 392
Foreign-Currency Options......Page 394
Exchange-Rate Determination......Page 395
Indexes of the Foreign-Exchange Value of the Dollar: Nominal and Real Exchange Rates......Page 399
Arbitrage......Page 401
The Forward Market......Page 402
EXCHANGE-RATE RISK: THE HAZARD OF INVESTING ABROAD......Page 409
Interest Arbitrage......Page 410
Foreign-Exchange Market Speculation......Page 412
HOW TO PLAY THE FALLING (RISING) DOLLAR......Page 413
Summary......Page 415
Study Questions......Page 416
EXPLORING FURTHER 11.1: Techniques of Foreign-Exchange Market Speculation......Page 419
What Determines Exchange Rates?......Page 421
Determining Long-Run Exchange Rates......Page 423
Inflation Rates, Purchasing Power Parity, and Long-Run Exchange Rates......Page 426
INFLATION DIFFERENTIALS AND THE EXCHANGE RATE......Page 430
Determining Short-Run Exchange Rates: The Asset-Market Approach......Page 432
The Ups and Downs of the Dollar: 1980 to 2007......Page 437
Exchange-Rate Overshooting......Page 439
Forecasting Foreign-Exchange Rates......Page 440
Study Questions......Page 444
EXPLORING FURTHER 12.1: Fundamental Forecasting—Regression Analysis......Page 447
CHAPTER 13 Balance-of-Payments Adjustments......Page 449
Price Adjustments......Page 450
Interest Rate Adjustments......Page 452
Financial Flows and Interest Rate Differentials......Page 453
Income Adjustments......Page 454
Disadvantages of Automatic Adjustment Mechanisms......Page 455
Monetary Adjustments......Page 456
Study Questions......Page 459
EXPLORING FURTHER 13.1: Income-Adjustment Mechanism......Page 461
Effects of Exchange-Rate Changes on Costs and Prices......Page 465
JAPANESE FIRMS MOVE OUTPUT OVERSEAS TO LIMIT EFFECTS OF STRONG YEN......Page 468
Cost-Cutting Strategies of Manufacturers in Response to Currency Appreciation......Page 469
Will Currency Depreciation Reduce a Trade Deficit? The Elasticity Approach......Page 471
J-Curve Effect: Time Path of Depreciation......Page 474
Exchange-Rate Pass-Through......Page 477
The Absorption Approach to Currency Depreciation......Page 480
Summary......Page 482
Study Questions......Page 483
EXPLORING FURTHER 14.1: Exchange-Rate Pass-Through......Page 485
Exchange-Rate Practices......Page 487
Choosing an Exchange-Rate System: Constraints Imposed by Free Capital Flows......Page 488
Fixed Exchange-Rate System......Page 490
CHINA LETS YUAN RISE VERSUS DOLLAR......Page 496
Floating Exchange Rates......Page 497
Managed Floating Rates......Page 500
The Crawling Peg......Page 506
Currency Crises......Page 507
Capital Controls......Page 511
Increasing the Credibility of Fixed Exchange Rates......Page 513
Summary......Page 518
Key Concepts & Terms......Page 519
Study Questions......Page 520
Economic Objectives of Nations......Page 521
Aggregate Demand and Aggregate Supply: A Brief Review......Page 522
Monetary and Fiscal Policy in a Closed Economy......Page 523
Monetary and Fiscal Policy in an Open Economy......Page 525
DOES CROWDING OCCUR IN AN OPEN ECONOMY?......Page 526
Macroeconomic Stability and the Current Account: Policy Agreement Versus Policy Conflict......Page 529
Inflation with Unemployment......Page 530
International Economic-Policy Coordination......Page 531
Key Concepts & Terms......Page 535
Study Questions......Page 536
Nature of International Reserves......Page 537
Demand for International Reserves......Page 538
Foreign Currencies......Page 541
Gold......Page 543
Special Drawing Rights......Page 545
Facilities for Borrowing Reserves......Page 546
International Lending Risk......Page 548
The Problem of International Debt......Page 549
Reducing Bank Exposure to Developing-Nation Debt......Page 551
Debt Reduction and Debt Forgiveness......Page 552
The Eurodollar Market......Page 553
Key Concepts & Terms......Page 554
Study Questions......Page 555
Glossary......Page 556
Index......Page 568