Trade and the Global Economy Syracuse University, IRP 404 Fall 2012 Professor: Raymond J. Ahearn Tel: (o) 202-707-7629; © 703-785-5775 Email: [email protected]; [email protected]

I. Course Objectives This class will focus on the economic, political, and legal dimensions of trade policy and the new challenges posed by globalization. This examination will take place from the perspective of the United States, but roles of other countries and international institutions also will be an important focus of readings and class discussions. Considerable emphasis will be placed on the trade-offs policymakers face in making trade policy decisions, as well as on the increasing role that trade and capital flows play in affecting U.S. jobs and welfare. This course is intended to provide a broad introduction to the fundamental trade policy issues confronting the United States in an increasingly integrated global economy. In addition, the course is intended to provide greater appreciation of the role that economics as a discipline can provide for continual lifetime learning and choices. Contrary to the view that economics is “the dismal science,” it can be fun too! The course material is divided into three blocs: (1) basic economic concepts, rules, and institutions of the global economy; (2) the formulation and administration of U.S. trade policy, including contemporary issues in U.S. trade relations; and (3) selected issues linking U.S. businesses and workers to the global economy. Topical issues such as the different fiscal policy visions of Obama and Romney, prospects for “sequestration” at the end of the year, and the future of the euro will also be discussed and analyzed throughout the semester. The class is designed to stimulate critical thinking and informed analysis in an informal and collegial setting. The discussions will reinforce the “Washington experience” linking internships and other course with readings on global trade policy issues. Active participation and discussion and the exchange of ideas, as well as the ability to understand issues from a multi-disciplinary perspective, are important to the learning experience. On most issues and case studies discussed, there is no single “right” answer, but students should be able to support their positions with reference to generally accepted facts and data, an understanding of the readings, and sound reasoning.

II. Grading Policy and Readings Grades will be based on   

class discussion and participation (20%); one class presentation (20%); one written exam (20%); and



two policy memos (20% each).

Required readings will be posted on Blackboard or provided as hand-outs. Each student is expected to keep abreast of current issues related to the global economy by reading the Washington Post, New York Times, Financial Times, Wall Street Journal, and the Economist.

III. Course Outline Week 1: Introduction and Overview: Elaboration of course objectives, requirements, and expectations, assignment of presentation topics, and overview of course syllabus.

Bloc #1: Economic Underpinnings of the Global Economy Week 2: The United States in A Global Economy: Introduction to the elements, benefits, and challenges of international economic integration. How can globalization and international economic integration be measured? In what ways is the U.S. economy more integrated with the world today than it was a century ago? In what ways is it less integrated? How has this integration varied according to the movement of goods and services, business location decisions, ownership of production facilities, and flows of technology? How does this integration affect your own career choices and opportunities? Do you think globalization has gone too far? How can the concept of international competitiveness apply to individuals, firms, industries, and countries? What are advantages and disadvantages of having to compete internationally? Discussion Topic: Human Rights and Trade –Apple’s Labor Problems in China. Week 3: Economics of Global Trade: Introduction to the gains and costs of foreign trade, foreign investment, off-shoring, and outsourcing. Who were the mercantilists and are they alive and well today? In what ways does the theory of comparative advantage still hold today and in what ways does it not hold today? What does Babe Ruth have to do with it? How does a free flow of labor affect the theory of comparative advantage? What are the effects of increased trade on jobs and wages? How does intra-firm trade contradict the theory of comparative advantage? How do countries try to shape and influence their comparative advantage? Why are such attempts at industrial policy controversial? Why do firms invest abroad? What are global supply chains? How on a personal level do you engage in specialization in production and trade? In outsourcing? Discussion Topic: Challenges for U.S. Economic Assistance in Rebuilding Afghanistan. Week 4: Economics of Global Finance: Introduction to the balance of payments and exchange rates. What are the balance of payments? What transactions give rise to a receipt (export) of dollars from foreigners? What is the meaning of a current account surplus (deficit)? Does the U.S. current account deficit cost U.S. jobs? Can the United States continue to run current account deficits indefinitely? What can policymakers do to reduce or eliminate the current account deficit? What are the different types of financial flows? How do portfolio and direct investment flows differ? What is the foreign-exchange market? What is meant by an appreciation (depreciation) of the dollar? How is the value of the U.S. dollar determined? In a free market, what factors determine currency values? How is the value of China’s Yuan determined? What are the economic consequences for China of preventing its currency from appreciating in

accordance with market forces? Discussion Topic: Economic Challenges Posed by Korean Unification? Week 5: International Economic Institutions: Introduction to the international economic institutions with a specific focus on the World Trade Organization. What are the roles of the International Monetary Fund, the World Bank, and the World Trade Organization? Why were they created? How are they similar (different)? How has increased economic integration posed new challenges for each institution? Why have these organizations been attacked by the antiglobalization movement in the past? How has the stalemate in the Doha round of multilateral trade negotiations affected the credibility of the WTO? What institutional reforms of the WTO are needed? What are the WTOs strengths and weaknesses? Why are countries negotiating mostly bilateral and regional trade agreements instead of multilateral agreements? Discussion Topic: The Efficacy of U.S. Economic Sanctions?

Bloc #2: U.S. Trade Policy and Relations Week 6: U.S. Trade Policy: Content, Context, and Administration: What is U.S. trade policy? What are the key elements of trade negotiations, import policy, and export policy? What role does the Congress, the Executive Branch, and interest groups play in the making of U.S. trade policy? Who is in charge of U.S. trade policy? Why has Congress delegated so much of its authority over trade to the executive branch? Which congressional committees play a leading role in the making of trade policy? What determines most members of Congress positions on trade? Why did Congress create the Office of the United States Trade Representative (USTR)? How does the USTR coordinate the development of U.S. trade policy? Why are so many different agencies involved in the process? Discussion Topic: How do Romney and Obama differ on trade? Will trade be an issue in the election? outsourcing? Week 7: The Obama Administration’s Trade Agenda: What have been Obama’s trade priorities? How have they differed from previous administrations? What are his accomplishments? What are the differences between Democrats and Republicans on the trade issue? What are the forces for protection in the U.S. body politic? What are the tools for protection? Is the U.S. one of the most open markets in the world? What are the forces for trade liberalization in the U.S.? Why does organized labor tend to oppose trade liberalization? Why are more white collar workers anxious about trade liberalization? Has globalization upended the U.S. consensus in favor of trade liberalization? Discussion Topic: U.S. Public Views on Trade Liberalization and Globalization: What Do the Polls Tells Us? Week 8: U.S Economic Relations with China: How has China’s remarkable economic transformation been accomplished? What are the key factors that contributed to its rapid growth? How has China’s rapid growth affected U.S. exports and imports? Why has China’s large and growing trade surplus with the United States been a top political issues? Why is China often branded an unfair trader by some U.S. stakeholders? Why is China now trying to “rebalance” its economy from being led by high levels of investment to high levels of consumption? What reforms does the Communist Party have to pursue if it is to be successful in rebalancing China’s economy? How could these reforms be a threat to the communist party and other vested interests such as the military and stakeholders in state-owned enterprises? What can

the United States do to help create a more balanced trading relationship with China? Discussion Topic: Why is the value of China’s Currency A Controversial Issue? Week 9: U.S. Economic Relations with the European Union: How is the European Union a form of economic integration? What are the main stages of integration that have taken place? How did the adoption a single currency, the euro, affect the integration effort? What have been the pros and cons of a single currency? What are the architectural weaknesses of a monetary union and how have they contributed to the ongoing Eurozone crisis? What steps are European leaders taking to resolve the crisis? How has the crisis affected the U.S. economy? Discussion Topic: What has Germany’s role been in resolving the Eurozone crisis? Week 10: Exam

Bloc #3: Selected Issues in Globalization Week 11: Rising Economic Powers and the Global Economy: How have the BRICs (Brazil, Russia, India, and China) transformed the structure of the global economy? Should their rise be feared or welcomed? What are the main factors driving their economic rise? What challenges do the BRICs face in continuing to grow at rapid rates? How is their rise leading to a dispersion of economic and political power? In a more multi-polar world who will take leadership responsibility of the global economy? What are the strengths and weaknesses of the G-20 in managing the global economy? Without a global government for the world economy is selfinterest enough to keep the Great Powers from pursuing beggar-thy-neighbor policies? Discussion Topic: Energy Independence: Pipe Dream or Real Possibility? Week 12: U.S Manufacturing and the Global Economy: How has the U.S. manufacturing sector been affected by globalization? What factors have driven large-scale declines in U.S. manufacturing employment? Is there anything made in America anymore? What kinds of manufacturing can still thrive in the United States? Why are some companies shifting production back to the United States from China and other countries? How important is a strong manufacturing sector to a strong economy? Is there any difference between producing $100 of semiconductor chips or $100 of potato chips? Should the U.S. government try to “revive” the manufacturing sector? What has Obama tried to do in this regard? Discussion Topic: The African Growth and Opportunity Act (AGOA): How Effective Has It Been? Week 13: U.S. Labor and the Global Economy: What impact has globalization had on U.S. labor markets? How can U.S. workers compete against foreign workers who earn far less? How can U.S. workers compete against foreign workers who work for companies based in countries that impose minimal health and safety standards? How has globalization affected the bargaining power of unions and workers? What role is globalization playing in depressing median wages or contributing to rising income inequality? What are the most promising areas of the U.S. services sector for employment? Discussion Topic: What Skills and Education Do U.S. Workers Need to Compete in Today’s Global Economy? Week 14: Economic Integration in the Americas: How has the North American Free Trade Agreement (NAFTA) transformed economic relations in North America? Why did Mexico

propose and sign the NAFTA agreement? Why did the United States (Papa Bush and Jim Baker) agree to enter into the negotiation? Why has NAFTA been so controversial in the United States? Why have claims of jobs created and jobs lost by the NAFTA been so misleading? How has the United States tried to extend NAFTA to the rest of Latin America? Why have the Central American countries signed on to a version of NAFTA and Brazil and its other MERCSUR partners rejected this approach to regional integration? Discussion Topic: How Has NAFTA Affected Illegal Immigration From Mexico? Week 15: Wrap-up of Loose Ends and Evaluation :