Lecture 0 Introduction: Overview of the International Economy by Alan V. Deardorff University of Michigan 2016 PubPol/Econ 541

Lecture 1: Overview2 Outline “Globalization” Trade Policies that Affect Others

Lecture 1: Overview3 Means different things to different people –My definitions (see my online Glossary): 1. The increasing world-wide integration of markets for goods, services and capital. 2. Also role of MNCs, IMF, WTO, World Bank. 3. Elsewhere: domination by United States. –Some see good, others see bad “Globalization”

Lecture 1: Overview4 Outline “Globalization” Trade Policies that Affect Others

Lecture 1: Overview5 Trade (per CIA, 2015 est.) –World exports: $16.64 trillion (compare world GDP of $74 trillion) –World trade has grown faster than world GDP most years But not during , due to world recession And not now: Just lately it has declined! Country Interactions: Trade

Lecture 1: Overview6

7 World Recession Recent Slowdown

Lecture 1: Overview8 See below for –Who trades most? –Who trades with whom? –Share of trade in GDP –US: What do we export/import? To/from whom? Country Interactions: Trade

Lecture 1: Overview9 Who Trades the Most? ($ b. & % share, 2014) ExportersImporters ValueShareValueShare China US EU-28* EU-28* US China Japan Japan Korea, S Hng Kng World World *EU external only Source: WTO, International Trade Statistics, 2015, Table I.8

Lecture 1: Overview10 WTO, World Trade Report 2015

Lecture 1: Overview11 WTO, World Trade Report 2015 Or, including Intra-EU(28) trade…

Lecture 1: Overview12 WTO, World Trade Report 2013

Lecture 1: Overview13 WTO, World Trade Report 2013

Lecture 1: Overview14 WTO, World Trade Report 2013

Lecture 1: Overview15 WTO, World Trade Report 2013

Lecture 1: Overview16 WTO, World Trade Report 2013

Lecture 1: Overview17 WTO, World Trade Report 2013

Lecture 1: Overview18 WTO, World Trade Report 2015

Lecture 1: Overview19 Importance of Trade for Countries? (GDP in US$ b., Exports % of GDP, Selected countries, 2015) GDPExports/GDP United States % Japan % Germany % Canada % India % Mexico % Netherlands % Singapore % Philippines % Nepal 0.94% Source: CIA World Fact Book

Lecture 1: Overview20 Importance of Trade for Countries? A Few More of Interest GDPExports/GDP China % Hong Kong % Korea, South % Korea, North (2009) 4.014% Burma 9.815% Syria 3.012% Israel % Source: CIA World Fact Book

Lecture 1: Overview21 Who Trades with Whom? ($ b., 2014, Intra- and inter-regional merchandise trade) Source: WTO, International Trade Statistics, 2015, Table I.4 Destination: Origin:North Amer. Latin Amer. Eur.AsiaAfricaOther North Amer Latin Amer Europe Asia Africa Other World

Lecture 1: Overview22 WTO, World Trade Report 2013

Lecture 1: Overview23 WTO, World Trade Report 2013 of Intra-Industry Trade

Lecture 1: Overview24 WTO, World Trade Report 2013

Lecture 1: Overview25 WTO, World Trade Report 2013

Lecture 1: Overview26 WTO, World Trade Report

Lecture 1: Overview27 WTO, World Trade Report 2013

Lecture 1: Overview28 What Does the World Trade? ($ b & annual % growth rates, merchandise exports) Source: WTO, International Trade Statistics, 2015, Table II.1 Value All Products17,797 Agriculture1,76599– 12 7–152 Fuel&Mining3, – 36 62–3–6 Manuf.12,24396–

Lecture 1: Overview29 WTO, World Trade Report 2013

Lecture 1: Overview30 WTO, World Trade Report 2015

Lecture 1: Overview31 WTO, World Trade Report 2014

Lecture 1: Overview32 WTO, World Trade Report 2013

Lecture 1: Overview33 What Does the US Trade? ($ b. 2011) ExportsImports Total1,497.42,235.8 Agriculture140.0 Petroleum462.3 Industrial supplies Capital goods, exc. auto Automotive Other non-ag234.6 Other non-petrol685.1 Source: Economic Report of the President, Feb 2013, Table B-104. Did (Not available since 2011)

Lecture 1: Overview34 What Does the US Trade? US imports are much larger than US exports US is a big… –Exporter of agricultural products –Importer of oil (but that’s been falling) –Exporter and importer of capital goods (i.e., machines for making things)

Lecture 1: Overview35 Outline “Globalization” Trade Policies that Affect Others

Lecture 1: Overview36 –Policies that affect other countries Direct Indirect Ways that countries interact economically

Lecture 1: Overview37 Ways that countries interact economically –Policies that affect other countries Direct –Trade policies (tariffs, quotas, FTAs, anti-dumping,…) –Foreign aid –Capital controls –Exchange rate management –Immigration restrictions Indirect

Lecture 1: Overview38 Ways that countries interact economically –Policies that affect other countries Indirect –Subsidies (esp. agriculture) »US farm subsidies > foreign aid –Macro policies (monetary, fiscal) »Exchange-rate policies –Environmental policies –Standards »Labor »Health & safety »Norms

Lecture 8: US39 US tariff history: Today landandfreedoml.org

Lecture 8: US40 US tariff history: Today Average tariff Smoot-Hawley Irwin, “Trade Restrictiveness and Deadweight Losses from U.S. Tariffs,” 2008, Fig 1.

Lecture 1: Overview41 OECD, Global Value Chains: Challenges, Opportunities, and Implications for Policy, 2014

Lecture 1: Overview42 OECD, Global Value Chains: Challenges, Opportunities, and Implications for Policy, 2014

Lecture 1: Overview43 Trade Agreements Past –GATT Rounds: Multilateral reductions in tariffs and other barriers Uruguay Round created WTO in 1995 –European Economic Community (now EU) Customs union –NAFTA = North American Free Trade Agreement Free trade among US, Canada, Mexico –Other FTAs: Several hundred in force today

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Lecture 1: Overview55 Trade Agreements Present –Doha Round: Multilateral negotiations, begun 2001 Negotiations limped along until December 2015 Round ended in failure at 2015 WTO Ministerial in Nairobi –Trans-Pacific Partnership (TPP) 12 country-FTA, “21 st century trade agreement” Includes: US, Japan and others Does not include China –Trans-Atlantic Trade and Investment Partnership (TTIP): US and EU

Lecture 1: Overview56 Trade Agreements Most Recent –“Bali Package” on Trade Facilitation December 2013 First ever agreement reached under WTO Adopted in November 2014 –The 2015 Nairobi commitment to abolish export subsidies for farm products

Lecture 1: Overview57 OECD, Global Value Chains: Challenges, Opportunities, and Implications for Policy, 2014