International economics

Cover
Title
Statement
Copyright
Brief Contents
Contents
Preface
About the Author
Chapter 1: The International Economy and Globalization
	Economic Interdependence: Federal Reserve Policy Incites Global Backlash
	Globalization of Economic Activity
		U.S. Apple Growers Not Overly Worried about Chinese Imports
	Waves of Globalization
		First Wave of Globalization: 1870–1914
		Second Wave of Globalization: 1945–1980
		Latest Wave of Globalization
		Diesel Engines and Gas Turbines as Movers of Globalization
	The United States as an Open Economy
		Trade Patterns
		Labor and Capital
	Why Is Globalization Important?
	Globalization and Competition
		Globalization Forces Kodak to Reinvent Itself
		Bicycle Imports Force Schwinn to Downshift
		Element Electronics Survives by Moving TV  Production to America
	Common Fallacies of International Trade
		Is the United States Losing Its Innovation Edge?
	Is International Trade an Opportunity or a Threat to Workers?
	Has Globalization Gone Too Far?
	The Plan of This Text
	Summary
	Key Concepts and Terms
	Study Questions
Part 1: International Trade Relations
	Chapter 2: Foundations of Modern Trade Theory: Comparative Advantage
		Historical Development of Modern Trade Theory
			The Mercantilists
			Why Nations Trade: Absolute Advantage
			Adam Smith and David Ricardo
			Why Nations Trade: Comparative Advantage
		Production Possibilities Frontiers
		Trading under Constant-Cost Conditions
			Basis for Trade and Direction of Trade
			Production Gains from Specialization
			Babe Ruth and the Principle of Comparative Advantage
			Consumption Gains from Trade
			Distributing the Gains from Trade
			Equilibrium Terms of Trade
			Terms of Trade Estimates
		Dynamic Gains from Trade: Economic Growth
		Changing Comparative Advantage
			Natural Gas Boom Fuels Debate
		Trading under Increasing-Cost Conditions
			Increasing-Cost Trading Case
			Partial Specialization
		The Impact of Trade on Jobs
		Wooster, Ohio Bears the Brunt of Globalization
		Comparative Advantage Extended to Many Products and Countries
			More Than Two Products
			More Than Two Countries
		Factor Mobility, Exit Barriers, and Trade
		Empirical Evidence on Comparative Advantage
			Can American Workers Compete with Low-Wage Workers Abroad?
		The Case for Free Trade
		Comparative Advantage and Global Supply Chains
			Advantages and Disadvantages of Outsourcing
			Outsourcing and the U.S. Automobile Industry
			The iPhone Economy and Global Supply Chains
			Outsourcing Backfires for Boeing 787 Dreamliner
			Reshoring Production to the United States
			Deindustrialization Redeploys Workers to Growing Service Sector
		Summary
		Key Concepts and Terms
		Study Questions
	Chapter 3: Sources of Comparative Advantage
		Factor Endowments as a Source of Comparative Advantage
			The Factor-Endowment Theory
			Visualizing the Factor-Endowment Theory
			Applying the Factor-Endowment Theory to U.S.–China Trade
			Chinese Manufacturers Beset by Rising Wages and a Rising Yuan
			Does Trade with China Take Away Blue-Collar American Jobs?
			Factor-Price Equalization
			Globalization Drives Changes for U.S. Automakers
			Who Gains and Loses from Trade? The Stolper–Samuelson Theorem
			Is International Trade a Substitute for Migration?
			Specific-Factors Theory: Trade and the Distribution of Income
			Does Trade Make the Poor Even Poorer?
		Is International Trade Responsible for the Loss of  American Manufacturing Jobs? How about Robots Instead?
		Is the Factor-Endowment Theory a Good Predictor of Trade Patterns? The Leontief Paradox
		Economies of Scale and Comparative Advantage
			Internal Economies of Scale
			External Economies of Scale
			Does a “Flat World” Make Ricardo Wrong?
		Overlapping Demands as a Basis for Trade
		Intra-industry Trade
		Technology as a Source of Comparative Advantage: The Product Cycle Theory
			Radios, Pocket Calculators, and the International Product Cycle
			Japan Fades in the Electronics Industry
		Dynamic Comparative Advantage: Industrial Policy
		World Trade Organization Rules That Illegal Government Subsidies Support Boeing and Airbus
		Government Regulatory Policies and Comparative Advantage
			Do Labor Unions Stifle Competitiveness?
		Transportation Costs and Comparative Advantage
			Trade Effects
			Falling Transportation Costs Foster Trade
			How Containers Revolutionized the World of Shipping
			The Port of Prince Rupert: Shifting Competitiveness in Shipping Routes
		Summary
		Key Concepts and Terms
		Study Questions
	Chapter 4: Tariffs
		The Tariff Concept
		Types of Tariffs
			Specific Tariff
			Ad Valorem Tariff
			Compound Tariff
			Trade Protectionism Intensifies as Global Economy Falls into the Great Recession
		Effective Rate of Protection
		Tariff Escalation
		Outsourcing and Offshore Assembly Provision
		Dodging Import Tariffs: Tariff Avoidance and Tariff Evasion
			Ford Strips Its Wagons to Avoid a High Tariff
			Smuggled Steel Evades U.S. Tariffs
		Postponing Import Tariffs
			Gains from Eliminating Import Tariffs
			Bonded Warehouse
			Foreign-Trade Zone
			FTZs Benefit Motor Vehicle Importers
		Tariff Effects: An Overview
		Tariff Welfare Effects: Consumer Surplus and  Producer Surplus
		Tariff Welfare Effects: Small-Nation Model
		Tariff Welfare Effects: Large-Nation Model
			Donald Trump’s Border Tax: How to Pay for the Wall
			The Optimal Tariff and Retaliation
		Examples of U.S. Tariffs
			Obama’s Tariffs on Chinese Tires
			Should Footwear Tariffs Be Given the Boot?
			Could a Higher Tariff Put a Dent in the Federal Debt?
		How a Tariff Burdens Exporters
		Tariffs and the Poor: Regressive Tariffs
		Arguments for Trade Restrictions
			Job Protection
			Protection against Cheap Foreign Labor
			Fairness in Trade: A Level Playing Field
			Maintenance of the Domestic Standard of Living
			Equalization of Production Costs
			Infant-Industry Argument
			Noneconomic Arguments
		Would a Tariff Wall Really Protect U.S. Jobs?
			Petition of the Candle Makers
		The Political Economy of Protectionism
			A Supply and Demand View of Protectionism
		Summary
		Key Concepts and Terms
		Study Questions
	Chapter 5: Nontariff Trade Barriers
		Absolute Import Quota
			Trade and Welfare Effects
			Allocating Quota Licenses
			Quotas versus Tariffs
		Tariff-Rate Quota: A Two-Tier Tariff
			Tariff-Rate Quota Bittersweet for Sugar Consumers
		Export Quotas
			Japanese Auto Restraints Put Brakes on U.S. Motorists
		Domestic Content Requirements
			How American Is Your Car?
		Subsidies
			Domestic Production Subsidy
			Export Subsidy
		Dumping
			Forms of Dumping
			International Price Discrimination
			Avoiding Antidumping Duties: U.S.–Mexico Sugar Agreement
		Antidumping Regulations
			Whirlpool Agitates for Antidumping Tariffs on Clothes Washers
			Vaughan-Bassett Furniture Company: Furniture Dumping from China
		Is Antidumping Law Unfair?
			Should Average Variable Cost Be the Yardstick for Defining Dumping?
			Should Antidumping Law Reflect Currency Fluctuations?
			Are Antidumping Duties Overused?
		Other Nontariff Trade Barriers
			Government Procurement Policies: “Buy American”
			U.S. Fiscal Stimulus and Buy American Legislation
			Social Regulations
			CAFE Standards
			Europe Has a Cow over Hormone-Treated U.S. Beef
			Sea Transport and Freight Regulations
		Summary
		Key Concepts and Terms
		Study Questions
	Chapter 6: Trade Regulations and Industrial Policies
		U.S. Tariff Policies Before 1930
		Smoot–Hawley Act
		Reciprocal Trade Agreements Act
		General Agreement on Tariffs and Trade
			Trade without Discrimination
			Promoting Freer Trade
			Predictability: Through Binding and Transparency
			Multilateral Trade Negotiations
			Avoiding Trade Barriers during the Great Recession
		World Trade Organization
			Settling Trade Disputes
			Does the WTO Reduce National Sovereignty?
			Does the WTO Harm the Environment?
			Harming the Environment
			Improving the Environment
			WTO Rules against China’s Hoarding of Rare Earth Metals
			Future of the World Trade Organization
		Trade Promotion Authority (Fast Track Authority)
		Safeguards (The Escape Clause): Emergency  Protection from Imports
			U.S. Safeguards Limit Surging Imports of Textiles from China
		Countervailing Duties: Protection against Foreign Export Subsidies
			Countervailing Duties: Trade Disputes between Canada and the United States
			Would a Carbon Tariff Help Solve the Climate Problem?
		Antidumping Duties: Protection against Foreign Dumping
			Remedies against Dumped and Subsidized Imports
			U.S. Steel Companies Lose an Unfair Trade Case and Still Win
		Section 301: Protection against Unfair Trading Practices
		Protection of Intellectual Property Rights
			China’s Piracy of Software
		Trade Adjustment Assistance
			Trade Adjustment Assistance for Workers, Firms, Farmers, and Fishermen
			Is Trade Adjustment Assistance Necessary?
			United States Lifts Its Restrictions on Oil Exports
		Industrial Policies of the United States
			The Export-Import Bank
			U.S. Airlines and Boeing Spar over Export-Import Bank Credit
			U.S. Solar Industry Dims as China’s Industrial Policy Lights Up
			Carrier Inc. Agrees to Keep Jobs in Indiana
		Strategic Trade Policy
		Economic Sanctions
			Factors Influencing the Success of Sanctions
			Sanctions and Nuclear Weapons: Iran and North Korea
			Russia Hit by Sanctions over Ukraine
		Summary
		Key Concepts and Terms
		Study Questions
	Chapter 7: Trade Policies for the Developing Nations
		Developing Nation Trade Characteristics
		Tensions between Developing Nations and Advanced Nations
		Trade Problems of the Developing Nations
			Unstable Export Markets
			Falling Commodity Prices Threaten Growth of Exporting Nations
			Worsening Terms of Trade
			Does Foreign Direct Investment Hinder or Help Economic Development?
			Limited Market Access
			Agricultural Export Subsidies of Advanced Nations
			Bangladesh’s Sweatshop Reputation
		Stabilizing Primary-Product Prices
			Production and Export Controls
			Buffer Stocks
			Multilateral Contracts
			Does the Fair Trade Movement Help Poor Coffee Farmers?
		The OPEC Oil Cartel
			Maximizing Cartel Profits
			Declining Oil Prices Test OPEC’s Unity
			OPEC as a Cartel
		Aiding the Developing Nations
			The World Bank
			International Monetary Fund
			Generalized System of Preferences
			Does Aid Promote Growth of Developing Nations?
		Economic Growth Strategies: Import Substitution versus Export-Led Growth
			Import Substitution
			Import Substitution Laws Backfire on Brazil
			Export-Led Growth
			Is Economic Growth Good for the Poor?
			Can All Developing Nations Achieve Export-Led Growth?
		East Asian Economies
			Flying Geese Pattern of Growth
			Is State Capitalism Winning?
		China’s Great Leap Forward
			Challenges and Concerns for China’s Economy
			China’s Export Boom Comes at a Cost: How to Make Factories Play Fair
		India: Breaking Out of the Third World
		Summary
		Key Concepts and Terms
		Study Questions
	Chapter 8: Regional Trading Arrangements
		Regional Integration versus Multilateralism
		Types of Regional Trading Arrangements
		Impetus for Regionalism
		Effects of a Regional Trading Arrangement
			Static Effects
			Dynamic Effects
		The European Union
			Pursuing Economic Integration
			Agricultural Policy
			Is the European Union Really a Common Market?
			Britain Announces Withdrawal from the European Union (Brexit)
		Economic Costs and Benefits of a Common Currency: The European Monetary Union
			Optimal Currency Area
			European Monetary “Disunion”
			Eurozone’s Problems and Challenges
			Greece and the Eurozone
			Deflation and the Eurozone
		North American Free Trade Agreement
			NAFTA’s Benefits and Costs for Mexico and Canada
			NAFTA’s Benefits and Costs for the United States
			Modernizing NAFTA
			Free Trade Agreements Bolster Mexico’s Competitiveness
			U.S.–Mexico Trucking Dispute
			U.S.–Mexico Tomato Dispute
			Is NAFTA an Optimal Currency Area?
			A Trans-Pacific Partnership?
			A U.S.–China Free Trade Agreement?
		Summary
		Key Concepts and Terms
		Study Questions
	Chapter 9: International Factor Movements and Multinational Enterprises
		The Multinational Enterprise
		Motives for Foreign Direct Investment
			Demand Factors
			Cost Factors
		Supplying Products to Foreign Buyers: Whether to Produce Domestically or Abroad
			Direct Exporting versus Foreign Direct Investment/Licensing
			Foreign Direct Investment versus Licensing
		Country Risk Analysis
			Do U.S. Multinationals Exploit  Foreign Workers?
		International Trade Theory and Multinational Enterprise
		Foreign Auto Assembly Plants in the United States
		International Joint Ventures
			Welfare Effects
		Multinational Enterprises as a Source of Conflict
			Employment
			Caterpillar Bulldozes Canadian Locomotive Workers
			Technology Transfer
			National Sovereignty
			Balance-of-Payments
			Transfer Pricing
			The Tax Cuts and Jobs Act of 2017: Apple Plans to Build a New U.S. Campus
		International Labor Mobility: Migration
			The Effects of Migration
			Immigration as an Issue
			Does Canada’s Immigration Policy Provide a Model for the United States?
			Does U.S. Immigration Policy Harm Domestic Workers?
		Summary
		Key Concepts and Terms
		Study Questions
Part 2: International Monetary Relations
	Chapter 10: The Balance-of-Payments
		Double Entry Accounting
		Balance-of-Payments Structure
			Current Account
			International Payments Process
			Capital and Financial Account
			Special Drawing Rights
			Statistical Discrepancy: Errors and Omissions
		U.S. Balance-of-Payments
		What Does a Current Account Deficit (Surplus) Mean?
			Net Foreign Investment and the Current Account Balance
			Impact of Capital Flows on the Current Account
			Is Trump’s Trade Doctrine Misguided?
			The iPhone’s Complex Supply Chain Depicts Limitations of Trade Statistics
			Is a Current Account Deficit a Problem?
			Business Cycles, Economic Growth, and the Current Account
			How the United States Has Borrowed at Very Low Cost
			Do Current Account Deficits Cost Americans Jobs?
			Can the United States Continue to Run Current Account Deficits Indefinitely?
		Balance of International Indebtedness
			United States as a Debtor Nation
			Global Imbalances
		The Dollar as the World’s Reserve Currency
			Benefits to the United States
			Will the Special Drawing Right or the Yuan Become a Reserve Currency?
			Will Cryptocurrencies Lower the Dollar’s Status as a World Reserve Currency?
		Summary
		Key Concepts and Terms
		Study Questions
	Chapter 11: Foreign Exchange
		Foreign Exchange Market
		Foreign Currency Trading Becomes Automated
		Types of Foreign Exchange Transactions
		Interbank Trading
		Reading Foreign Exchange Quotations
			Yen Depreciation Drives Toyota Profits Upward
		Forward and Futures Markets
		Foreign Currency Options
		Exchange Rate Determination
			Demand for Foreign Exchange
			Supply of Foreign Exchange
			Equilibrium Rate of Exchange
		Indexes of the Foreign Exchange Value of the Dollar: Nominal and Real Exchange Rates
			Arbitrage
		The Forward Market
			The Forward Rate
			Relation between the Forward Rate and the Spot Rate
			Managing Your Foreign Exchange Risk: Forward Foreign Exchange Contract
			Case 1
			Case 2
			How Markel, Volkswagen, and Nintendo Manage Foreign Exchange Risk
			Does Foreign Currency Hedging Pay Off?
			Currency Risk and the Hazards of Investing Abroad
		Interest Arbitrage, Currency Risk, and Hedging
			Uncovered Interest Arbitrage
			Covered Interest Arbitrage (Reducing Currency Risk)
		Foreign Exchange Market Speculation
			Long and Short Positions
			Andy Krieger Shorts the New Zealand Dollar
			George Soros Shorts the Pound and Yen
			People’s Bank of China Widens Trading Band to Punish Currency Speculators
			How to Play the Falling (Rising) Dollar
			Stabilizing and Destabilizing Speculation
		Foreign Exchange Trading as a Career
			Foreign Exchange Traders Hired by Commercial Banks, Companies, and Central Banks
			Do You Really Want to Trade Currencies?
			Money Managers Scramble to Pull Off Currency Carry Trades
		Summary
		Key Concepts and Terms
		Study Questions
	Chapter 12: Exchange Rate Determination
		What Determines Exchange Rates?
		Determining Long-Run Exchange Rates
			Relative Price Levels
			Relative Productivity Levels
			Preferences for Domestic or Foreign Goods
			Trade Barriers
		Inflation Rates, Purchasing Power Parity and Long-Run Exchange Rates
			Law of One Price
			Burgeromics: The “Big Mac” Index and the Law of One Price
			Banks Found Guilty of Foreign Exchange Market Rigging
			Purchasing-Power-Parity
		Determining Short-Run Exchange Rates: The Asset Market Approach
			Relative Levels of Interest Rates
			Expected Change in the Exchange Rate
			Diversification, Safe Havens, and Investment Flows
			International Comparisons of GDP: Purchasing Power Parity
		Exchange Rate Overshooting
		Forecasting Foreign Exchange Rates
			Judgmental Forecasts
			Technical Forecasts
			Comercial Mexicana Gets Burned by Speculation
			Fundamental Analysis
			Exchange Rate Misalignment
		Summary
		Key Concepts and Terms
		Study Questions
	Chapter 13: Exchange Rate Adjustments and the Balance-of-Payments
		Effects of Exchange Rate Changes on Costs and Prices
			Case 1: No Foreign Sourcing—All Costs Are  Denominated in Dollars
			Case 2: Foreign Sourcing—Some Costs Denominated in Dollars and Some Costs Denominated in Francs
		Cost-Cutting Strategies of Manufacturers in Response to Currency Appreciation
			Appreciation of the Yen: Japanese Manufacturers
			Appreciation of the Dollar: U.S. Manufacturers
			Japanese Firms Send Work Abroad as Rising Yen Makes Their Products Less Competitive
		Will Currency Depreciation Reduce a Trade Deficit? The Elasticity Approach
			Case 1: Improved Trade Balance
			Case 2: Worsened Trade Balance
		J-Curve Effect: Time Path of Depreciation
		Exchange Rate Pass-Through
			Partial Exchange Rate Pass-Through
			Does Currency Depreciation Stimulate Exports?
		The Absorption Approach to Currency Depreciation
		The Monetary Approach to Currency Depreciation
		Summary
		Key Concepts and Terms
		Study Questions
	Chapter 14: Exchange Rate Systems and  Currency Crises
		Exchange Rate Practices
		Choosing an Exchange Rate System: Constraints Imposed by Free Capital Flows
		Fixed Exchange Rate System
			Use of Fixed Exchange Rates
			Par Value and Official Exchange Rate
			Russia’s Central Bank Fails to Offset the Ruble’s Collapse
			Exchange Rate Stabilization
			Devaluation and Revaluation
			Bretton Woods System of Fixed Exchange Rates
		Floating Exchange Rates
			Achieving Market Equilibrium
			Trade Restrictions, Jobs, and Floating Exchange Rates
			Arguments for and against Floating Rates
		Managed Floating Rates
			Managed Floating Rates in the Short Run and Long Run
			Exchange Rate Stabilization and Monetary Policy
			Is Exchange Rate Stabilization Effective?
		The Crawling Peg
		Currency Manipulation and Currency Wars
			Is China a Currency Manipulator?
			Currency Crises
			The Global Financial Crisis of 2007–2009
			Sources of Currency Crises
			Speculators Attack East Asian Currencies
		Capital Controls
			Should Foreign Exchange Transactions Be Taxed?
		Increasing the Credibility of Fixed Exchange Rates
			Currency Board
			For Argentina, No Panacea in a Currency Board
			Swiss Franc Soars after Exchange Rate Anchor Scrapped
			Dollarization
		Summary
		Key Concepts and Terms
		Study Questions
	Chapter 15: Macroeconomic Policy in an Open Economy
		Economic Objectives of Nations
		Policy Instruments
		Aggregate Demand and Aggregate Supply: A Brief Review
		Monetary and Fiscal Policies in a Closed Economy
		Monetary and Fiscal Policies in an Open Economy
			Effect of Fiscal and Monetary Policies under Fixed Exchange Rates
			Effect of Fiscal and Monetary Policies under Floating Exchange Rates
			Monetary and Fiscal Policies Respond to Financial Turmoil in the Economy
		Macroeconomic Stability and the Current Account: Policy Agreement versus Policy Conflict
		Inflation with Unemployment
		International Economic Policy Coordination
			Policy Coordination in Theory
			Does Policy Coordination Work?
			Does Crowding Occur in an Open Economy?
		Summary
		Key Concepts and Terms
		Study Questions
Glossary
Index