EC246-2-AU: International Trade Institutions and Policy

There are two main textbooks for this course that complement each other. These are recommended as essential reading below. In addition, a (growing) number of books have recently been published on issues we study in the course. Some of these titles are suggested as supplementary reading, more precisely on certain topics as described further down. Other sources, including books, book chapters and journal articles, are sometimes proposed as background reading on particular aspects of a topic. For those who are profoundly interested in the subject matter of the course, specialised journals and websites are selected from a multitude of existing ones: these contain relevant articles and documents, often downloadable as pdf files.

Because of the comprehensiveness and complementarity of the two textbooks, no detailed lecture notes (or handouts) will be provided for this course. Yet to help students in their preparation, the course outline which follows specifies the precise pages expected to be read from each source. Moreover, the presentation slides to be discussed in class are made available on the course website: they condense the material of each lecture into an essential structure that is easy to remember. As the course proceeds on, updated versions of these slides may be posted in advance of each lecture. Any feedback will be appreciated.

Essential reading

1. Hoekman, Bernard and Michel Kostecki, The Political Economy of the World Trading System: The WTO and Beyond, Oxford University Press, 2001 (2nd ed.) – presents at an introductory level and from the viewpoint of political economy the functioning of the World Trade Organisation as well as the stages in its past evolution and the likely future challenges.

2. Caves, Richard, Jeffrey Frankel and Ronald Jones, World Trade and Payments: An Introduction, Addison-Wesley, 2002 (9th ed.) – introduces in a comprehensive way the underlying economic theory of international trade and payments as well as the principal instruments of commercial policy needed to better understand the global trading system; a helpful companion website to this well-known and widely used textbook can be consulted.

Supplementary reading

1. Srinivasan, T.N., Developing Countries and the Multilateral Trading System: From the GATT to the Uruguay Round and the Future, Westview Press, 1998 – a brief but illuminating account, by a leading trade theorist and within a historical context, of the sensitive issues concerning the relations of developing economies with the global trading system.

2. Gandolfo, Giancarlo, International Trade Theory and Policy, Springer, 1998 – a comprehensive historical and intellectual reference book on trade theory and policy, with sections on both intermediate and advanced treatment of the subject.

3. Collier, Paul and David Dollar, Globalization, Growth and Poverty: Building an Inclusive World Economy, Oxford University Press and World Bank, 2002 – synthesises research within the World Bank on globalisation, explaining its main effects and anxieties, and sets up an agenda for building an inclusive world economy.

Background reading

1. Jackson, John, The World Trading System: Law and Policy of International Economic Relations, MIT Press, 1997 (2 ed.) – the legal approach to commercial policy and multilateral trade negotiations.

2. McDonald, Brian, The World Trading System: The Uruguay Round and Beyond, Macmillan Press, UK, and St. Martin's Press, US, 1998 – an insider policy maker's summary of what is the global trading system, why and how it developed, and where it may be heading to.

3. Bhagwati, Jagdish, The Wind of the Hundred Days: How Washington Mismanaged Globalization, MIT Press, 2000 – a collection of recent newspaper articles, essays, reviews and lectures of another leading trade theorist that illustrates topical issues in modern commercial policies, in particular aspects of their application by the Clinton administration and challenges to the WTO posed by globalisation.

Course Outline

All starred (*) references below are recommended as essential readings whereas the non-starred ones are suggested either as supplementary readings for a deeper understanding of a particular whole topic or as background readings on certain aspects of it.

1. Introduction to Trade Theory and Policy and Economic Lessons of the Inter-War Period: ITO

1.1 The Multi-Disciplinary Nature of the Subject Matter of the Course and Why We Shall Approach It from an Economic Perspective

1.1.1 Trade Theory or Why There Is Trade: An Economic Introduction into the Subject

     (1) *Caves, Frankel and Jones, Chapter 2, pp. 13-23
     (2) *Hoekman and Kostecki, Annex 2.1, pp. 489-493
     (3) Sen, Amartya, "Markets, State and Social Opportunity", Chapter 5, pp. 111-145, in Sen, Amartya, "Development as Freedom", Oxford University Press, 1999
     (4) McDonald, Chapter 2, pp. 19-22

1.1.2 Trade Policy or Why There Are Institutions and Rules: A Legal and (Socio-)Political Introduction into the Subject

     (1) *Hoekman and Kostecki, Chapter 1, pp. 25-29, and Annex 2.1, pp. 493-494 – a succint summary of the international trade policy market
     (2) *Jackson, Chapter 1, pp. 6-10 and 25-30 – the international law perspective
     (3) Frieden, Jeffrey and David Lake, "Introduction", pp. 1-16, in Frieden, Jeffrey and David Lake (eds.), "International Political Economy: Perspectives on Global Power and Wealth", Bedford/St. Martin's, 2000 (4th ed.) – the political science perspective
     (4) Bayne, Nicolas and Stephen Woolcock, "What is Economic Diplomacy?", Chapter 1, pp. 3-20, in Bayne, Nicolas and Stephen Woolcock (eds.), "The New Economic Diplomacy: Decision-Making and Negotiation in International Economic Relations", Ashgate, 2003 – the international relations perspective
     (5) Woolcock, Stephen, "Theoretical Analysis of Economic Diplomacy", Chapter 2, pp. 23-43, in Bayne, Nicolas and Stephen Woolcock (eds.), "The New Economic Diplomacy: Decision-Making and Negotiation in International Economic Relations", Ashgate, 2003 – the international political economy perspective
     (6) McDonald, Chapter 3, pp. 23-31 – a summary of trade policy by an international "practitioner"

1.2 The Two Competing Trade Policy Doctrines: An Overview of the Principal Pros and Cons

1.2.1 Free Trade: Benefits and Costs

    (1) *Caves, Frankel and Jones, Chapter 2, pp. 23-26, Chapter 3, pp. 31-42, and Chapter 4, pp. 51-53
    (2) Bhagwati, Chapter 7, pp. 69-86, Chapter 8, pp. 87-103, Chapter 9, pp. 105-108, and Chapter 10, pp. 109-118
    (3) Irwin, Douglas, "Free Trade Under Fire", Princeton University Press, 2002, Chapter 2, pp. 21-69
    (4) Irwin, Douglas, "Against the Tide: An Intellectual History of Free Trade", Princeton University Press, 1996, "Introduction", pp. 3-8, and Part One, pp. 11-100
    (5) Bhagwati, Jagdish, "Free Trade Today" (Three Lectures at the Stockholm School of Economics), Princeton University Press, 2002

1.2.2 Protectionism: Benefits and Costs

     (1) *Caves, Frankel and Jones, Chapter 11, pp. 193-208 and Chapter 12, pp. 209-233
     (2) Irwin, Douglas, "Against the Tide: An Intellectual History of Free Trade", Princeton University Press, 1996, Part Two, pp. 101-216, and "Conclusion", pp. 217-230
     (3) Bhagwati, Jagdish, "Protectionism" (1987 Ohlin Lectures at the Stockholm School of Economics), MIT Press, 1988 (1990, 4th printing)

1.3. The World Economy Before and After World War II: A Historical Introduction into the Subject

1.3.1 The Economic Lessons of the 1930s

     (1) Arndt, Heinz Wolfgang, "The Economic Lessons of the Nineteen-Thirties", Frank Cass & Co. Ltd., 1963, in particular Chapter 1, pp. 9-33, Chapter 9, pp. 221-249 and Chapter 10, pp. 250-302
     (2) Woolcock, Stephen, "The ITO, the GATT and the WTO", Chapter 6, in particular pp. 107-109, in Bayne, Nicolas and Stephen Woolcock (eds.), "The New Economic Diplomacy: Decision-Making and Negotiation in International Economic Relations", Ashgate, 2003
     (3) Dunkley, Graham, "The Free Trade Adventure: the WTO, the Uruguay Round and Globalism – A Critique", Zed Books, 2000 (first published in 1997 by Melbourne University Press), Chapter 2, pp. 19-25

1.3.2 The Havana Charter and the Failure of the ITO: A Blueprint for Multilateral Trade Negotiations

     (1) *Jackson, Chapter 2, pp. 31-38
     (2) Srinivasan, Chapter 2, pp. 9-12, and Chapter 3, pp. 20-24
     (3) Woolcock, Stephen, "The ITO, the GATT and the WTO", Chapter 6, in particular pp. 109-114, in Bayne, Nicolas and Stephen Woolcock (eds.), "The New Economic Diplomacy: Decision-Making and Negotiation in International Economic Relations", Ashgate, 2003
     (4) Dunkley, Graham, "The Free Trade Adventure: the WTO, the Uruguay Round and Globalism – A Critique", Zed Books, 2000 (first published in 1997 by Melbourne University Press), Chapter 2, pp. 26-28

2. GATT and the Control of World Trade: The Early Rounds

2.1 GATT: Philosophy and Working Methods

     (1) *Hoekman and Kostecki, chapter 1, pp. 29-40
     (2) Swinback, Alan and Carolyn Tanner, "Farm Policy and Trade Conflict: The Uruguay Round and CAP Reform", University of Michigan Press, 1996, Chapter 1, pp 1-14
     (3) Srinivasan, Chapter 2, pp. 12-19
     (4) Jackson, Chapter 2, pp. 39-43
     (5) McDonald, Chapter 4, pp. 32-38

2.2 Tariff Barriers

     (1) *Caves, Frankel and Jones, Chapter 10, pp. 175-177 and 183-184 in particular
     (2) *Hoekman and Kostecki, Annex 2, pp. 491-493
     (3) McDonald, Chapter 8, pp. 65-76
     (4) Jackson, Chapter 5, pp. 139-153

2.3 Intra-Industry vs. Inter-Industry Trade

     (1) *Caves, Frankel and Jones, Chapter 8, pp. 129-172
     (2) Bowen, Harry, Abraham Hollander and Jean-Marie Viaene, "Applied International Trade Analysis", Macmillan Press Ltd., 1998, Chapter 1, pp. 24-28

3. Trade, the Third World, UNCTAD and the New International Economic Order

3.1 The Singer-Prebish Thesis

     (1) Arndt, Heinz Wolfgang, "Economic Development: The History of an Idea", University of Chicago Press, 1987 (paperback edition 1989), Chapter 3, pp. 73-82
     (2) Todaro, Michael and Stephen Smith, “Economic Development”, 2002 (8 ed.), Chapter 12, pp. 518-519 and 522-525

3.2 Policy Responses: Import Substitution

     (1) Arndt, Heinz Wolfgang, "Economic Development: The History of an Idea", University of Chicago Press, 1987 (paperback edition 1989), Chapter 3, pp. 72-73
     (2) Todaro, Michael and Stephen Smith, “Economic Development”, 2002 (8 ed.), Chapter 13, pp. 563-567

3.3 UNCTAD and the New International Economic Order

     (1) *Srinivasan, Chapter 3, pp. 24-26
     (2) Arndt, Heinz Wolfgang, "Economic Development: The History of an Idea", University of Chicago Press, 1987 (paperback edition 1989), Chapter 5, pp. 140-145

3.4 Non-Tariff Barriers

     (1) *Hoekman and Kostecki, Annex 2, pp. 493-506
     (2) McDonald, Part III, pp. 83-132
     (3) Jackson, Chapter 5, pp. 153-155

3.5 Export Price Instability and Administered Commodity Markets

     (1) *Caves, Frankel and Jones, Chapter 12, pp. 214-215
     (2) Todaro, Michael and Stephen Smith, “Economic Development”, 2002 (8 ed.), Chapter 12, pp. 520-522

4. Preferential Arrangements and the Newly Industrialised Countries

4.1 Theoretical Considerations

4.1.1 Forms of Regional Trade Arrangements

     (1) *Caves, Frankel and Jones, Chapter 14, pp. 253-255

4.1.2 Trade Creation and Trade Diversion

     (1) *Caves, Frankel and Jones, Chapter 14, pp. 255-259

4.2 Examples of Preferential Arrangements form Recent Economic History

4.2.1 EU

     (1) *Caves, Frankel and Jones, Chapter 14, pp. 259-262

4.2.2 NAFTA

     (1) *Caves, Frankel and Jones, Chapter 14, pp. 262-264

4.2.3 CMEA (ComEcon)

     (1) *Caves, Frankel and Jones, Chapter 14, pp. 264-268

4.3 The Asian Tigers/NICs and the "End" of the Third World

     (1) *Caves, Frankel and Jones, Chapter 14, pp. 268-272

5. GATT and the Control of World Trade: The Late Rounds

5.1 World Food Markets in Disarray

     (1) *Caves, Frankel and Jones, Chapter 13, pp. 235-252
     (2) *Swinback, Alan and Carolyn Tanner, "Farm Policy and Trade Conflict: The Uruguay Round and CAP Reform", University of Michigan Press, 1996, Chapter 2, pp. 19-31
     (3) Tyers, Rod and Kym Anderson, "Disarray in World Food Markets: A Quantitative Assessment", Cambridge University Press, 1992
     (4) Johnson, David Gale, "World Agriculture in Disarray", Macmillan (for the Trade Policy Research Centre, London), 1991 (2nd ed.; first published in 1973)
     (5) Bhagwati, "Protectionism" (1987 Ohlin Lectures), MIT Press, 1988 (1990, 4th printing), Chapter 3, pp. 43-59

5.2 The Policy Response: Tokyo and Uruguay Rounds

     (1) *Caves, Frankel and Jones, Chapter 13, pp. 235-252
     (2) *Srinivasan, Chapter 3, pp. 26-27, and Chapter 4, pp. 28-36
     (3) Swinback, Alan and Carolyn Tanner, "Farm Policy and Trade Conflict: The Uruguay Round and CAP Reform", University of Michigan Press, 1996, Chapter 1, pp. 14-17, and Chapter 7, pp. 115-140

5.3 GATT: Achievements and Failures

     (1) *Hoekman and Kostecki, Chapter 1, pp. 41-46
     (2) *Srinivasan, Chapter 5, pp. 37-47, and Chapter 6, pp. 48-58
     (3) Bhagwati, Chapter 19, pp. 183-188
     (4) Bhagwati, Jagdish, "Protectionism" (1987 Ohlin Lectures), MIT Press, 1988 (1990, 4th printing), Chapter 1, pp. 1-15

6. The WTO as an Institution

6.1 Organisation and Structure

     (1) *Hoekman and Kostecki, Chapter 2, pp. 49-73

6.2 Membership – China, Russia, Other LDCs

     (1) *Hoekman and Kostecki, Annex 1, pp. 485-486
     (2) Bhagwati, Chapter 29, pp. 255-259 – in favour of China's entry

6.3 Dispute Settlement

     (1) *Hoekman and Kostecki, Chapter 3, pp. 74-99

6.4 Negotiating Forum

     (1) *Hoekman and Kostecki, Chapter 4, pp. 100-142

7. WTO Multilateral Trade Arrangements

7.1 Agreed Rules

7.1.1 Trade in Goods (GATT)

     (1) *Hoekman and Kostecki, Chapter 5, pp. 145-207

7.1.2 Sector-Specific Multilateral Trade Agreements

     (1) *Hoekman and Kostecki, Chapter 6, pp. 208-236
     (2) McDonald, Part IV, pp. 133-160

7.1.3 Trade in Services (GATS)

     (1) *Hoekman and Kostecki, Chapter 7, pp. 237-273
     (2) McDonald, Chapter 22, pp. 217-251

7.1.4 Protection of Intellectual Property (TRIPs)

     (1) *Hoekman and Kostecki, Chapter 8, pp. 274-300
     (2) McDonald, Chapter 19, pp. 163-179

7.2 Holes and Loopholes

7.2.1 Safeguards and Exceptions

     (1) *Hoekman and Kostecki, Chapter 9, pp. 303-345

7.2.2 Regional Integration

     (1) *Hoekman and Kostecki, Chapter 8, pp. 274-300

7.2.3 Plurilateral Agreements

     (1) *Hoekman and Kostecki, Chapter 9, pp. 369-382

8. Applied Analysis of Trade Data, Policies and Negotiations: An Overview

8.1 Trade Flows and Trade Overlap: SITC

     (1) Bowen, Harry, Abraham Hollander and Jean-Marie Viaene, "Applied International Trade Analysis", Macmillan Press Ltd., 1998, Appendix A.1, pp. 598-602

8.2 Industry Characteristics: ISIC

     (1) Bowen, Harry, Abraham Hollander and Jean-Marie Viaene, "Applied International Trade Analysis", Macmillan Press Ltd., 1998, Appendix A.2, pp. 602-605

8.3 Country Characteristics

     (1) Bowen, Harry, Abraham Hollander and Jean-Marie Viaene, "Applied International Trade Analysis", Macmillan Press Ltd., 1998, Appendix A.2, pp. 603-608

8.4 Factor Flows and Investment Overlap

     (1) Bowen, Harry, Abraham Hollander and Jean-Marie Viaene, "Applied International Trade Analysis", Macmillan Press Ltd., 1998, Chapter 1, pp. 3-42

8.5 Applied Analysis of Trade Negotiations

     (1) Gaisford, James and William Kerr, "Economic Analysis for International Trade Negotiations: The WTO and Agricultural Trade", Edwar Elgar, 2001, Chapter 2, pp. 21-65

9. Globalisation and Trade

9.1 Globalisation and Its Economic Effects

     (1) *Collier and Dollar, "Overview", pp. 1-21, Chapter 1, pp. 23-51, Chapter 2, pp. 53-84, and Chapter 3, pp. 85-120

9.2 The WTO and Environmental Protection

     (1) *Hoekman and Kostecki, Chapter 13, pp. 441-448
     (2) *Srinivasan, Chapter 8, pp. 65-70
     (3) Sturm, Daniel and Alistair Ulph, "Environment and Trade: The Implications of Imperfect Information and Political Economy", World Trade Review, 2002, 3 (November), pp. 235-256: pdf – a helpful recent survey
     (4) Collier and Dollar, Chapter 4, in particular pp. 130-141
     (5) Bhagwati, Chapter 20, pp. 189-200
     (6) McDonald, Chapter 24, pp. 257-268

9.3 The WTO and Labour Standards

     (1) *Hoekman and Kostecki, Chapter 13, pp. 448-453
     (2) *Srinivasan, Chapter 8, pp. 71-91
     (3) McDonald, Chapter 26, pp. 279-284
     (4) Irwin, Douglas, "Free Trade Under Fire", Princeton University Press, 2002, Chapter 3, pp. 70-110

9.4 Globalisation Anxieties and an Agenda for Action: Building an Inclusive World Economy

     (1) *Collier and Dollar, Chapter 5, pp. 145-159
     (2) Bhagwati, Chapter 41, pp. 323-342

10. The Political Economy of International Trade Policy

10.1 NGOs and the WTO: Seattle and After

10.1.1 Political Economy of Trade Policy
10.1.2 Actors in Economic Dipomacy
10.1.3 Business and the WTO
10.1.4 NGOs and the WTO
10.1.5 Seattle, Doha and Further…

Readings on all or part of these aspects include:

     (1) *Hoekman and Kostecki, Chapter 14, pp. 461-478
     (2) Woolcock, Stephen, Chapter 3, pp. 45-64, in Bayne, Nicolas and Stephen Woolcock (eds.), "The New Economic Diplomacy: Decision-Making and Negotiation in International Economic Relations", Ashgate, 2003
     (3) Bhagwati, Part V, pp. 265-290
     (4) Carden, Richard, "The World Trading System", Chapter 17, pp. 275-284) in Bayne, Nicolas and Stephen Woolcock (eds.), "The New Economic Diplomacy: Decision-Making and Negotiation in International Economic Relations", Ashgate, 2003

10.2 The Control of International Trade – an Assessment

     (1) *Hoekman and Kostecki, Chapter 15, pp. 479-485
     (2) Jones, Kent, "The WTO Core Agreement, Non-Trade Issues and Institutional Integrity", World Trade Review, 2002, 3 (November), pp. 257-276: pdf
     (3) Esty, Daniel, "The World Trade Organisation Legitimacy Crisis", World Trade Review, 2002, 1 (March), pp. 7-22 – debating the future of the WTO
     (4) Henderson, David, "WTO 2002: Imaginary Crisis, Real Problems", World Trade Review, 2002, 3 (November), pp. 277-296: pdf – debating the future of the WTO
     (5) Esty, Daniel, "Rejoinder ", World Trade Review, 2002, 3 (November), pp. 297-299: pdf – debating the future of the WTO