Lecture-0 Topics in International Trade and Political Economy An overview of the course Carlos Llano

How deep the globalization process is? 1. Introduction How deep the globalization process is?

International Trade of Goods in the World. 2006 Figure 1.2 World Trade in Goods, 2006 ($ billions) Feenstra and Taylor: International Trade, Second Edition Copyright © 2011 by Worth Publishers

Figure 1.3 Trade in Goods and Services Relative to GDP Feenstra and Taylor: International Trade, Second Edition Copyright © 2011 by Worth Publishers

Figure 1.4 Average Worldwide Tariffs, 1860–2000 Feenstra and Taylor: International Trade, Second Edition Copyright © 2011 by Worth Publishers

Warning: The recent evolution of “Trade/GDP” Facts: downturn evolution of the ratio between Trade/GDP in the world between 2005-2017. Causes: Composition: model of growth (goods / construction / services). Parts of GDP (C; I; G) Globalization peak: Insourcing; Changes in China`s “growth model: upstream movement within the global value-chain. Protectionism!

Simulation Hypothesis World GDP -1,5% in the Short term -2% in the Long term World Trade - 15% Source: World Economic Outlook. IMF. October 2016 The IMF has recently published (October 2016) a simulation analysis for a potential increase in protectionism, which will take the form of a 10% increase in import prices in 3 years (50% in tariffs; 50% non-tariff barriers).

Potential effects over the Spanish Economy With the scenario drawn by the IMF: The Spanish economy will reduce the GDP in 0.5 to 1 p.p. each year. With an impact in “loss of employment” of around 1 million people till 2030.

Potential effects over the Spanish Economy With the scenario drawn by the IMF: The Spanish ratio between Public Debt/GDP will rise above 120%. The Spanish ratio between Current Account Deficit/GDP will drop again to 10% (similar levels to the ones observed before the crisis).

Migrants in the World. 2005. Figure 1.6 Foreign-Born Migrants, 2005 (millions) Feenstra and Taylor: International Trade, Second Edition Copyright © 2011 by Worth Publishers

The current Refugees Crisis in Europe. Warning: The current Refugees Crisis in Europe.

Foreign Direct Investment (FDI) in the World. 2010. The stock of investment is illustrated by the width of the lines, with the largest flows having the heaviest lines and the smallest having dashed lines. © 2014 Worth Publishers International Economics, 3e | Feenstra/Taylor © 2014 Worth Publishers International Economics, 3e | Feenstra/Taylor

Schedule and syllabus Week 1 (January 9th -11th). Classic and neoclassic models. Computer Lab 1. Week 2: (January 16th -18th). New Trade Theory. Economies of Scale, Imperfect Competition, and International Trade. Week 3: (January 23th -25th). Trade: Empirical analysis. Computer Lab 2. Intra-industry trade using Excel and STATA. Computer Lab 3. The gravity model. Applied laboratory with STATA. Week 4: (January 30th – February 1st). Recent developments in international trade I/II: Introduction to Economic Geography. The Spatial Dixit-Stiglitz model The New Economic Geography: the Core-Periphery Model. Week 5: (February 6th-8th). Recent developments in international trade II/II: The New Economic Geography and International trade New topics: Heterogeneous firms; FDI and multinationals; Economic Complexity; Value-chain fragmentation and international trade.

Materials Studding materials: Power point presentations: Summary of the main concepts. Photocopies for some chapters. Additional material: papers, readings... Abbreviation Main References F&T -2010 Feenstra and Taylor. (2010): International Economics. Worth Publishers; 2 Ed. BGM -2009 Brakman S., Garretsen H. van Marrewijk C. (2009): The New Introduction to Geographical Economics. Cambridge University Press. FKV-1999 Fujita, M.; Krugman, P.; Venables, A. (1999): The Spatial Economy. The MIT Press. Cambridge, Massachusetts. London, England*. KO-2005 Krugman, P., Obstfeld M. and Melitz (2012): International Economics: Theory and Policy. Addison-Wesley. TWB-08 The World Bank (2008): “Reshaping economic geography”. WB report.

Who am I? Carlos Llano Associate professor. Economics and Business School. Universidad Autónoma de Madrid (UAM-Spain). Coordinator. Master in International Economics at the UAM. Fields of interest: international and interregional trade; NEG; regional and urban economics; spatial economics; macroeconomics. Office: E1-306 Emails: carlos.llano@uam.es Web: www.uam.es/carlos.llano/

What is the course about? Goal: to understand the main international trade models and the relationship between economics and geography. Content: Both theoretical and empirical perspectives are covered. We examine the relationship between economic activity, territorial location and trade, in the context of recent developments in Trade Theory and Economic Geography. Approach: Advanced-undergraduate level (Feenstra and Taylor, 2010; Krugman et al, 2012). Computer Labs. Stata, etc.

Methodology and Grading The course will include three kinds of activities: Theoretical classes: Each lesson will cover a topic. Advanced-undergraduate level (Feenstra and Taylor, 2010; Krugman et al, 2012). 2-3 Computer Labs: where the students will use econometric and simulation models. Project: during the course, the students will develop a brief project using real data. The specific content of the project will be described during the course. Grading: Project (50%). March 31st. 2017 Exam (50%). March 31st. 2017