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POLSC411: International Political Economy

Unit 2: Trade   Unit 2 will explore the ways in which domestic politics influences a state’s policies abroad.  In Unit 1, you learned how economic policy has been used to further state power and national interest.  In democracies, politicians need to be elected and will therefore be reluctant to adopt policies that may be efficient from a macroeconomic perspective but may also inflict hardship and adjustment on the domestic economy.  For example, it may make sound economic sense to ensure free trade in the steel sector, but politicians would fear that they would be voted out of office if their constituents lost their jobs, because a more efficient steel company from abroad began to dominate the domestic market.

Unit 2 Time Advisory
This unit should take you 26 hours to complete.

☐    Subunit 2.1.1: 14.5 hours
☐    Subunit 2.1.1.1: 5.5 hours

☐    Subunit 2.1.1.2: 2.5 hours

☐    Subunit 2.1.1.3: 1.5 hours

☐    Subunit 2.1.1.4: 5 hours

☐    Subunit 2.1.2 : 4 hours ☐    Subunit 2.1.2: 3.5 hours

☐    Subunit 2.1.3 2.5 hours

☐    Assessment: 1.5 hours

Unit2 Learning Outcomes
Upon successful completion of this unit, the student will be able to:
- Analyze the effects of trade policies on domestic and international actors. - Explain and apply game theory. - Compare and contrast different systems for managing international trade.

2.1 Trade   2.1.1 Protectionism   2.1.1.1 Tariffs   - Reading: International Economics: Theory and Policy: “Chapter 1: Introductory Trade Issues: History, Institutions, and Legal Framework, Section 1: The International Economy and International Economics” and “Section 2: Understanding Tariffs” Links: International Economics: Theory and Policy: Chapter 1: Introductory Trade Issues: History, Institutions, and Legal Framework: “Section 1: The International Economy and International Economics” (PDF) and “Section 2: Understanding Tariffs” (PDF)
 
Instructions: Please read these sections in their entirety.  Trade between countries is one of the foundations of human interaction.  Whether it is for unique raw materials, specialized labor, or cultural artifacts, people have traded for goods and services for thousands of years.  Countries can restrict trade by means of protectionism or allow unimpeded movement through free trade. Pay close attention to how the author defines international economics and tariffs.
 
Terms of Use: This text was adapted by The Saylor Foundation under a Creative Commons Attribution-NonCommercial-Share-Alike 3.0 License without attribution as requested by the work’s original creator or licensee.

  • Lecture: iTunes U: Yale University: Morgan Robinson and Susan Froetschel’s “The Lure of Protectionism in Ohio” Link: iTunes U: Yale University: Morgan Robinson and Susan Froetschel’s “The Lure of Protectionism in Ohio” (iTunes U)
     
    Instructions: Scroll down to item 66, and click on the “View in iTunes” hyperlink to download the podcast titled “The Lure of Protectionism in Ohio” (9 minutes).  Listen to the entire lecture to get a general understanding of tariffs and politics intersect.
     
    Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

2.1.1.2 Smoot-Hawley Tariff Act of 1930   - Reading: International Economics: Theory and Policy: “Chapter 1: Introductory Trade Issues: History, Institutions, and Legal Framework,” “Section 4: The Great Depression, Smoot-Hawley, and the Reciprocal Trade Agreements Act” Link: International Economics: Theory and Policy: Chapter 1: Introductory Trade Issues: History, Institutions, and Legal Framework: “Section 4: The Great Depression, Smoot-Hawley, and the Reciprocal Trade Agreements Act” (PDF)
 
Instructions: Please read this section in its entirety.  The author applies general ideas about tariffs to this specific act.
 
Terms of Use: This text was adapted by The Saylor Foundation under a Creative Commons Attribution-NonCommercial-Share-Alike 3.0 License without attribution as requested by the work’s original creator or licensee.

  • Lecture: iTunes U: George Mason University: Rustici’s “Smoot-Hawley and the Great Depression” Link: iTunes U: George Mason University: Rustici’s “Smoot-Hawley and the Great Depression” (iTunes U)
     
    Also available in:
    Mp3
     
    Instructions: Scroll down to item 69, and click on the “View in iTunes” hyperlink for this lecture titled “Rustici on Smoot-Hawley and the Great Depression.”  Listen to the entire podcast (85 minutes) to get a general understanding of tariffs and Smoot-Hawley in particular.  Please note that the lecture in 2.2.1.1 comes from a liberal perspective; this lecture is conservative.  Consider how the two differ.
     
    Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

2.1.1.3 Participants in Tariff Decisions   - Reading: International Economics: Theory and Policy: “Chapter 10: Political Economy and International Trade, Sections 2-7” Link: International Economics: Theory and Policy: Chapter 10: Political Economy and International Trade: “Sections 2-7” (PDF)
 
Instructions: Please read these sections in their entirety.  The author explains who is affected by tariffs and why.  Think about how the decision makers bargain.  Does this remind you of game theory?
 
Terms of Use: This text was adapted by The Saylor Foundation under a Creative Commons Attribution-NonCommercial-Share-Alike 3.0 License without attribution as requested by the work’s original creator or licensee.

  • Lecture: iTunes U: Vanderbilt University: David Parsley’s “Featured Research: Lobbying Expenditures Yield Big Returns for Companies” Link: iTunes U: Vanderbilt University: David Parsley’s “Featured Research: Lobbying Expenditures Yield Big Returns for Companies” (iTunes U)
     
    Also available in:
    Mp3
     
    Instructions: Scroll down to item 7, and click on the “View in iTunes” hyperlink for this lecture titled “Featured Research: Lobbying Expenditures Yield Big Returns for Companies.”  Listen to the entire podcast (11 minutes).  Note how firms use lobbying tactics to influence politicians.

    Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

2.1.1.4 Non-tariff Barriers   - Reading: The World Trade Organization’s “Non-Tariff Barriers: Red tape, etc.” Link: The World Trade Organization’s “Non-Tariff Barriers: Red tape, etc.” (HTML)
 
Instructions: Read through the entire document.  Non-tariff barriers are more difficult to quantify, because they use non-financial rules and regulations to limit trade.  In some ways, these kinds of barriers can be more effective, because they are harder to detect and overcome. Note the various kinds of non-tariff barriers for trade.
 
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  • Lecture: iTunes U: CanadExport’s “Expert Shares Advice on Reducing Border Barriers” Link: iTunes U: CanadExport’s “Expert Shares Advice on Reducing Border Barriers” (iTunes U)
     
    Also available in:
    Adobe Flash, Mp3
     
    Instructions: Please click on the “View in iTunes” hyperlink for the podcast titled “Expert Shares Advice on Reducing Border Barriers.”  Listen to the entire lecture (17 minutes).  This is a practical guide about how to address labor mobility as a non-tariff barrier to trade between the US and Canada. Consider how theories and applications differ.
     
    Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

2.1.2 Free Trade Agreements   - Reading: International Economics: Theory and Policy: Chapter 9: Trade Policies with Market Imperfections and Distortions: “Section 10: Economic Integration: Free Trade Areas, Trade Creation, and Trade Division” Link: International Economics: Theory and Policy: Chapter 9: Trade Policies with Market Imperfections and Distortions: “Section 10: Economic Integration: Free Trade Areas, Trade Creation, and Trade Division” (PDF)
 
Instructions: Please read this section in its entirety.  Now that we’ve studied the scope and nature of restrictions to trade, we turn our attention to how free trade works. The author explains how models of free trade work and how they affect consumers and producers.
 
Terms of Use: This text was adapted by The Saylor Foundation under a Creative Commons Attribution-NonCommercial-Share-Alike 3.0 License without attribution as requested by the work’s original creator or licensee.

  • Lecture: iTunes U: University of Notre Dame’s Kellogg Institute for International Studies’ “Central American Free Trade Agreement Roundtable (Part 1)” and “Central American Free Trade Agreement Roundtable (Part 2)” Link: iTunes U: University of Notre Dame’s Kellogg Institute for International Studies’ “Central American Free Trade Agreement Roundtable (Part 1)” (iTunes U) and “Central American Free Trade Agreement Roundtable (Part 2)” (iTunes U)
     
    Instructions: Click on the “View in iTunes” hyperlink for items 1 and 2, which are the first and second parts of the “Central American Free Trade Agreement Roundtable” podcasts.  Listen to both parts in their entirety (59 and 46 minutes, respectively).  Think about the practical applications of a free trade agreement.
     
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2.1.3 Managed Trade   - Reading: International Economics: Theory and Policy: Chapter 1: Introductory Trade Issues: History, Institutions, and Legal Framework: “Sections 5-7” Link: International Economics: Theory and Policy: Chapter 1: Introductory Trade Issues: History, Institutions, and Legal Framework: “Sections 5-7” (PDF)
 
Instructions: Please click on the link above and read each section in its entirety.  Between protectionism and free trade exists an area of managed trade.  Countries have worked together to develop frameworks of global cooperation to limit trade barriers but not reduce them. The author explains how institutions like the World Trade Organization developed to manage trade.
 
Terms of Use: This text was adapted by The Saylor Foundation under a Creative Commons Attribution-NonCommercial-Share-Alike 3.0 License without attribution as requested by the work’s original creator or licensee.

  • Lecture: iTunes U: Middlebury College: James Morrison’s “The Global Trade Regime Today” Link: iTunes U: Middlebury College: James Morrison’s “The Global Trade Regime Today” (iTunes U)
     
    Instructions: Scroll down the webpage to item 17 titled “Class 10: The Global Trade Regime Today,” and click on “View in iTunes” for this podcast.  Listen to the entire lecture (113 minutes).  Consider how these trade institutions evolved over time.
     
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2.1.4 Sanctions   - Reading: Paul deLespinasse’s Basic Political Concepts Link: Paul deLespinasse’s Basic Political Concepts (HTML)
 
Instructions: Read the entire book (37 pages).  It is very theoretical but does a great job explaining how sanctions motivate people and countries.
 
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  • Lecture: The Center for Strategic International Studies’ “Can Sanctions on Iran Create the Leverage We Need?” Link: The Center for Strategic International Studies’ “Can Sanctions on Iran Create the Leverage We Need?” (Adobe Flash)
     
    Also available in:
    Adobe Flash (Audio)
     
    Instructions: Please scroll down to item 138, which is a podcast titled “Can Sanctions on Iran Create the Leverage We Need?” and click on the “View in iTunes” hyperlink to launch the podcast. Please listen to the whole discussion (104 minutes).  Trade is restricted or permitted for more than economic reasons.  Countries may punish or reward other nations by using sanctions and special trade relationships. Consider the practical applications for applying sanctions.  Compare this to the theoretical reading material in this section.
     
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Unit 2 Quiz   - Assessment: The Saylor Foundation’s “Unit 2 Quiz” Link: The Saylor Foundation’s “Unit 2 Quiz (PDF)
 
Instructions: Please take this short quiz.  When you are finished, compare your answers to The Saylor Foundation’s “Unit 2 Quiz Answers.” (PDF)